Executive Action Will Be Questioned; Issue May Go To the Supreme Court
President Biden made it official this week: he’s planning to let 43 million people skip on repaying their student loans.
Students owe an average of about $30,000, and those who earn less than $125,000 per year, or $250,000 for married couples, won’t have to repay $10,000. Those who have Pell Grants won’t have to repay $20,000. And nobody will have to make any payments on their student loans until January.
The president’s announcement fulfills a campaign promise – just in time for the mid-term elections. The forgiveness will cost almost $400 billion – and three-fourths of the benefit is going to those in the top 60% of wage earners, according to a study by the Wharton Business School.
No one is happy about his proposal. Those on the political left wanted him to forgive $50,000 in student loan debt, not just $10,000. Those on the political right hate the idea of yet another government giveaway, which they argue (correctly) that it will increase the federal debt and raise inflation even further.
And every fair-minded person (like me) hates this proposal for the simple reason that it is incredibly unfair. Let me explain.
If you paid for college out of your savings, you get nothing from Joe Biden's plan. If you worked hard to earn enough money to pay for school, you get nothing from Joe Biden's plan. If you borrowed money from somewhere else, instead of getting student loans – such as refinancing your mortgage or using credit cards, you get nothing from Joe Biden's plan. If you didn’t go to college because you felt that you couldn't afford it, you get nothing from Joe Biden's plan. If you choose a cheaper college that you really didn’t want to attend because you couldn't afford the more expensive school, you get nothing from Joe Biden's plan.
The only way you can favor of the president’ plan is if you're among the 43 million people who enjoying the $10,000 or $20,000 forgiveness. If that’s you, you're not focused on fairness; you're being selfish and greedy.
Keep in mind that loan forgiveness doesn't make the debt disappear; it must still be repaid. If you’re not going to repay your own student loan, then you’re forcing the other American taxpayers to repay it for you.
I'm one of those taxpayers. I resent having to pay off your student loans for you. Sorry if that offends you, but hey, I’m busy paying off my car, my mortgage and my credit cards. How about having the government picks up the tab for those so I don’t have to?
Even some Democrat economists hate the president’s idea, including Larry Summers, who Treasury Secretary under Bill Clinton, and Jason Furman, an economist in the Obama administration. They both say Biden’s plan will result in future tax increases.
If you’re not upset about this plan yet, consider this: most of the people who will enjoy forgiveness of their debt don't need the help. Indeed, half of all US households in this country are headed by married couples, and those who earn up to $250,000 qualify for loan forgiveness. Guess who earns $250,000 or less? airline pilots, nurse anesthetists, dentists, pediatricians, physicists, architects, judges, astronomers, podiatrists, marketing managers, makeup artists, financial managers, petroleum engineers, air traffic controllers, pharmacists, computer engineers, lawyers, compensation managers, sales managers, purchasing managers, HR managers, and optometrists. All these people earn between $125,000 and $250,000, according to the Bureau of Labor Statistics
And the worst part is this: That loan forgiveness isn’t going to help for any of these people. No one has been making payments for more than two years, because payments were suspended during the pandemic’s outbreak. Even though everyone's back at work now – the unemployment rate is the lowest in four decades - for some stupid reason, the president has continued the moratorium on student loan repayments.
And now the president says the moratorium still continues for the rest of the year. Thus, the loan forgiveness won’t help you because you haven't been making payments, anyway. You long ago diverted the money you had been spending on loan repayments toward other expenses – meaning, if President Biden really wanted to help those 43 million people (and the economy), he'd give them each a check for ten grand. Doing so would allow them to that cash now – just like everyone was able to do with all the other stimulus money the government doled out during the pandemic. As dumb as this idea is, it’s still better than the president’s forgiveness plan.
And is the plan even legal Congress may object – and so might the courts. If it’s allowed to stand, President Biden will have succeeded in encouraging all sorts of bad behavior. Colleges will raise tuition – and why not? They’ll wink-and-nod to incoming freshman not to worry about the cost, saying their loans will be canceled by the government one day, too.
And in the bad behavior category, the worst part of President Biden's proposal is that those earning less than $30,000 will no longer have to make payments on their student loans. Thus, the president is actually encouraging people not to work – because they’ll have to repay the loans if they do. Two hundred years ago, you got thrown in prison if you didn't repay your debts. Now, you get rewarded.
The president’s entire proposal is teaching precisely the wrong lesson and rewarding people for all the wrong behaviors. If we persist in producing bad public policy like this, our nation’s future is at risk.