Biden’s Student Loan Gambit Is Unlawful, Misguided and Immoral, But It Will Buy a Lot of Votes
The long-awaited student loan forgiveness is here. The aggregate numbers are staggering. The White House press release shows the political spin and what the plan will mean to borrowers but carefully avoids the total cost to taxpayers.
On his own authority alone, the President is forgiving $10,000 to $20,000 of student loan debt ($20,000 for those who went to college on Pell Grants; $10,000 for others). Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples).
The Amounts Are Huge
Before the final details were announced, the Penn Wharton Budget Model calculated that the forgiveness of $10,000 of debt on this basis would cost U.S. taxpayers about $300 billion this year and $330 billion over 10 years. With the increase in forgiveness for Pell Grant loans and the new limits on income-based payment plans, the new expense total may reach $400 billion to $500 billion.
Any way you look at it, the cost is huge. How much $300 billion? It’s more than the annual state budgets for Texas, Florida and Pennsylvania combined. It’s almost three times the amount allocated to road and bridge improvements in the earlier bipartisan infrastructure bill. It’s three times the $102 billion by which the so-called Inflation Reduction Act supposedly reduces the federal deficit over 10 years (starting in 2027).
Of course, those uses of funds required and received legislative approval. But the Biden action never went before Congress because the Democrats did not have the votes to approve it.
The Debt Cancellation is an Illegal Abuse of Power
Under the U.S. Constitution, presidents and their executive branch of government cannot spend money unless it has been authorized by Congress. The White House points out that the Higher Education Act of 1965 lets the Education Secretary “compromise” (i.e., modify) student debt. But the Federal Claims Collection Act of 1966 sets very limited terms and strict procedures for any such “compromise.” In West Virginia v. EPA, the Supreme Court recently held that Congress must provide clear authorization to agencies taking action on major questions. Unilaterally canceling $300 billion to $500 billion of debt is wildly different than compromising individual loans on a borrower-by-borrower basis — so much so that the Biden plan is unlikely to withstand challenge in the federal courts.
The Plan is Misguided
The plan is embarrassingly overbroad. The $125,000 cutoff ceiling doubles to $250,000 when applied to married couples filing jointly even if the second married partner has no forgivable loans. According to the U.S. Census Bureau, median household income was $67,521 in 2020. Despite the White House’s efforts to generate sympathy for impoverished former students shackled by college loans (which they were happy to have at the time), there’s a big jump from that median household income figure to the $250,000 cap. Based on just the $10,000 forgiveness amount, the WSJ reported that about 70% of the loan relief would go to borrowers in the top 60% of income distribution. The White House press release tries to make the best of this by saying that the action will not benefit individuals or households in “the top 5% of incomes.” I get the impression the White House press office expects us to say, “Oh, sure, that makes sense.” But, of course, it doesn’t.
The breadth of the plan increases the insult for everyone else who will be paying for the cost of the loan cancellations. This group includes a lot of people, including parents and grandparents who scrimped and saved or took out mortgages to put their kids through, as well as people who repaid their college loans, worked their way through college, attended less expensive programs they could afford or pursued other career options absent college. The extension of the program to people making as much as $250,000 makes the insult far worse. The plan will force truck drivers, clerks and laborers who did not go to college to bear the loan burdens of college graduates whose educations will allow them to earn far more.
The plan also fails to offer any solution to the problem of college costs going forward. Borrowers lucky enough to be in the window of the Biden cancellations will receive a windfall. But the problem of burgeoning college costs and student loans will simply reset and start again, building new balances that the Democrats can promise to forgive if people will only vote for them.
The Plan is Filled with Moral Risk
Spreading the benefits across 94% of U.S. incomes is not an accident. It is a carefully crafted invitation to a wide audience of more free college benefits to come. A narrower forgiveness plan focused on those who need help most could offer more help to the needy, but it would leave out (and doubtless offend) more affluent borrowers who would want to be part of the largess. By spreading the benefits across a wider spectrum of beneficiaries, Biden is increasing the number of targets in his vote-buying scheme.
The sad piece of all this is how blatant it is. Two and a half months before our hotly contested mid-term elections, a president fighting to improve his approval ratings unilaterally acts to cancel at least $300 billion of federal assets that will benefit millions of current and former students who could be very helpful if they vote. The White House says its actions will forgive the college loan balances of 20 million borrowers and up to 43 million will receive at least some benefits.
That’s a lot of potential voters, but the total number of voters favorably influenced by the plan is even higher when the parents, grandparents and partners of the student borrowers are considered. It’s hard to estimate what that multiplier might be, as some families could have multiple borrowers. If you assume each borrower has just one or two other family members who can vote (and are not counted as or for another borrower), these figures could quickly double or triple. On that basis, 43 million beneficiaries could become 86 million or 129 million voters who have a dog in this fight. (For context, recall that Biden received about 81 million votes in the 2020 presidential election while Trump received about 74 million.)
The message will be simple and clear: “Vote for Democrats if you want these benefits to stay in place — and you want even more free benefits to come. Whatever the constraints may be on unilateral presidential action, Congress can vote to cancel all college loans and make college free for everybody. Vote Democratic and give us the majorities we need to do even more. Don’t worry, we will make the rich pay for it.”
Even if the plan is eventually thrown out by the courts, the promised cancellation benefits will be in the minds of these student loan borrowers and their family members when they go to vote in November. If the plan is eventually overturned by the Supreme Court , it will give the Democrats another excuse to criticize (and undermine the authority of) the Court and urge the election of Democratic Senators who will confirm liberal justices who will accede to unilateral executive action by a Democratic President.
Some media are spreading backstories explaining how hard and long Biden’s team worked to come up with its final student loan cancellation plan. While it may have been a long tough slog, its hard to ignore the political good fortune of dropping the plan so close to the mid-term election when momentum is critical and time is too short for opponents to mount an effective legal attack.
The greatest moral risk from the Biden plan may be its impact on Americans’ sense of personal responsibility. Whatever the current narratives about the importance of delivering “equity” over equal opportunity, America is a nation that has been built by sweat, tears, innovation and tenacity. Cancelling college debt on Biden’s overbroad basis provides equal benefits to those who worked hard to graduate and repay their loans and those who dropped out of college after borrowing too much. One of the great ironies of this situation is the outpouring of criticism the Biden plan has received from many of its traditionally Democratic beneficiaries. Rather than celebrate their good fortune, these borrowers are assailing the Democrats for doing too little and demanding that they do more. Unfortunately, this reaction reinforces popular tropes that too many Americans have become soft and entitled.
By failing to attack the root cause of escalating tuition costs, the Biden plan also amplifies the moral risk associated with the funding of colleges and universities — public and private. These institutions have benefitted from trillions of dollars of tuition, room and board revenue paid from student loans. Despite Biden’s lip service that colleges and universities must control tuition and other costs, his debt-cancellation-for-votes gambit will enable the creation of even more student debt, this time fueled with a wink and nod that students should not worry about the resulting loans because they will eventually be forgiven if the students will just vote for Democrats in coming elections.
This is not the way to curb tuition increases or force colleges to be more responsible about the return on their students’ educational investments. To the contrary, it will keep the flow of funds going to pay for new and better facilities and the increasing salaries of college professors and administrators who, incidentally, tend to vote overwhelmingly Democratic and actively pass their political persuasions to their students. Like teachers’ unions, colleges and universities understand the value of symbiotic relationships when they see them.
The cost of college is a serious problem in America and the White House press release includes useful data about the scope of some of the issues. But it also paints an incomplete and misleading story designed to maximize political gain. Bribing voters has no place in our country, particularly as we debate the best ways to assure fair and open elections free from improper influence. Biden’s unilateral action that spreads $300 billion to $500 billion of direct financial benefits across 43 million Americans with household incomes up to $250,000 is not the way to fix our system of funding higher education. We have a lot of things to improve in these United States and we need to focus our priorities and spend our resources wisely and fairly — with bipartisan Congressional debate and authorization rather than the stroke of a president’s partisan pen.
