With President Biden's attempted $400 billion student-loan forgiveness scheme facing potential doom before the Supreme Court next month, the administration is pursuing an alternative path to transforming federal student loans into welfare.
Dressed up as a "student loan safety net," this scheme will work its mega-billion-dollar mischief by changing repayment rules to slash payments for almost everyone and eliminate payments altogether for the rest.
Once again, the White House is bypassing Congress, claiming that three different education laws give the administrative state the power to rework payback rules -- to include those that kill repayment altogether.
"Student debt has become a dream killer," said Education Secretary Miguel Cardona. "This is a promise to the American people that, at long last, we will fix a broken system and make student loans affordable." Yes...by making them disintegrate and sticking everyone else with the tab.
Under the Biden administration's proposed Revised Pay As You Earn (REPAYE) plan, individual borrowers who make less than roughly $30,600 won't have to make any payments at all. The same goes for any borrower in a family of four who makes less than about $62,400.
"Lo, the administration is making college free for grads who go to work as a barista or bartender, as Alexandria Ocasio-Cortez did after graduating from Boston University," writes the Wall Street Journal editorial board.
But wait -- it gets better for borrowers and worse for the rest of us who are pulling this overloaded wagon. Today, the federal regime cancels remaining debt after 20 or 25 years of payments. Biden's handlers want to zap the remaining balance after just 10 years for those who borrowed out $12,000 or less. Every $1,000 after that tacks on another year.
Most ridiculous of all, in that accelerated countdown to debt evaporation, borrowers get credit for years when they aren't making any payments at all. Borrowers can even say goodbye to the accrual of interest when they're not making payments.
The Biden administration’s proposed rules for higher education are big structural changes to lower costs for working people and hold colleges accountable. These plans will significantly cut monthly loan payments and it’s part of a real transformation of the student loan system.— Elizabeth Warren (@SenWarren) January 10, 2023
Ever-focused on some races and skin colors, an administration statement said that, "on average, Black, Hispanic, American Indian and Alaska Native borrowers would see their lifetime payments per dollar borrowed cut in half." They didn't bother publicizing the impact on whiteys and Asians...because, gee, what do they matter?
Setting aside the fact that the Constitution doesn't empower the federal government to issue student loans in the first place, this rolling fiasco illustrates why the government has absolutely no business being in the loan business.
The government amassed a colossal $1.6 trillion book of loans, only to now relentlessly seek ways to destroy it, thus creating a new avenue for the redistribution of wealth...not only to students (including those studying low-yield subjects), but also to America's increasingly Marxist colleges.
Put differently, it's the latest way for certain citizens and institutions to vote themselves wealth from the treasury, thus heralding the end of the republic.
This is also a case study in government policy creating incentives that only magnify problems those policies are supposed to attack:
- Americans have too much student debt, yet this program will encourage students to take on more debt.
- Colleges charge way too much for what they deliver, but slashing the cost of debt makes it easier for colleges to charge even more.
- Legions of college graduates are either underemployed or unemployed, but the new repayment rules encourage them to keep their earnings low -- below $30,600 for individuals and $62,400 for a member of a family of four.
- Many students don't finish the requirements to get a degree -- but with less at stake financially, more students will feel free to abandon their studies and stick taxpayers with the bill.
- Too many young people are studying frivolous, low-yield topics -- but Biden's scheme eggs them on.
The White House says the "student loan safety net" will cost $138 billion through 2032. However, if it survives legal challenges, expect the price tag to exceed estimates as all those perverse incentives wreak havoc on society.
Can we get going on that national divorce we keep hearing about?