I’m sure you remember President Biden’s summer announcement that he plans to cancel student debt for thousands of Americans. While student loan forgiveness had been discussed for several months, the announcement was somewhat of a surprise because it was widely believed that doing so was not constitutional. In my September 2nd bulletin, I highlighted the fact that both Speaker Nancy Pelosi and the General Counsel of the Department of Education under President Obama have acknowledged that the President does not have the legal authority to forgive student loans. Since then, the courts have confirmed what we already knew.
Last month, the 8th Circuit Court of Appeals in St. Louis issued an injunction on the forgiveness program after six states, including Missouri, sued. It should be noted that our Attorney General has played a significant and admirable role in this case. A federal court in Texas also ruled that debt forgiveness is “unlawful.” The next step will be the Supreme Court hearing the case in February and likely deliver its ruling in June.
For taxpayers and those of us who believe in principles of fiscal responsibility, this is good news for several reasons. Estimates say the President’s plan would cost taxpayers up to a $1 trillion – remember, forgiving the loans just means taxpayers foot the bill. There is also overwhelming evidence that every time the government increases education subsides, universities use it as an opportunity to increase tuition. But, there is certainly damage left in the wake of the Administration’s reckless behavior.
As I have noted, the White House knew their actions were illegal. They also knew if they issued it in late summer, the courts wouldn’t hear the cases challenging it until after the election. They believed announcing up to $20,000 in free money to young voters could help turnout for Democrat candidates. But if Democrat candidates were the beneficiaries of the political stunt, who lost out? One answer is the millions of people who actually believed their debt would be forgiven and made financial decisions based on that. Whether or not you support loan forgiveness – I clearly do not – you can certainly understand why a person would enroll for a program to forgive thousands of dollars’ worth of loans. You could also understand why a person who believes they will no longer be making monthly loan payments would start putting that money toward another need. In all likelihood, sometime next year they’re going to be met with the reality of the Administration’s hollow promises providing zero relief and setting them back several years in paying off the loans. Again, President Biden knew this was the likely outcome. Instead of prioritizing the real-life effects on Americans, he chose the quick political payoff.
The cost of education is a serious issue in the U.S. that’s going to take serious solutions. Instead of focusing on a disingenuously named “Inflation Reduction Act” and duping millions of borrowers, the White House should spend some energy on policies that will actually benefit students and borrowers. If they ever do, they’ll find plenty of people in Congress ready to rise to the challenge.