Every Utahn feels the burden of inflation amid rising living costs. In that context, President Joe Biden’s announcement last August that his administration would cancel $10,000 or $20,000 in student loans for most borrowers probably sounded enticing. But whether the government should step in and provide financial relief is a question that generates disagreement, with 49% of Utahns saying they don’t support loan forgiveness. 

Whether student loans will be forgiven is still up in the air. By the end of this month, the Supreme Court is expected to decide whether the Biden administration’s plan for student debt cancellation is constitutional. Whatever the outcome, the decision will undoubtedly impact Utah families.  

While the issue of constitutionality is of national importance, so is answering questions about the effectiveness of student loan cancellation. Who in Utah does it impact? Will a Supreme Court ruling in favor of the program help or harm Utah families? 

Utah families and student loans 

Utah families are in a reasonably good position with student loans compared with many other states. Utah has a relatively average rate of individuals within the state eligible to apply for the Biden administration’s student loan forgiveness program. According to a Salt Lake Tribune news story, about 200,000 Utahns are eligible for Biden’s program, and about 121,000 applications were approved before a pause occurred for pending litigation.  

The same news story reported that Utah’s most populous and diverse counties – Salt Lake, Utah, Davis and Weber – accounted for more than 75% of applications. Five other counties with significant applications – Washington, Cache, Tooele, Iron and Box Elder – had a higher poverty rate and lower per-capita income than the state average. 

Number of eligible and approved student loan forgiveness applications 

*Numbers are rounded to the nearest thousand. 

With application counts in mind, the question arises: How significantly will student loan payments impact Utah family budgets once they resume? Obviously, the financial realities will vary from one family to the next; for some families, student loan payments will be a heavy lift while for others the financial burden will not manageable. But there is some evidence that offers some insight on the overall picture.  

Utah has the lowest percentage of students with loans they need to pay off – 38% – and has the lowest student debt burden average at $18,344. From that perspective, the proportion of Utah families with overly burdensome student loan payments seems likely to be lower than average. However, a 2016 report said Utah households carry more overall debt than the national average – an average that has only grown since the pandemic. This data point suggests that Utah families with student loan payments will be making those payments with a heavier overall debt load than average.  

In other words, student loan payments alone may not be breaking the bank for Utah families. However, because of Utahns’ higher-than-average debt loads, even seemingly manageable student loan payments may have significant budget impacts for many families. This aligns with my recent analysis of how Utahns’ rising household incomes seem not to have kept up with the increased living costs of housing, food and gas. 

With Utah families feeling the increased financial demands of daily life, receiving $10,000 to $20,000 worth of student loan cancellation might at first glance seem to be a good thing. However, deeper consideration of the realities paints a different picture. 

Why the student loan forgiveness program is a bad idea for Utah families 

Last September, Sutherland’s Nic Dunn shared a framework for evaluating the Biden administration’s student loan cancellation program. That framework included three questions: 

1. Does the proposal fit within the proper role of the institution advancing it?
2. Is the policy well-crafted to address the right problem?
3. Are there any long-term implications that will cause problems in the future? 

The Biden administration’s proposed student loan cancellation program answers “no” to all three questions.  

Regarding the first question, the Biden administration’s student loan cancellation plan seems likely to be struck down as unconstitutional by the Supreme Court, based on news coverage of the court’s oral arguments in the lawsuit against the administration’s plan. 

On the second question, the proposed program does not address the core problems experienced by students and parents alike. Like taking an ibuprofen to relieve headaches caused by chronic stress, allocating taxpayer money towards canceling student debt fails to address the core problem Utah families are experiencing: ever-increasing costs of higher education. If policymakers want to address student loan debt, then looking at policy levers that directly impact the drivers of higher education costs would be a more effective response. 

As for the third question, the White House plan offers perverse incentives over the long term – meaning that canceling student loans may encourage behaviors that exacerbate the existing problems for families. For example, broad cancellation of student loans today may cause future students and parents to take loan forgiveness for granted. This would tend to increase the money they borrow for higher education – making the student loan problem in the future worse than it is today. 

Beth Akers, American Enterprise Institute resident fellow, wrote: 

The changes the White House has proposed will be seriously problematic for the federal lending program. Borrowers will have more incentive to borrow than ever before and colleges will have no reason to keep the prices they charge in line with the value they offer, the combination of which will only exacerbate the challenges with college affordability that we already face. The exorbitant fiscal cost of the proposed changes is just the tip of the iceberg. And it’s a shame that the White House isn’t being forthcoming even on that aspect of the plan. 

Other expert commentators also suggest that colleges and universities may continue to increase their tuition, knowing that government financial aid programs (i.e., taxpayers, including many families) will absorb much of that tuition cost burden on students in the short term – and likely the long term as well with future student loan cancellations. As time passes, this increased cost absorption will lead to higher taxes, inflation and education costs. 

One person’s tax benefit is another person’s tax burden. Offering a government-funded benefit now by canceling student loans will lessen families’ financial burdens in the short term only by magnifying them in the long term. No matter the Supreme Court’s decision, it will be wise for policymakers to stay focused on wisely creating the right solutions to the right problems faced by families.