August 29, 2022
Once again Biden has put the interests of his political party over the welfare of our nation. The latest move- an unconstitutional “cancelation” of up to a trillion dollars of student loan debt- Except that no swipe of a pen can make debt disappear.
Reality- blue-collar workers and those who sacrificed going to a school they could not afford, forwent vacations and material goods to ensure they could pay their financial obligations, are now forced to pay for the debt of the less responsible.
Biden is not only wiping out up to $20,000 of debt for those making $125,000 a year, but he is also extending loan forbearance for another four months. Further, since the Obama administration, borrowers only need to pay up to 10% of discretionary income each month. Biden has slashed income-based repayment plans to 5% of discretionary income.
Remember in 2010 when President Obama nationalized student lending claiming it would “save American taxpayers $68 billion in the coming years.” He was a little off.
According to the Committee for a Responsible Federal Budget, Biden’s student loan forgiveness plan will cost US taxpayers between $440 and $600 billion- the largest sum of money ever disbursed in our nation’s history by executive action.
The Penn Wharton Budget Model concluded that the total cost could exceed $1 trillion.” How much does the Biden administration estimate their plan will cost or who will pay? They refuse to say. There are only one of two reasons for this dodge- either they have no idea, or they know the answer is not politically palatable.
Not only is this immoral, but it is also unconstitutional. Just last year, Biden and House Majority leader Nancy Pelosi both acknowledged that the president does not have the power for debt forgiveness and that such a move would require an act of Congress.
Incredibly, Biden is relying on a post-9/11 law known as the Heroes Act to cancel up to $20,000 in student debt for more than 40 million Americans. President George W. Bush signed the Heroes Act into law in 2003 to allow the Secretary of Education discretion to grant debt relief to military members during wars or national emergencies.
As stated by law professor Jonathan Turley- “It’s extremely dubious to argue that that act gives the president the right to toss aside $300 billion in student loans…it will find a chilly reception at the Supreme Court.
Unfortunately, Biden does not let the bounds of the law restrain him when it comes to acting for the good of his political party. Biden’s claim that the Covid pandemic is an emergency necessitating debt relief is nothing short of a lie.
Just three weeks ago, his CDC relaxed Covid guidelines, acknowledging Covid is no longer a significant threat. Bidens’ Department of Homeland Security has also been fighting to end Title 42-a Trump-era public health policy allowing for the quick removal of migrants- claiming Covid is no longer an emergency.
Further belying Biden’s dubious claim that the Covid pandemic justifies erasing a trillion dollars of student loan debt are the facts that: there are close to 11 million open jobs, unemployment among college graduates is at a record low 2%, and the past three years those with student loans did not have to make a single payment, and had the interest on their debt waived.
Moreover, borrowers in the top 60% of the income distribution hold more than 70% of the student loan debt. And more than half of the debt is held by those with graduate degrees. In other words, Biden is bailing out young lawyers, MBAs, and others with significant earning potential on the backs of middle and lower-class Americans.
There is no emergency stemming from the now-waning pandemic preventing the repayment of loans. The only “emergency” is the prospects of Democrats holding the House and Senate after the November midterm elections. In the 2020 presidential election, Biden won the votes of the under 34 crowd by an overwhelming majority. Current polling shows his support among this group has fallen by 40 points.
Biden’s cancellation of student debt months before the upcoming election is not a coincidence- it is the reason. Sadly Biden only cares about the short-term political gain and not the repercussions of overriding a legal contract entered into by millions of Americans to pay their debt.
Not the least of which is the moral hazard that will come from telling millions that their debt has magically disappeared- aka transferred to fellow Americans. Why will future students consider the cost of college knowing that past students had their loans slashed? No doubt this will encourage more borrowing with expectations of debt cancellation.
Further, many economists, including economic advisors in the Obama/Biden administration- Larry Summer and Jason Furman, have publicly stated that canceling $500 billion to one trillion of debt will exacerbate the already 40-year-high inflation.
“Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. Doing it while going well beyond one campaign promise (10K of student loan relief and breaking another (all proposals paid for) is even worse” -Jason Furman (Harvard Economist and former chair of the Council of Economic advisers in the Obama/Biden administration)
Furman also pointed out that this massive debt relief will encourage higher tuition. It is not coincidental that after the enactment of the first major government student loan program in 1973, tuition costs started outpacing inflation. Rather than keep the costs stable, universities took the extra government-subsidized cash as a cue an unlimited money spigot had been turned on and jacked up tuition.
After decades of government interference disrupting market forces, college tuition now bears no semblance to what many average Americans can afford. Before 1980, the cost of college rose in synch with inflation. Since then, college tuition has grown as a multiple of inflation.
A 2018 Oxford University study found for every dollar increase in federally subsidized student loans, tuition went up an average of 60 cents. If Biden wanted to make college even more unaffordable for future students, a massive trillion-dollar subsidy in the form of loan forgiveness was the perfect answer.
Debt forgiveness also helps to perpetuate the student loan debt problem. The Committee for a Responsible Federal Budget estimates that in less than ten years student loan levels will be back at the current level.
Biden’s unconstitutional student loan cancellation is just further proof that he and his administration will always choose the interests of their political party, even if it means long-term harm for the American people. However, along with Republicans, some Democrats have criticized Biden’s massive debt cancellation. Perhaps the electorate is smarter than Biden realizes, and this will not be the political win he expects.
