Biden's student loan bailout

by Tom Cole

Last week, President Joe Biden unveiled a plan to unilaterally erase a wide swath of certain federal student loan debts. Not only is such action completely unfair to millions of Americans who do not have student loans or already paid them off, but it will also add hundreds of billions of dollars more to the national debt. This move will ultimately drive our country deeper into a recession in the days and months ahead and could permanently damage the American psyche for generations to come. 

Currently, federal student loan debt totals around $1.7 trillion, and it is primarily held by those with higher income and graduate degrees. In fact, nearly a third of student loan debt is held by the top 20 percent of earners and 56 percent is held by households with graduate degrees. Clearly, the president’s continual pause on federal student loan payments during the pandemic, turned now to an outright bailout, disproportionately benefits a few at the expense of many. Put in perspective, according to Biden’s plan, the 87 percent of Americans who do not have student loans will be on the hook for paying off the loans of the 13 percent who do. This sets a dangerous precedent that will undoubtedly incentivize others to go into debt believing that their debts will also be forgiven at some future date.

President Biden plans to forgive $10,000 of debt for borrowers and $20,000 of debt for students receiving Pell grants. According to these terms, more than 40 million borrowers qualify to have their debts forgiven. However, the reality is that “forgiving” student loans does not mean no one is paying for them. Since borrowers took this money from the federal government, a supposed cancellation of that financial commitment is really just a transferal to the American taxpayer. Current estimates reveal that this sweeping action on federal student loans will cost the nation at least $519 billion. This will only add more fuel to the raging inflationary fire that is already making it difficult for Americans to pay for basic items needed to live and take care of their families. Moreover, the hundreds of billions of dollars this plan will add to the national debt erases any supposed deficit reduction or inflation relief Democrats claimed their recently passed partisan reconciliation bill would deliver.

More importantly, it is questionable whether the Biden Administration even has the authority to take this irresponsible action without consulting with and getting approval from Congress. The president’s regrettable student loan forgiveness plan will undoubtedly be subjected to the opinions of the courts.

Although American life is largely back to normal and we are no longer in a state of emergency due to coronavirus, the president clearly wants to point to a pandemic “emergency” when it is politically convenient. We cannot simultaneously have a pandemic so severe that no one needs to repay their student loans yet so mild that millions of largely unvaccinated illegal immigrants are allowed to enter our country unchecked for coronavirus.

The so-called cancellation of student loans is an egregious bailout for a relatively well-to-do group at the expense of Americans who have worked hard, repaid their debts or chosen not to go to college at all. In a country that has always rewarded hard work and personal responsibility, this move is, quite simply, unprecedented.