Rewarding bad behavior
"The [student loan] debt doesn't really get canceled; it just means they shift the debt off the backs of the people who took out the loans to you and me and everyone else who's a taxpayer. I think it is outrageous; I think it is an injustice; I think it's rewarding people for bad behavior. If you have a debt and you don't repay it – we use to call those kind of people 'deadbeats.'
"So, the idea that we're teaching a whole generation that you don't have to pay back your debts is just … irresponsible. But more importantly, it's completely unfair to the people who paid back their student loan."
Economist Stephen Moore
The Hill is reporting Biden may announce at least $10,000 in loan forgiveness for borrowers who make less than $125,000 annually. There may also be another payment freeze for roughly four months, which would continue a stop-and-go process that dates back to the Trump administration when it took action during the pandemic.
Biden’s planned announcement is being called an election-year tactic by critics while supporters of so-called student loan forgiveness have demanded the U.S. government help millions of Americans struggling to repay their student loans.
Reacting to the Hill’s story, Lindsey Burke of The Heritage Foundation says it’s irresponsible to simply wipe away legal debts when millions of others were responsible and paid off their debts by living modestly and making sacrifices.
“I am sure at this point those Americans who have repaid their loans are wondering if they are going to get a $10,000 rebate check,” she says, “but I'm not holding my breath."
Up until 2010, applying for a college student loan required most students to walk into a bank and walk out approved for a loan, with repayment guaranteed by the federal government. After passage of a 1993 law, the federal government began loaning directly to students, and thus competing with the private sector, then a 2010 law set up “direct lending” and eliminated private lending altogether.
Outstanding student loan debt passed the $1 trillion mark in 2012 and stood at more than $1.7 trillion in 2021, according to the website LendEdU.com.
If the Biden administration wipes away much of that debt, how much will taxpayers be stiffed? According to an analysis by the well-known Wharton School of the University of Pennsylvania, the cost is approximately $300 billion if the “forgiveness” is capped at $10,000 with a maximum income of $125,000. The cost jumps to $980 billion with a $50,000 cap.
The yearly tuition for obtaining an MBA at Wharton, incidentally, is approximately $76,000 for the first year and $74,500 for the second. The estimated total cost for the two-year program is $227,428, which reflects the crushing cost of a university education for many.
But is wiping away all of the debt even legal?
Burke says that is an "open question" because the Higher Education Act gives the President authority to cancel some targeted student loan debts. An executive order that allows "broad-based cancellation" is another matter, she says.
House Speaker Nancy Pelosi told reporters in April, just four months ago, that a president doesn't have the legal authority to wipe away student loan debt.
"He can postpone. He can delay, but he does not have that power," she said. "That has to be an act of Congress."