President Joe Biden’s student loan “relief” plan is an egregious redistribution of wealth. The plan would provide “debt cancellation” (meaning a taxpayer-funded bailout) of up to $10,000 for borrowers making less than $125,000, and up to $20,000 for Pell Grant recipients. The White House claims this plan will reduce costs for up to 43 million with student loans and cancel the full balance of roughly 20 million of them.
Aside from being unfair and a blatant political ploy to buy votes just before the November elections (which is already backfiring), there is the issue of whether the cancellation is constitutional. Several attorneys general are seeking plaintiffs to challenge the plan.
And more than two weeks after the plan was announced, the White House still cannot come up with a price tag, claiming it depends on how many people apply for the bailout. Respected outside economic forecasters, however, have no such problem. According the Penn Wharton Budget Model, Biden’s bailout could cost up to $1 trillion and would overwhelmingly benefit households that are in the top 60% of income earners.
Biden’s Education Secretary Miguel Cardona has defended the plan as a necessary step to make sure everyone has a “leg up in securing a bright future.”
“For too many people, student loan debt has hindered their ability to achieve their dreams — including buying a home, starting a business, or providing for their family,” he said. “Getting an education should set us free; not strap us down! … Today, we’re delivering targeted relief that will help ensure borrowers are not placed in a worse position financially because of the pandemic and restore trust in a system that should be creating opportunity, not a debt trap.”
There are several problems with this delusional statement. The secretary is admitting that college is strapping students down and causing a “debt trap” because it is too expensive. But the decision to pay off $10,000 in loans will only encourage colleges to charge more, perhaps hoping that the government will continue to take on more of the debt they’re handing to students.
With guaranteed federal loans, universities and colleges do not have to compete to drive down costs or offer higher quality education. Indeed, the college lending game perpetuated by the government may be one of the greatest scams in history. A 2021 Skilled Trades Report found that the cost of attending two- and four-year institutions has risen by more than 300%, controlling for inflation, since 1980. As the U.S. government continues to funnel dollars into higher education through subsidized student loans, the cost will continue to rise.
The government knows only 64% of students pursuing higher education will graduate, but they continue lending to anyone with a pulse, which is the root of the problem. Stronger parameters should be established to limit the taxpayer funding of dropouts and those who study subjects for which there is no demand in the labor market.
If it isn’t worth it to the students who took out the loan to pay it off, it certainly is not worth it to their neighbors, who are now being expected to help them pay it off. No one expects someone else to pay off their mortgage, car, or other voluntary loan, and student loans should not be treated any differently.
Biden’s attempt to do just that is especially offensive to the tens of millions who made the difficult choice to pay off their debt themselves or forego taking on debt at all. America is a free country, but personal responsibility is fundamental to keeping it that way. Student loan debt forgiveness undermines that principle and rewards our worst impulses. Hard-working people deserve better, and they’ll remember that come Election Day.
Christina Smith is the director of health and science policy at Citizens Against Government Waste.
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