President Joe Biden is set to announce student loan forgiveness of $10,000 — and perhaps more — for lower-income debtors on Wednesday, in a move that is unconstitutional, unfair, and dangerous for the stability of our economy and our democracy.
There is no doubt that some borrowers would benefit from student loan relief — especially young people, low earners, borrowers in the black community. It would help them avoid default, and perhaps allow some to enter the housing market.
Some of these debtors can truly be seen as victims of a system that urges young people to attend college when other paths might be better suited to their talents and interests; that jacks up federally-subsidized tuition costs; and that steers students toward highly-ideological majors that provide few marketable skills, but train them as future left-wing voters and activists.
However, most borrowers took out student loans quite voluntarily, and there are several strong arguments against relief:
1. Fairness. Rewarding those who are not paying their loans is unfair to people who have worked hard — and sacrificed — to pay off their own student debt. It is also unfair to people who made the choice not to attend college — often because of the prospect of debt — who must now pay, as taxpayers, to subsidize others’ student loans, even though they may have their own debts (such as mortgage and car payments). Moreover, despite income caps, wealthier borrowers will find ways to benefit.
2. Inflation. Giving out $10,000 in loan relief to millions of American borrowers, plus continuing a pause in student loan repayments for others, will increase the amount of money available to consumers in the economy, creating more inflationary pressures and undoing whatever good the recent so-called “Inflation Reduction Act” might have hoped to achieve. The rest of society will pay higher prices for goods and services, hence subsidizing student loan borrowers indirectly through inflation.
3. Moral Hazard. Bailouts create the expectation of more bailouts in the future, distorting the incentives of future borrowers and removing the awareness of risk that theoretically guides rational decisions in the marketplace. Once the credibility of the student loan market — and other capital markets — is eroded enough, people begin to lose faith in economic institutions and to abandon traditional habits of frugality and hard work that are necessary for any free market economy to survive and to grow.
4. No Academic Reform. There is nothing in Biden’s impending proposal that will reform the way colleges and universities charge for higher education. Currently, many institutions are providing substandard degrees while suppressing all but the most left-wing opinions. Professors in some disciplines are little more than tenured political activists, training foot soldiers for radical causes. Universities bear none of the costs of students’ failures to repay their loans, so they will continue as before.
5. Executive Usurpation. The president lacks the power to make sweeping decisions about federal government spending or debt. The only way he can hope to forgive $10,000 per borrower — for incomes up to $125,000, according to early reports — is through the kind of aggressive executive action that President Barack Obama introduced into immigration policy. Rather than working with Congress, and making compromises on reforms to higher education, Biden is mocking the separation of powers.
6. Banana Republic. The hallmark of Third World banana republics is that demagogues promise massive redistributions of wealth to ensure that they are reelected. Biden’s impending announcement, so soon before a midterm election Democrats may lose, smacks of cheap left-wing populism. Once a president begins acting as Santa Claus, spending other people’s money without any constraint, there is no end to it, and future presidents — left and right — will do the same to appease the voters.
Joel B. Pollak is Senior Editor-at-Large at Breitbart News and the host of Breitbart News Sunday on Sirius XM Patriot on Sunday evenings from 7 p.m. to 10 p.m. ET (4 p.m. to 7 p.m. PT). He is the author of the recent e-book, Neither Free nor Fair: The 2020 U.S. Presidential Election. His recent book, RED NOVEMBER, tells the story of the 2020 Democratic presidential primary from a conservative perspective. He is a winner of the 2018 Robert Novak Journalism Alumni Fellowship. Follow him on Twitter at @joelpollak.