When the Supreme Court struck down the Biden administration’s plan for massive student loan forgiveness ($10,000 to $20,000 for 98% of borrowers), I said to friends, “Biden will sneak in most of what he wanted in other ways.” Specifically, I thought he would continue the extremely generous income-repayment scheme that he and Education Secretary Miguel Cardona had announced, which, in addition to the loan-forgiveness scheme, effectively ended repayments for vast numbers of student borrowers—and was not mentioned in the Supreme Court decision.
That Biden–Cardona move came even faster than I expected, on the very day that the SCOTUS opinion was announced. The plan, apparently, calls for borrowers to make payments equal to an absurdly low five percent of disposable income, with over $30,000 in income excluded. A new college graduate making $45,000 a year in his first job would face annual repayments of less than $1,000 a year; if the student had a rather modest $20,000 in debt, the interest payments on that debt would be greater than the repayment amount, meaning the debt would normally increase—but not under the new Biden plan. In effect, the interest rate falls to zero for less responsible borrowers. Call it a deferred loan forgiveness plan. A high school graduate borrowing $20,000 to start a lawn care business would not be so lucky—he would probably owe debt repayments to a private bank lender of $4,000 a year, maybe more.
The Little People Be Damned! Only college students need apply for this federal sweetheart deal financed by a lender, the Federal government, that is running up annual deficits at trillion-dollar rates despite under-four-percent unemployment. Highly productive college grads, of course, like computer and engineering whizzes making $80,000 to start and $125,000 or more after ten years, would have to repay their loans, but the students in woke majors like gender studies who end up as baristas at Starbucks are free from repayment. Tax those who get jobs society values, but subsidize those who majored in subjects loved by the progressives who dominate most universities. Down with engineering, computer science, and finance; up with gender studies, critical racial theory, and postmodern art.
But what angers me most about the recent Biden–Cardona fatwa (justified now under the Higher Education Act rather than the later HEROES Act) is not its fiscal irresponsibility (the plan will probably cost hundreds of billions of dollars, in a nation whose major entitlement programs are already pushing us rapidly toward Fiscal Armageddon), but rather its brazen contempt for the rule of law and civil, respectable behavior, and the fact that it undermines the rules-based civil society on which America has consistently depended since the great constitutional battle of the Civil War, which ended 158 years ago.
[Related: “SCOTUS’s Loan Forgiveness Ruling and the Path Forward”]
Americans are increasingly ignoring such time-honored restraints on behavior as the Ten Commandments (even Republicans mostly do not go to church). They are ignoring the once widely accepted, unwritten fiscal constitution that said that in most years, governments should spend no more money than they receive in revenues. In some cities, law enforcement officers have been rendered largely ineffective by woke mayors and prosecutors as shoplifting, rioting, and murder become more commonplace.
My contempt for the current president’s disdain for civil political behavior is certainly bipartisan—I consider Donald Trump’s attempted overthrow of the 2016 election and his cavalier behavior regarding classified documents to be reprehensible as well. Our whole society seems to be unraveling.
This brings me back to higher education. Many colleges in the era of grade inflation no longer impart much knowledge—worse yet, they do not inculcate virtue. They do not teach young American leaders how to behave in ways that benefit society while positively exercising civic leadership. Virtue is severely undermined by college presidents and other campus leaders who publicly or tacitly support rioting and the destruction of property. Colleges are supposed to promote not only economic growth and job opportunities for graduates but also healthy discourse that benefits all of society, not just those in the ivory tower. It is not surprising that there has been a sharp decline in public support for colleges. I think Milton Friedman was probably right when he wrote me in 2003 that, perhaps, we should tax universities as a nuisance rather than subsidize them for their socially beneficial contributions to society.
When I wrote about this issue recently in the New York Post, I said that Biden’s loan forgiveness ideas were best described with several “I” words, like “irresponsible.” I was told not to call the ideas “idiotic,” but that is what I think they are politically. In addition to being bad public policy, the Biden student loan proposals, even as revised post-SCOTUS, do not seem to have any net positive political value to the president. Sure, they might win the votes of some student loan debtors, but they also anger others, including independents who have paid off their loans or never went to college. Polling data certainly did not surge for Biden in the aftermath of the original proposals, despite the continued and increasingly adverse travails of his presumptive leading opponent, Mr. Trump.
Image: Wikimedia Commons, Public Domain
It’s not improper for a president to seek another statute to do what the Supreme Court has stated he could not do by executive order. All that matters is whether or not the second statute permits the actions that he’s now taking. That’s for the courts to determine.
The better and mor moral method (in my lowly opinion) is to seek an explicit statute from Congress. Money bills must originate in the House. It’s not going to happen. You know it. I know it. Biden knows it. So, he’s throwing the stuff against the wall, hoping something will stick. And, if it doesn’t, after a year or more of litigation; not to worry. He can blame the Republicans and Clarence Thomas. For the Democrats, that’s a win – win.
The statute of limitations on debts is six or seven years in most states — and prior to the revision to the bankruptcy code, if the loan had been in default for seven years then it was dischargable in bankruptcy.
You didn’t want the kids just coming out of college to declare bankruptcy and then take the six-figure job, but when the kid winds up with a totally useless degree (or doesn’t even graduate — and about half don’t) then after it was clear that he/she/it wasn’t going to be able to repay the loan, bankruptcy was used as intended.
I think that Biden’s income based repayment is the worst of both worlds — as Dr. Vedder points out, it’s overly generous. And the other thing is that it subsidizes the labor costs of the activist left (who would have to pay more if student loan cancellation wasn’t part of the deal). Indirectly, it essentially ensures careers for those majoring in things like Women’s Studies.
I’d like to see a recharge to the institution — have the institution lose some money when the graduate isn’t successful. That would change things in a hurry….
It should be clear now that Biden’s original plan to forgive $10,000 of student loan debt was purposely deceitful and immoral. In fact, it was just the beginning. The real goal was eventually to wipe out all student load debt.
Patti, he has to — but not for the reason you might think.
It is Gen X who are the parents of the current generation of undergrads, and they were around in the late ’80s and early ’90s when student loans had a 9% interest rate and there wasn’t any income-based repayment options. I’ll never forget one of Jay Leno’s jokes — that the reason why there were so many department store Santas that year was because they were all hiding from the student loan repayment officers.
The Gen Xers who went to college, those who didn’t — it is something that they all had knowledge of. And much like it was the WW-II generation who refused to send their children to Vietnam, they are reluctant to let their kids assume all of this debt. Particularly when a college degree is not the employment certificate it once was.
So they have to be told that their kids won’t have to worry about repaying *their* loans, or the kids won’t go to college at all — and what happens to the political left then???
It’s kinda like how FDR had to create the FDIC in order to have people putting money back into the banks — they had either lost money in a bank or knew someone who had, and wouldn’t have put the money there without insurance.
It’s all about what happens in the fall of 2026….