Biden’s Backdoor Student-Debt Bailout Is a Disaster

What’s a president to do when Courts continue to block His plans to be flagrantly unconstitutional. It is possible to quietly backdoor this same agenda via another channel.

At least, that’s the approach President Joe Biden is taking with student loans. His plan is to “cancel” Transfer to taxpayers: Graduate student debt up to $20,000 is seized in court He clearly outstrips his constitutional authority To do so, Congress must not pass legislation. Therefore, his Department of Education is just An income-driven repayment plan was announced This would be a great way to save money. “cancel” Student debt at taxpayer expense – huge amounts Another mechanism.

An income-driven repayment system works by you paying back only what you can, based on your income, and then the rest is forgiven. Revised Pay As You Make is a much more limited program and has been in existence since 2015.

The White House’s new version is far more generous: It would require borrowers to pay at most just 5% of their discretionary income in monthly payments — and many borrowers wouldn’t have to pay anything at all. In many cases, the taxpayers will absorb the remainder of your loan if you make these small, or in some cases nonexistent, payments for a period of 10 years.

It’s kind of complicated, but in practice, it means many borrowers will get thousands and thousands of dollars in debt paid off by the taxpayer instead of having to repay what they owe. You don’t have to take my word for it. Adam Looney, a left-leaning policy scholar Brookings Institution reports that while it will vary, the typical borrower will only have to pay back 50 cents for every dollar he owes — getting half his student debt “canceled” over time.

Biden spoke out in rare moments of candor. Education Department officials called it this plan You can find more information at “student loan safety net.” That’s exactly what it is: a new welfare program, this time helping a relatively well-off demographic in college and professional graduates, paid for by us working taxpayers.

And it wouldn’t be cheap! The nonpartisan Committee for a Responsible Federal Budget According to the plan, combined with Biden’s previous proposals, will cost $600 billion — or more — over a decade. On average, that amounts to $4,000 per federal income taxpayer.

However, there are more problems than just the cost. This plan would make the problem of student debt even worse. How?

Well, it’ll make borrowing money via government loans to pay for college an even more attractive option than it already is because future borrowers will know they’re only going to have to repay a fraction of what they borrow. Unlike Biden’s “cancellation” tied up in court, this isn’t a supposedly one-time deal: It changes student-loan regulations for good.

There’s more money available in loans each year than is actually taken out. So we’ll almost certainly see students taking out tens of billions more in student loans every year if this plan goes into effect — not fixing the problem but instead only blowing more air into the student-loan bubble.

Oh, and don’t be surprised if colleges jack up tuition prices to even more absurdly high levels in response.

Biden’s plan could also seriously harm student incentives. It effectively rewards lower-earning graduates and punishes high earners, as you’re going to get more forgiveness if your income is lower. This has led to the enactment of the most-subsidized degrees Brookings states that music, drama, and cosmetology are all possible options. If the starting salaries are anything to be believed, it’s not exactly degrees that are in demand.

What are the least-subsidized majors Business, computer science, engineering. You know, all those areas with high starting salaries because they’re in most need in our economy right now.

That’s right: Biden’s policy would distort market incentives and actively push students toward Less You can offer more tax bailouts to help them get productive, lower-paying degrees if they follow those routes. Isn’t that, well, the opposite of what we should be trying to do?

Of course, Biden’s move makes more sense when you consider it as a political maneuver. It will effectively accomplish his goal of funneling tax dollars to a constituency — young, highly educated people — that overwhelmingly vote for the Democratic Party (and possibly saved Dems in the midterms). But shrewd politics don’t change the fact it’s a foolish policy with awful implications — and a raw deal for taxpayers.

Brad Polumbo, a Robert Novak Journalism Fellow and co-founder of BASEDPolitics, is a journalist fellow at Robert Novak.