Being Right: Biden’s Student Loan Bailout

Michael Hanratty, Staff Writer

When asked last February about waiving federal student loan debt by executive order, President Joe Biden told CNN, “I don’t think I have the authority to do it.” Fast forward 18 months, and he did just that.

On Aug. 24, President Biden canceled $10,000 in federal student loan debt for all borrowers making less than $125,000 and $20,000 for Pell Grant recipients. His executive order also revamped the income-based repayment system for federal loans, lowering required monthly payments to 5% of discretionary income and essentially waiving interest on them. It’s terrible policy, creating perverse incentives for colleges and borrowers alike. It’s unconstitutional, too — and Joe Biden knows it. The only thing that has changed since Biden’s February 2021 comment is his approval rating. The President had a choice: break the law to juice Democratic turnout this November, or stay true to the Constitution. He chose the Democrats.

On the merits alone, the Student Loan Bailout is a boondoggle. The Congressional Budget Office estimated the cost at a staggering $420 billion, or nearly half of the pre-existing federal deficit for this year. With the national debt already north of $30 trillion, it’s not as if we have extra money to be throwing around.

Beyond the sheer cost of the plan, though, it fundamentally changes the character of the federal student loan program. The plan reduces monthly minimum payments but maintains the same standards for loan forgiveness – essentially, if you’ve paid the monthly minimum for 20 years, your loans are forgiven. Analysis by the left-leaning Brookings Institution found that under the new rules, only about 50 cents of every dollar borrowed in federal student loans will ever be paid back. (Today, for every dollar borrowed, approximately a dollar is paid back.)

The incentive is clear: borrow, borrow and borrow some more — your debt will never come due. Instead, taxpayers will be on the hook — carpenters and plumbers will be subsidizing degrees in Puppet Arts, Cannabis Biology and Costume Technology. And colleges won’t be blind to Uncle Sam’s generosity. They know that students’ borrowing capacity is about to increase dramatically, and they’ll certainly raise tuition accordingly. Undoubtedly, there should be some sort of student loan safety net; a backstop so that college gone wrong doesn’t bankrupt you for life. The Biden plan, though, goes far and beyond. As Beth Akers of the American Enterprise Institute put it, the Biden plan turns the federal student loan program into “a convoluted system of ex-post grant aid, with dollars going to those who borrow the most instead of those who need it most.”

It would be one thing if Congress duly authorized such a program. That President Biden instituted these sweeping changes by executive order on shaky legal footing (to put it generously) is far worse. The Department of Justice argues that the HEROES Act of 2003 gave the administration the authority to cancel student loan debt and restructure the income-based repayment program. Passed in the wake of 9/11, the HEROES Act allows the Secretary of Education to “waive or modify” student loan debt when “necessary” in response to a national emergency. And the Biden administration’s national emergency of choice? The COVID-19 pandemic.

In March 2020, the rationale might have held up. Two and a half years later, though, the pandemic is simply no longer a national emergency. President Biden said as much a few weeks ago as he told CBS that “the pandemic is over.” If that’s the case, then the executive order is plainly illegal. The administration knows it, too — they’re doing anything to keep the program from ever coming before a judge. Two major lawsuits challenge the executive order in federal court. In both cases, the Biden administration changed the rules of the forgiveness program after the suit was filed, hoping to deprive the plaintiffs of standing to challenge it.

Perhaps we shouldn’t be surprised that President Biden put forth such an obviously flawed plan: economic illiteracy and constitutional apathy are defining features of his first two years in office. This time, though, it’s arguably worse. The student loan bailout is, quite simply, a brazen attempt to buy votes for Democrats ahead of the midterms. The Biden administration made a crude calculation — it is willing to do lasting damage to taxpayers and the rule of law to increase the Democrats’ chances of holding Congress this November.