OPINION:
A version of this story appeared in the On Background newsletter from The Washington Times. Click here to receive On Background delivered directly to your inbox each Friday.
Undeterred by the Supreme Court’s rejection of his previous scheme to shift the cost of student loans from those who incurred them to those who did not, President Biden announced on Monday that he is preparing a proposal — appropriately scheduled to be unveiled during campaign season later this fall — that would once again shift costs from the relatively well-off and those educated beyond their intelligence to the thrifty and prudent.
Under his plan, 4 million borrowers who have been repaying their student loans — or perhaps not repaying their loans — for 20 years or more could have their debt completely canceled. An additional 10 million borrowers would get $5,000 or more of their obligation forgiven. The scheme would fully eliminate accrued interest on the loans for 23 million borrowers.
This whole exercise is, of course, the rankest sort of campaign propaganda. In case you missed that, the White House fact sheet had separate sections on what the proposed plan would do for Black borrowers and Hispanic borrowers. No word yet on what White borrowers might get.
For contextual purposes, about 46 million Americans owe about $1.75 trillion in student loans. That’s about $700 billion more than Americans owe in credit card debt, but it is much less than the $20 trillion or so in mortgage debt that Americans hold. About 55% of students went into some debt to pay for college, and the average debt is about $28,000.
The federal student loan program is, at its very core, regressive and inequitable. Essentially, the cash flows from the working class to the propertied and college-educated class. Loan amnesty of any stripe will make it even more regressive and inequitable. A little more than one-third of Americans have a college degree; two-thirds don’t. Those two-thirds pay federal taxes that support the federal student loans.
Not that it is dispositive in every instance, but there is a wealth of data that indicates that, over the course of a career, a worker with a bachelor’s degree earns about $1 million more than one without such a degree. So, those who are likely to make less money over the course of a career pay for the choices of those who will make more.
That’s precisely why there has been and will be no legislated amnesty of forgiveness; the majority of voters know that it is their ox that is being gored.
There is already a system in place to forgive loans. It’s not a great system, but giving a wheelbarrow of cash to everyone who decided — and let’s be clear, in each instance, a decision was made to take out a loan and a commitment was made to repay that loan — to get a student loan won’t make it better.
Finally, it is fundamentally unfair and inequitable to those who did and are doing the right thing and either have paid off or are paying off their loans. It takes, on average, a little more than 20 years for people to pay off their debt. As a practical matter, that means that about 20 million Americans have paid off their loans in the last 10 years.
What should we say to those people? Thank you for working diligently for 20 years and honorably discharging your debts; if you had timed it a little better, you could have gotten some of that free cash Uncle Joe is about to hand out. Let’s not even get started on what we might say to the ROTC students or those making it through school on their GI Bill benefits.
What kind of moral hazard do we create for the next group who is thinking about taking out a loan? Should they assume that at some point, some of their debt and all of the interest on that debt will disappear, courtesy of the magic government money machine? Is that a wise and prudent way to proceed?
More terribly, what do we say to those who, for financial or other reasons, decided to forego their academic dreams because they chose not to incur student loan debt for financial, family, or other reasons? Tough luck? Your timing is terrible? Maybe next time?
How is any of that fair?
• Michael McKenna is a contributing editor at The Washington Times and a co-host of the podcast “The Unregulated.” He paid off his student loans.
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