The Patriot Post® · Student Loan Forgiveness: Take Two
If at first Joe Biden doesn’t succeed in buying your vote, he’ll try, try again.
In late February, the Supreme Court will hear two cases — Department of Education v. Brown and Biden v. Nebraska — that are challenging the constitutionality of this president’s plan to arbitrarily wipe away hundreds of billions of dollars in student loan debt. The High Court has already rejected the administration’s requests to go forward with the program before oral arguments, but it did put both cases on the fast track to settle the argument.
There’s a lot riding on this one, which is why Team Biden has already come up with an alternative plan should a court defeat ensue.
Earlier this week, the Department of Education released proposed rules that will do essentially the same thing as Biden’s executive decree, but presumably through more constitutionally respectable means.
The proposed rules would relax the current income-driven repayment (IDR) program available to borrowers. Income-driven repayment matches loan payment amounts to a person’s income, regardless of the amount of the principal or whether monthly payments are making any dent in it.
When the Obama administration ordered the federal government to take over the student loan business in 2010, Democrats established an IDR plan that capped monthly payments at 10% of a borrower’s discretionary income. It also discharged the balance of the debt after 20 years, or 10 years if the borrower worked for the government or a nonprofit. It seemed like a pretty clever scheme. All borrowers would have to do is make a minimal payment toward their student loan. The interest would continue to accrue, of course, and they’d never make any meaningful progress on the principal, but after 20 years, the debt would go away regardless of how much remains.
The new plan does this travesty one better: The income threshold will be lowered to 5% of income, borrowers earning less than $33,000 per year will pay nothing, and the government will cap the interest so as not to jack up the total loan balance.
As the left-leaning Brookings Institute notes, this IDR plan turns student loans into untargeted grants. The incentive to repay student loans is completely removed. All a borrower has to do is strive for a low- to mid-paying job and hold tight while the government repeatedly forgives the accruing interest until the loan itself is forgiven.
The case can be made that most student borrowers wouldn’t purposely tank their own careers to stay in lower income brackets and thereby avoid paying back their loans. That may be true, but there are other unintended consequences to this unnecessary and immoral government largesse.
The Biden administration maintains that this new IDR plan will cost $138 billion through 2032. Yeah, right. There’s no way to calculate what will happen when an entire generation of students discovers they can essentially go to college for free. Our sense is that $138 billion is too low; the full tab will likely be much higher.
With these relaxed repayment conditions, student borrowing will rise, perhaps dramatically. And how many of those students will use those precious two to four years on frivolous courses? If you think current college curricula are top-heavy with pop culture dreck, imagine what comes next.
Then there’s tuition, which saw a spike after the federal takeover of the student loan industry 10 years ago. Why? Because schools figured it was open season for raising the price of attending, since the government (read: the taxpayers) was ultimately going to pay for it. Prepare to watch that model go completely off the rails now.
This new income-driven repayment plan is nothing more than a fallback to honor Biden’s immoral student loan forgiveness scheme. That in itself was a scheme to buy votes at the expense of the American taxpayer — a scheme that will put the country in greater debt and send the message that financial responsibility is a thing of the past.
If it goes through, a decent college education will become a thing of the past as well.