National Review Online
Thursday, November 19, 2020
This week, the Left has intensified its calls for
President-elect Joe Biden to forgive student debt via executive order, perhaps
as much as $50,000 per borrower. Such a move would constitute both awful policy
and an abuse of the discretion that Congress has granted to the executive
branch in this area.
It is often said that Americans’
trillion-and-a-half-dollar student-loan debt is a “crisis.” It is not. As Beth
Akers of the Manhattan Institute has noted, the typical four-year college
graduate who borrowed starts with a debt of $28,500, which he can eliminate
with 20 years of $181 monthly payments. By way of comparison, bachelor’s-degree
holders outearn high-school grads by something like a million dollars over the
course of their lives. College costs too much, but not so much that we need to
feel sorry for the most educated people in our society.
What about those with far higher burdens? These large
sums normally come from graduate studies, not four-year degrees, and are
disproportionately possessed by folks with relatively high incomes, including
doctors and lawyers. Higher undergraduate debt is also often the result of a
deliberate choice to attend expensive private colleges rather than more affordable
public ones, and to turn down avenues such as military service that can pay for
college. Moreover, many students from truly modest means are already given
significant grant aid. On top of that, the problem of truly unmanageable debt
has already been addressed — and at the expense of federal taxpayers.
The federal government owns about 90 percent of student
debt, and it allows borrowers to escape their burdens through assorted
“income-driven repayment” options. Borrowers who go this route, which is about
half of them, generally pay 10 to 20 percent of their discretionary income —
and after 20 or 25 years (ten for those working in public service), any
remaining debt is forgiven. Someone with a lot of grad-school debt but a low
income can obtain tens of thousands of dollars’ worth of forgiveness this way.
Some borrowers do fall through the cracks of this system
and default, but they are disproportionately those with low debt,
especially folks who attended college but didn’t graduate. Any further reform
efforts should be targeted toward this problem, and should be matched by
reducing the incentives for students who are unlikely to graduate to borrow a
lot of money for college in the first place.
There is simply no justification for forgiving student
debt broadly, even with limits to the overall amount of forgiveness or the
income of the beneficiaries. Forgiving college debt is a slap in the face to
those who paid down their debts early, those who minimized their borrowing by
attending cheaper schools or working during their studies, those who forwent
college entirely, and those suffering under other kinds of debt. College-loan
forgiveness is also a poor way to stimulate the economy in the short term during
the COVID-19 malaise, because there are plenty of groups more deserving,
because much of the forgiven debt wouldn’t have been repaid for years anyway,
and because the forgiveness would probably be taxed. And it’s virtually
guaranteed to be regressive, for the simple reason that Americans who went to
college are a richer-than-average bunch. And if debt forgiveness is premised
upon the idea that the current lending system is unfair, why should only one
generation of borrowers benefit? This will create political pressure, as all
“one-time” amnesties do, for repetition on behalf of future borrowers, who will
be encouraged to think of debt as free money that will never need to be repaid.
Forgiving debt via executive order poses
additional problems. Congress has unwisely granted the executive branch a broad
authority to modify, compromise, waive, or release students’ debts, but this
was clearly not meant to authorize a mass-scale jubilee, and there are solid
arguments that courts should not even allow it. For instance, federal law also
directs agencies to “try to collect” the debts they are owed, and as the late
Antonin Scalia once wrote, policymakers don’t hide elephants in mouseholes: An
obscure provision of the law shouldn’t be taken as a license to ignore the rest
of it.
Joe Biden ran as a moderate who could unite the country.
Hardly anything could be more divisive than shunting taxpayer dollars at folks
who’ve been to college while low-skilled workers bear the brunt of our current
economic pain.
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