728 x 90

The Biden Administration Just (Quietly) Scaled Back Student Loan ‘Cancellation’

In August, the White House announced that most federal student loan borrowers would be eligible for forgiveness. Most borrowers who didn’t receive a Pell Grant would be eligible for up to $10,000 of forgiveness, while borrowers who did receive a Pell Grant—a type of financial aid for low-income undergrads—would be eligible for up to $20,000.

In what NPR describes as a “remarkable reversal,” the U.S. Department of Education last week “quietly changed its guidance around who qualifies” for student debt forgiveness under President Biden’s controversial executive order.

“At the center of the change are borrowers who took out federal student loans many years ago, both Perkins loans and Federal Family Education Loans. FFEL loans, issued and managed by private banks but guaranteed by the federal government, were once the mainstay of the federal student loan program until the FFEL program ended in 2010.

Today, according to federal data, more than 4 million borrowers still have commercially-held FFEL loans. Until Thursday, the department’s own website advised these borrowers that they could consolidate these loans into federal Direct Loans and thereby qualify for relief under Biden’s debt cancellation program.

On Thursday, though, the department quietly changed that language. The guidance now says, ‘As of Sept. 29, 2022, borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into Direct Loans.’”

NPR adds that the change could affect as many 1.5 million borrowers, noting that it’s “unclear why the department reversed” course.

While the Department of Education is mum on the sudden change, National Review suggests it may be a legal maneuver to strengthen the constitutionality of Biden’s executive order, which was recently challenged by attorneys general in Iowa, Kansas, Nebraska, Missouri, South Carolina, and Arkansas, which filed a federal lawsuit alleging that Biden’s unilateral order was unconstitutional.

The Pacific Legal Foundation has also filed suit, contending “that student-loan borrowers in states like Indiana, Wisconsin, Minnesota, Arkansas, and North Carolina would be unfairly taxed for the student-loan ‘forgiveness’ under President Joe Biden’s program.”

Few people, I suspect, could explain the difference between an FFEL loan or a Perkins Loan (I certainly couldn’t). But many rightfully question the constitutionality of the president of the United States unilaterally “canceling” with the stroke of a pen hundreds of billions of dollars in student loans, all of which will have to be paid by taxpayers who did not take out the loan or receive the service.

While I’ll leave the constitutional question to legal scholars, it’s clear student debt forgiveness is unjust, highly regressive, and inflationary.

Lawrence Summers, an economist who served in both the Clinton and Obama administrations, made it clear that Biden’s order would have inflationary consequences.

“Student loan debt relief is spending that raises demand and increases inflation,” Summers argued. “It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.”

While many will point out that government shouldn’t be “helping” those who didn’t attend college anymore than those who did, his observation that forgiveness will cause tuition prices to rise is spot on.

Second, even the Washington Post concedes that Biden’s plan is “a regressive, expensive mistake.” How regressive?

As Politico points out, a recent study by economists Constantine Yannelis and Sylvain Catherine “concludes that blanket forgiveness of $10,000 in debt would offer $3.60 to the highest-earning 10 percent of households for every $1 it gave to the bottom 10 percent and that three quarters of the benefits would flow to households with above-median incomes.”

Finally, some may argue that student debt forgiveness is unjust because it’s regressive. While they have a point, debt forgiveness would be unjust even if it was not regressive. As Brad Polumbo recently wrote for FEE, loan forgiveness is a textbook example of what the 19th century economist Frédéric Bastiat described as “legal plunder.”

Polumbo explained that it’s no coincidence that Biden’s loan bailout was rolled out right before midterm elections in November, describing it as a “calculated attempt” to reward his voting base at the expense of the public treasury. This, Bastiat explained, is legal plunder.

“See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong,” Bastiat wrote in The Law. “See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”

Bastiat warned that “sometimes the law defends plunder and participates in it.” Looting might be legal when the government does it; but it’s never moral, regardless of how many votes it buys or who the beneficiaries are.

Why the Biden administration is “scaling back” its student loan forgiveness order is anyone’s guess. What’s clear is that it should not just be scaled back; it should be scrapped.

This article is adapted from a FEE Daily Newsletter and is republished with permission.

Image Credit: Flickr-The White House, United States government work

2 comments

Leave a Comment

Your email address will not be published. Required fields are marked with *

2 Comments

  • Avatar
    Albert Walker
    November 3, 2022, 7:15 pm

    Good day to all viewer online, my name is Albert Walker I am so overwhelmed sharing this great testimony on how i was checking for solution in the internet while miraculously i came across Dr Kachi who brought my ex Girlfriend back to me, This is the reason why i have taken it upon myself to thank this great spell caster called Dr Kachi, because through his help my life became more filled with love and i am happy to say that my ex Girlfriend who has been separated from me for the past 2years came back to me pleading for me to accept her back, This was a shocking to me my partner is very stable, faithful and closer to me than before, because before i contacted Dr Kachi i was the one begging my ex Girlfriend to come back to me but through the assistance of Dr Kachi, I now have my relationship restored. You can also have a better relationship only if you Contact Dr Kachi Website, https://drkachispellcast.wixsite.com/my-site OR Email: [email protected] You can reach him Call and WhatsApp Number:+1 (209) 893-8075

    REPLY
  • Avatar
    Thomas Gibson
    November 26, 2022, 10:05 pm

    I want to use this opportunity to tell the whole world on how I become rich and famous. I’m 93 years old. I was passing through difficulty in business and there was no hope of me coming out of my debt. I borrow money in my bank to do my business and I run at lost on the business I got frustrated and decided to be playing lottery to see if I can win and make my business grow and I have played for years now nothing good is coming my way on till I meet someone online talking about Dr Ayoola on the internet. He was taking about how this Dr Ayoola help him to win mega million lottery game. I said to myself if this is true and decide to contact him and told him to help me as well I later read more about this man and see how he has been helping people all over the world. I have faith in him and choose to work with him. After working with him he told me what I need to do for the number to be given to me which I did after he finish working he said I will have a dream and the number will be review to me in the dream. That night has I was sleeping I dream a number immediately he call me and gave me the same number I dream of and ask me to go and play the number. Today I’m here testifying of the good work he did for me I played the number and I won the sum of 1, 000,000 million dollars in a lotto max. You can contact Dr Ayoola for help if you want to win big in lottery game he has the gift of giving right number contact him today and thank me email him today Via email: [email protected] com or https://www.facebook.com/Dr-Ayoola-105640401516053/ text or call +14809032128

    REPLY

Posts Carousel