Last Summer, the Supreme Court struck down Joe Biden’s plan to forgive $400 billion in student loan debt. The amount that Biden wanted to wipe off the books would have actually cost taxpayers a trillion dollars when figuring in interest and other charges.
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Now Biden wants to erase another $7.4 billion in student debt. It will be the third separate program to forgive debt since the Supreme Court denied his original plan.
He’s able to do this by broadly reinterpreting federal regulations to reduce or eliminate debt and interest. Challenges to these efforts are slowly working their way through the courts, but Biden is content as long as he gets the votes of the former students.
“Today, my Administration is canceling student debt for 277,000 more people, bringing the total number of Americans who have been approved for debt relief so far under my Administration to 4.3 million borrowers through various actions,” Biden said Friday via the White House.
The current Biden plan would supposedly be paid for on credit. That’s right. Despite the fact that our interest payments on our current debt exceed the amount we spend on the military, Biden is simply throwing student loan debt relief on top of the pile of other unpaid bills.
The Wharton School of Economics pegs the cost of Biden’s debt cancelation so far at half a trillion dollars.
“We estimate that the New Plans will cost $84 billion in addition to the $475 billion that we estimated for President Biden’s SAVE plan, for a total cost of about $559 billion across both plans,” said the analysis.
The SAVE plan (Saving on a Valuable Education) is an income-based repayment plan that reduces some borrowers’s balance to zero and reduces monthly payments for others. Technically, the Biden administration isn’t ‘forgiving” debt as much as they’re rearranging it. And if some borrowers end up not owing any more on their loans, why isn’t that just dandy?
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Half a trillion dollars of our great-grandchildren’s money to buy an election. Not too bad if you can get away with it.
Biden’s forgiveness proposal announced on Monday included five main provisions, the Department of Education said.
These include: Waiving accrued and capitalized interest for millions of borrowers; automatically discharging debt for borrowers otherwise eligible for loan forgiveness under SAVE, even for those who do not enroll in the program; eliminating student debt for borrowers in repayment for 20 years or more; helping borrowers who enrolled in low-financial-value programs or institutions; and, assisting borrowers who experience hardship in paying back their loans.
“These historic steps reflect President Biden’s determination that we cannot allow student debt to leave students worse off than before they went to college,” U.S. Under Secretary of Education James Kvaal said. “The President directed us to complete these programs as quickly as possible, and we are going to do just that.”
So what’s wrong with helping the deserving poor? Or even the middle class? According to Wharton, that’s not the case.
According to the Wharton School newsletter, the plans include “debt relief for about 750,000 individuals residing in households that, on average, earn $312,977 in annual household income.”
The analysis also found most of the cost of these plans comes from waiving interest.
“Of the $84 billion, about $58 billion comes from waiving accrued and capitalized interest. The second-largest cost of $19 billion stems from eliminating debt for borrowers in repayment for 20 years or more (or 25 years with graduate student debt),” the analysis said.
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Student debt is a drag on the economy. It prevents younger couples from buying a house or even just moving out of their parents’ home. It also prevents some younger people from saving and investing. This hurts all Americans.
But the moral hazard of just forgiving debt outright like Biden is doing is too great. It makes chumps out of those who didn’t take out any loans for college as well as those who paid their loans back on time. It’s ludicrously unfair.
But it will help Biden’s re-election campaign. For that, America must pay.