After the Supreme Court invalidated President Joe Biden’s unconstitutional attempt to shift $430 billion in student loan debt onto taxpayers, he has unveiled a new plan to pay off $39 billion (with potentially much more) during his time in office. While this plan may be legally sound, it is a clear disregard for the concerns of average Americans, both in terms of policy and politics. Unlike his previous proposal, which offered relief to younger individuals, this new plan only benefits around 800,000 people who have been making payments for over 20 years, leaving anyone under 40 without any assistance. Additionally, most individuals over 40 who have diligently fulfilled their payment obligations are financially stable enough to continue doing so. It seems that Biden assumes that those who supported his initial plan will overlook the fact that this new plan offers them no support at all.
Unfortunately, this scheme appears to be a move by the White House to gain favorable media coverage, regardless of the consequences. It involves $40 billion in additional deficit spending, which will only contribute to the inflation that the Federal Reserve is already struggling with. Furthermore, these major loan forgiveness initiatives incentivize universities to continue raising tuition fees, forcing students to borrow money with the expectation that their debts will eventually be forgiven. Since only 17% of Americans have student loan debt, these proposals invariably harm the remaining 83% who either paid off their loans or never borrowed, often because they didn’t attend college and therefore don’t benefit from the higher incomes that a degree can bring.
This giveaway is occurring as the federal Education Department reassesses individuals who have consistently made payments for 20 or 25 years under various income-driven repayment plans. It is worth noting that these plans were already quite generous, as the minimum payments were adjusted based on income, meaning that many borrowers paid very little during certain periods. The pressure on bureaucrats to lean towards a more generous approach will further compound the issue.
Moreover, the taxpayers have already shouldered a $116 billion burden due to a three-year deferment on student loan payments, which was supposedly justified by the pandemic that ended two years ago. None of this plan makes sense except as an attempt to buy votes. Vice President Kamala Harris views this latest move as a “historic step,” but it is a step towards transforming America into a banana republic.
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