President Joe Biden will “forgive” up to $20,000 in federal student loan debt for millions of Americans by executive order.
Summary
President Joe Biden will “forgive” up to $20,000 in federal student loan debt for millions of Americans by executive order.
- Biden’s student loan handout is estimated to cost $300 billion over 10 years and will cost more than $2,000 per taxpayer.
- Americans who make less than $125,000 (or $250,000 for a family) can have up to $10,000 in student loan debt “forgiven” under Biden’s plan, and Pell grant recipients can have up to $20,000 “forgiven.”
- Americans who took out private loans, already paid off their student loans, or made alternative life choices to avoid student loans are not entitled to any relief and will have to fund Biden’s plan with their tax dollars.
- Debt forgiveness at this scale would encourage billions of dollars in consumer spending and could further fuel surging inflation.
- More than 40 million Americans could have their student debt reduced or eliminated under Biden’s plan. The president also announced he would extend the federal student loan moratorium for “the final time” through the end of the year.
- It is unclear whether President Biden has the legal authority to enact his student loan “forgiveness” program via executive decree and without congressional approval. Legal challenges are a virtual certainty.
- Republicans criticized Biden’s proposal as inflationary and a “bailout for the wealthy,” while even liberal-leaning economists criticized the plan’s cost and predicted it could “force future spending cuts or tax increases.”
- Senate Minority Leader Mitch McConnell (R-KY) said the plan was “a slap in the face to working Americans. Sen. Ben Sasse (R-NE) called the proposal “deeply regressive” as it “forces blue-collar workers to subsidize white-collar graduate students.”
- President Biden and other prominent Democrats have taken tens of millions of dollars from the higher education sector. The president raised $64.5 million from higher education workers in 2020, the industry’s top recipient.
- The New York Times noted Biden’s proposal was still “less than what some Democrats had been pushing for” and came after months of internal deliberations within the Biden White House. While progressives wanted to go farther, even centrist Democrats are calling the plan “deeply unfair” for “unnecessarily provid[ing] tens of thousands of dollars to many high-income households.”
- The Washington Post’s Megan McArdle wrote Biden’s “fix” for student loan debt “will likely make the problem worse” and predicted student loan forgiveness would only encourage irresponsible borrowing and future loan-takers to turn to the taxpayer for relief.
- CNN wrote Biden’s plan could have “profound and unpredictable electoral consequences.” The plan could encourage college-educated voters to turn out for Biden, or inspire an electoral backlash from the Americans forced to pay for the student loans of others.
- FOX News noted White House press secretary Karine Jean-Pierre avoided direct questions about who will pay for the student loan debt forgiveness plan and acted like restarting student loan payments in January would handle any negative externalities from the proposal.
- National Review slammed Biden’s plans as “wrong on every level.” The editorial pointed out the issue is not a top priority for most Americans, aside from progressives on Twitter, and will exacerbate inflation and even Speaker Nancy Pelosi has said Biden does not have the power to unilaterally forgive student debt.
- The Washington Examiner shortened Biden’s message to working-class Americans to two words: “Drop dead.” The Examiner wrote the bailout is “illegal, inflationary, immoral… and divisive” by “benefiting those most fortunate among us at the expense of those least fortunate.”
Author’s Take
President Joe Biden’s student debt “forgiveness” plan would transfer wealth from the poor and working class to the highly educated and wealthy at a scale virtually without precedent in American history. This proposal does nothing to reform higher education, but it does offer financial relief to an overwhelmingly Democratic constituency.
Student loan debt can’t just be canceled or forgiven without consequence. Someone has to pay for this – there’s no such thing as a free lunch. The president has decided to transfer that debt obligation from the adults who willingly took out that debt onto taxpayers.
President Biden is sending Americans a clear message: if you paid off your loans, made difficult choices to avoid student loans, or didn’t go to college, you’re a sucker.
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© Dominic Moore, 2022
