Biden to the working class: Drop dead
President Joe Biden’s student loan bailout is illegal, inflationary, and immoral, all at the same time. It is also divisive.
Nothing separates people more today than the line between those who have and have not gone to college . By giving away as much as $40,000 to families privileged with a college education, Biden is benefiting those most fortunate among us at the expense of those least fortunate, making existing inequalities even worse.
The Higher Education Relief Opportunities for Students Act of 2003 empowers the secretary of education to “waive or modify any statutory or regulatory provision applicable to” student loans so that borrowers are not adversely affected by any presidentially declared national emergency. The intent of the legislation was to provide relief for student borrowers in the military who were called into duty due to a national emergency. President Donald Trump used this authority to suspend student loan payments after he declared COVID an emergency in 2020.
But COVID is no longer an emergency by any reasonable definition. Biden himself has urged everyone to go back to work. Schools are open again. The crisis is over.
Each time the federal government extends the suspension of federal loan payments — it has done so six times already — it does so on shakier legal ground. A permanent erasure of debt was clearly not envisioned by that statute, nor is it in any way related to the original COVID emergency.
Like Biden’s refusal to enforce immigration laws, his refusal to collect student loan payments from certain borrowers is illegal. It undermines the rule of law.
Worse, Biden’s student loan bailout is indistinguishable from mailing a check to each beneficiary. At a time when inflation is still 8.5% and an even higher 13% for groceries, the last thing the economy needs is for the federal government to put $20,000 checks in the mail. Biden’s recently passed Inflation Reduction Act reduced government deficits by $300 billion over 10 years. This student loan bailout completely undoes that in the space of just one month.
Biden’s bailout also does nothing to fix the broken higher education system. That system vastly overcharges students for a credential which, although valuable in the labor market, does not make graduates demonstrably more productive. Biden’s move will only make that system worse.
The message to borrowers from this bailout is “borrow more money, you won’t have to pay it back.” The message to universities from this bailout is “raise tuition costs, your students can now spend more.” These messages create an immoral situation in which borrowers are encouraged to borrow more and universities are encouraged to charge more, all without any risk or consequence. Biden has shifted the risks and consequences to taxpayers. This is manifestly unfair.
Finally, Biden’s student loan bailout needlessly rewards some of the most privileged while punishing everyone else. Just under 40% of Americans have college degrees. This means that the 60% get nothing from this giveaway, as do those who already paid off their loans. The trucker who took out a loan to buy his rig gets nothing. The cook who took out a loan for her food truck gets nothing. On average , college graduates earn $27,000 a year more than those with just a high school diploma, but Biden chose to enrich these very college graduates at the expense of those who didn’t attend and therefore earn less.
It should also be noted that student borrowers were already being bailed out by inflation before Biden claimed the right to take this action. The people being hammered hardest by inflation are low-income workers who lack a college education and rent their homes or apartments. They are the least likely people to have college degrees. On the other hand, the privileged holders of federal student loan debt (and other fixed-rate debt, including mortgages) get to pay back yesterday’s more valuable dollars with tomorrow’s less valuable dollars, without facing higher payments. And this inflationary benefit comes at the expense of those who live hand-to-mouth and do not own valuable assets (including houses, jewels, and income-generating college degrees). This means that Biden’s college handout is forcing the poor to bail out the rich even more at a time when they have already been bailing out the rich without realizing it for the better part of a year.
The next generation deserves reforms that will cut administrative bloat at universities. (For example, Ohio State University doesn’t need 132 Diversity, Equity, and Inclusion bureaucrats at a cost of $13 million .) Reforms are needed to hold universities accountable for the money they make students borrow and to let students spend their education dollars on vocational programs that teach marketable skills at an affordable price.
Biden has not lifted a finger in the direction of these reforms. Instead, he has sent a clear message to everyone who doesn’t have a college degree or who already paid off student loans: Drop dead.