COMMENTARY
BY FLORIDA US CONGRESSMAN VERN BUCHANAN
When you look at who actually has student loans, the contrast is stark:
- 37 percent of Americans have a four-year degree
- 14.3 percent of Americans have an advanced degree
- 56 percent of student loan debt is held by those who went to graduate school
Under Biden's plan, that means plumbers are footing the bill for professors.
Worse, the president doesn’t even have the authority to wholesale
wipeout loan debt, as he and Speaker Pelosi have even noted previously!
So much for the separation of powers.
That’s why I cosponsored the Student Loan Accountability Act which ensures that the secretary of education cannot unilaterally cancel student loans.
Read
the editorial from the Wall Street Journal below and let your representatives in Congress know if you
agree – taxpayers shouldn’t have to foot this $500 billion behemoth!
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The Editorial Board
Well, he did it. Waving his baronial wand, President Biden on
Wednesday canceled student debt for some 40 million borrowers on no
authority but his own. This is easily the worst domestic decision of his
Presidency and makes chumps of Congress and every American who repaid
loans or didn’t go to college.
The President who never says no to the left did their bidding again
with this act of executive law-making, er, breaking. The government will
cancel $10,000 for borrowers making less than $125,000 a year and
$20,000 for those who received Pell grants. The Administration estimates
that about 27 million will be eligible for up to $20,000 in
forgiveness, and some 20 million will see their balances erased.
But there’s much more. Mr. Biden is also extending loan forbearance
for another four months even as unemployment among college grads is at a
near record low 2%. Congress’s Cares Act deferred payments and waived
interest through September 2020, but Donald Trump and Joe Biden have
extended the pause for what will now be nearly three years.
The Administration is claiming, again, that this will be the last
extension and is needed to help borrowers prepare to resume payments.
But even if the Administration lets the forbearance end in December,
about half of borrowers won’t have to make payments since their debt
will be canceled.
Most of the rest will only make de minimis payments because Mr.
Biden is also sweetening the income-based repayment plans that Barack
Obama expanded by fiat. Borrowers currently pay only up to 10% of
discretionary income each month and can discharge their remaining debt
after 20 years (10 if they work in “public service”).
Democrats said these plans would reduce defaults. They haven’t.
Federal student debt has ballooned because many borrowers don’t make
enough to cover interest and principal payments, so their balances
expand. Student debt has nearly doubled since 2011 to $1.6 trillion,
though the number of borrowers has increased by only 18%.
Now Mr. Biden is cutting undergrad payments to a mere 5% of
discretionary income. The government will also cover unpaid monthly
interest for borrowers so their balances won’t grow even if they aren’t
paying a penny. This will mask the cost to taxpayers of the
Administration's rolling loan write-off. Student-loan debt won’t appear
to swell even as it does. What a fabulous accounting trick.
The Penn Wharton Budget Model estimates that canceling $10,000 for
borrowers earning up to $125,000 will cost about $300 billion. The Pell
grant addition could increase this by as much as $270 billion. The
four-month freeze on payments will cost $20 billion on top of the
roughly $115 billion it already has.
The payment plan revisions could eventually add hundreds of billions
of dollars more. An analysis commissioned by the Trump Education
Department estimated that taxpayers would lose $435 billion on federal
student loans, largely because borrowers in these payment plans on
average were expected to repay only half of their balances. Now they
will repay even less.
Worse than the cost is the moral hazard and awful precedent this
sets. Those who will pay for this write-off are the tens of millions of
Americans who didn’t go to college, or repaid their debt, or skimped and
saved to pay for college, or chose lower-cost schools to avoid a debt
trap. This is a college graduate bailout paid for by plumbers and FedEx
drivers.
Colleges will also capitalize by raising tuition to capture the
write-off windfall. A White House fact sheet hilariously says that
colleges will “have an obligation to keep prices reasonable and ensure
borrowers get value for their investments, not debt they cannot afford.”
Only a fool could believe colleges will do this.
It’s important to appreciate that there has never been an executive
action of this costly magnitude in peacetime. Not Mr. Obama’s
immigration amnesties, not his Clean Power Plan, not Mr. Trump’s
border-wall fund diversion. Nothing comes close to this
half-trillion-dollar or more executive coup.
Congress authorized none of Mr. Biden’s loan relief and appropriated
no funds for it. Progressives say 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 such “compromise.”
Even Mr. Biden said in December 2020 it was “pretty questionable”
whether he had authority to cancel debt this way. The Supreme Court
recently underscored in West Virginia v. EPA that Congress must provide
clear authorization to agencies taking action on major questions.
Canceling so much debt is beyond major to a mega-ultra-super question.
With the cancellation precedent, progressives will return to this
vote-buying exercise every election year. The only antidote will be if
Democrats conclude this gambit boomeranged politically by mobilizing an
opposition coalition of Americans who are tired of being played for saps
by progressives. The test arrives in November.
