Posted on 08/25/2022 9:25:22 AM PDT by Heartlander
After months of will-he-or-won’t-he suspense, President Biden has announced his executive actions on student debt. The administration plans to cancel up to $10,000 for borrowers currently earning up to $125,000 annually ($250,000 for married couples)—with the maximum forgiveness doubled for the students who, based on their parents’ finances, received Pell Grants when they attended college. Biden will also extend the pause on payments “for one final time” through the end of the year and allow those with undergraduate loans to cap their payments at 5 percent of their discretionary income, as opposed to 10 percent under current policy. Because the “cancellation” is really a transfer, the combined changes will cost taxpayers something like $500 billion—about $1,500 for every person in the United States.
Forgiving student debt may be a savvy way for Biden to appeal to young, left-leaning voters, but it’s indefensible as policy. Beyond the baseline question of whether the government should ever wipe out the willfully assumed debts of a preferred class of Americans at the expense of everyone else, the program is a poorly targeted use of taxpayer funds, rewards the dysfunctions of the higher-ed sector, and is likely illegal.
Yes, the limits placed on the program make it less of a bonanza for the upper-middle class than it could have been. The largest debt loads are typically held by those with advanced, not just undergraduate, degrees, so blanket forgiveness would have been a massive windfall for young lawyers. But the $125,000 income threshold doesn’t come close to targeting the most sympathetic cases: those who were preyed upon by low-quality colleges, often didn’t even earn a degree, and wound up working at the proverbial Starbucks. The median earnings for a U.S. female working full-time and year-round were about $50,000 in 2020; for a male, the number was roughly $60,000. Yet the White House set its cutoff for five-figure handouts at more than twice those amounts—and, citing numbers prepared by its own Department of Education, boasts that 87 percent of the debt relief announced yesterday will go to those earning less than $75,000 in individual income. Even that would be an odd threshold for taxpayer largesse, as it’s above the 2020 median household income and more than triple the 2022 Federal Poverty Level for a family of three. But rest assured: “only” about $65 billion will go to individuals earning even more than that by themselves, at a cost of $200 per U.S. resident.
Thanks to the income cap, this is not a handout to the rich—but it’s a handout to a lot of not particularly needy Americans: educated, young, with their peak earning years ahead, and oftentimes already well-off. Many of these individuals made deliberate, well-informed decisions to borrow money to attend college, and benefited from it.
Income levels aren’t the only measure by which the program doles out taxpayer funds irrationally. Those who didn’t attend college will still pay their taxes to support forgiveness for those who did. (Among Americans 25 and up, nearly four in ten have no college education.) Someone with business, mortgage, or car loans might carry just as much debt as a former college student and have taken it out for just as good a reason—but he will get no relief.
Even among those who did borrow money to attend college, the program won’t treat everyone equally. If one graduate focused on paying down his debt while another spent his money on other priorities, the second individual will receive subsidies for which the first is ineligible. Those old enough to be done paying down their debts, as well as those young enough not to have started borrowing yet, will lose out to those of just the right age to benefit.
And if the idea is that the U.S. higher education system is overpriced and that young people are taking out too much debt, one-time forgiveness does nothing to change that. To the contrary, it sends the message that taxpayers stand ready to inject money into the system when prices and borrowing get out of control. As my Manhattan Institute colleague Brian Riedl has pointed out, colleges have an unholy superpower of soaking up money intended to help students—they can simply raise prices when more aid becomes available.
Yet despite these price increases, college is not quite as expensive as many think. The “sticker prices” that colleges advertise are essentially fake, adjusted downward in a form of price discrimination called “financial aid.” Among those graduating with bachelor’s degrees, about one-third have no federal loans, and starting balances for the remainder average about $27,000. Meantime, Americans with bachelor’s degrees out-earn high school grads by the better part of a million dollars over the course of their lives, despite taking a few years off to study (and party).
Not all that income difference is an effect of college itself. People who go to college are selected for their intelligence, conscientiousness, and so on. But at minimum, this shows that there is no reason to target individuals with higher levels of education for special relief. Intelligent policymakers would fix higher ed’s price problem by reforming higher ed, not by subsidizing people who willingly borrowed money to attend and now earn household incomes up to $250,000.
Finally, the legal question: Does any provision of federal law give the executive branch the power essentially to rewrite the terms of the student-loan program? Certainly, no statute was ever intended to do that. (Those looking to drop down this particular rabbit hole can start with dueling memos from the Biden and Trump Education Departments.) It will be revealing to see how courts handle the textual issues here, as well as the question of who, if anyone, has “standing” to sue to block others’ debt forgiveness.
But barring an adverse court ruling, young Americans with student debt are now set to receive a five-figure handout. And everyone else is set to pay for it.
Regardless of whether or not you think using tax dollars for gifts to “under-privileged” folks is virtuous, Biden’s student loan giveaway absolutely does not fit that definition.
Travesty. Unconstitutional. Plain ole wrong. Evil.
I went to school with students who got Pell Grants. Everything was paid for - tuition, books, fees and THEN they got Pell Grant money on top of that which most promptly spent on eating out, clothes and furniture.
FJB.
I paid off my own student loans after i lect college. I’m also in the process of paying for my daughter to go to college, a Big 10 school, at $52,000 a year.
We get no aid and she’s taken no loans.
I will be taking out a federal parent student loan her senior year in the amount of $10,000. I will not be paying back the loan. I am done paying for everyone else.
No matter what our Communist wanna be masters say this will never make it past Trumps Supreme Court. Thank you DJT!
If you’re so smart, why aren’t you rich? Our education systems are beyond broken.
This is a payout to the democrat base.
A “gibbedat” isn’t just an urban black, it also includes the white liberal.
My response to student loan forgiveness comes from an earlier era:
“Who hired the money?”
A blatant attempt to sway young voters to the left, IOW vote buying.......and the left isn’t done either.....before the midterms I suspect they will do SOMETHING to try to sway the black vote also.
Of course it depends on the field of study, but I've known many folks with MS and PhD degrees that I'd have to speak through gritted teeth about if I referred to their education as "advanced". LOL
More free taxpayer money for the Socialist Snowflake Generation (aka Generation Tranny) with worthless tuition receipts. Hey Jo Jo! How ‘bout a little taxpayer forgiveness and give some of OUR money back to us. You seem to have so much money that you’re running out of things to spend it on.
When the Democrats are in charge, they reward their constituents. Their constituents are Big Education, Big Tech, Big Pharma, Big Government, etc.
The Republicans put up token resistance and then agree to fund everything in an Omnibus package at the end of the year.
It would be nice if our Republican representatives started siding with conservatives for a change. Reduce the size of government. Lower the debt. Secure the border. Stop funding left-wing groups.
I heard a stat weeks ago; 60% of student loan debt is held by 40% of borrowers.
60% of the people who have student loans owe $20,000 or less- another words just about the same as a car loan.
There is no doubt the bribe to the affected voters was going to happen,
it's all about timing for the mid-term votes.
the 1500 per person number is based on 330 million population
if you use the adult population of 250 million, since children do not pay taxes, you get 2000 per adult
I agree with the article, but disagree with the idea that gaining a college degree makes one “educated”.
Universities may provide useful training, and the credentialling function it serves in technical fields does save time for employers. But few people emerging from a university are “educated” in more than a superficial sense.
they are indoctrinating the students
and making us pay for it
standard m.o. for the LEFT
The whole student loan program needs to be trashed. Its wasted money and it preys on ignorant youth. Borrowers are encouraged to no end by colleges to accept all the money they are offered. The income based payment is also deceptive. It promises making payments affordable but conveniently avoids the topic of interest that accrues on the borrower. This whole scam is pretty much the same as those payday loan companies where the underlying intent is to cripple people in endless debt.
That being said, I do feel for many who have a balance that only seems to be increasing. However, this 10k forgiveness is not going to solve the problem. People are still being told to take the money so we will be right back where we were in no time. I would be more accepting of some form of forgiveness if root issues were addressed. In its state now, they are putting a bandaid on an infected wound.
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