Student Borrowers Are Livid They Might Have to Pay Back Their Loans

By Noah Rothman

Thursday, June 08, 2023

 

The pandemic is over. The federal public-health emergency has expired. The extraordinary contingencies Washington, D.C., implemented to relieve the pressure that crisis had imposed on Americans are going away. For most, the restoration of normal life is a welcome development. But the beneficiaries of that crisis and advocates of the progressive social engineering it unlocked are furious. And they’re no longer content to sit back and wait for Democrats to make the pandemic’s emergency measures permanent: They’re demanding it.

 

In exchange for Congress’s agreeing to hike the debt ceiling, Joe Biden consented to the resumption of student-loan repayments. At the end of August, outstanding federal student loans will again begin accruing interest and require servicing. The Biden administration is attempting to cancel roughly $400 billion in outstanding student-loan debt — up to $20,000 per borrower — but the White House’s beneficence is on hold while the Supreme Court reviews the merits of the president’s contention that he can raid the U.S. treasury at will.

 

To judge by how debt-cancellation advocates discuss the issue, they don’t seem to have much faith that the Court will side with the White House. And that realization has sent some progressives activists into an inchoate rage spiral. The American Prospect provides a sterling example of how the administration’s allies are dissolving into an emotional puddle over the prospect of having to abide by the obligations into which they freely entered.

 

The Prospect ostensibly sets out to highlight how the private and public mechanisms for administering student-loan debt function poorly in the best of times, and they’re likely to be overwhelmed by the return of normality. But in catastrophizing the hardship of debt repayment, the piece undermines the case it sets out to make.

 

Citing the Consumer Financial Protection Bureau, the Prospect’s David Dayen savages the Department of Education’s online student-loan portal. He notes that roughly 20 percent of borrowers in 2015 reported experiencing “problems” with the portal, including “incorrect balances, missing payments, improper claims of delinquency, [and] revised amortization schedules.” But these errors cannot be resolved by throwing resources at the agency. “Even if we dumped all of the money in the world on them, they couldn’t get this right,” said Thomas Gokey, an activist with a group that calls itself the Debt Collective. The only alternative to a clunky internet portal, we are told, is total debt forgiveness.

 

“We know from the data of previous pauses that turning it on is going to result in massive delinquencies and defaults,” said the deputy director of the Student Borrower Protection Center, Persis Yu. “Cancellation buys the servicers resources to do the job at hand.” Indeed, it’s not hard to imagine how the dramatic truncation of “the job at hand” could facilitate its fulfillment, and it’s even easier to see how the cancelation of debt would reduce “delinquencies and defaults.”

 

If this exercise in question-begging isn’t convincing, how about some veiled threats? “Only good things happen when the payments are kept off,” Gokey insisted, “and only bad things result from turning them back on.” The “bad things” we can expect aren’t just lighter wallets among degree-holders but hordes of embittered young voters who will be tempted to vent their frustrations at Democrats.

 

“Millions of young people who have voted for Democrats in record numbers in the past two elections will endure what will feel like a new financial obligation of hundreds of dollars per month,” Dayen reminds his left-wing readers. Soon enough, “millions of borrowers will get a notice from a private company they’ve never interacted with, telling them to resume payments on a loan that’s been dormant for years.”

 

We are supposed to feel bad not just for borrowers who will experience administrative errors but anyone who took on student-loan debt. After all, these are people with “a high propensity to spend,” Dayen adds. True enough. Research indicates that the student-loan-debt pause led borrowers to take on even more debt. Restoring a regular debt-repayment schedule will provide younger voters with a clearer picture of their financial obligations. The activists hope those voters will thank Democrats for the education in fiscal responsibility by throwing them out of office on their ears.

 

“The White House is going to order the Education Department to send bills to 40 million people,” complained the executive director of the SBPC, Mike Pierce. “They will tell themselves a story that borrowers will be held harmless. But people will remember that he asked for payments. And they’ll remember their experiences.” Gokey agreed. “This will have devastating results in the next election,” he said.

 

So, what do the activists want the Biden administration to do to mollify this Bonus Army of borrowers? They’re vague about that. One suggestion, which receives all of one sentence’s worth of consideration, is to use the “compromise and settlement” clause of the 1965 Higher Education Act as the legal predicate for debt forgiveness — presumably, when the Supreme Court decides that using the 2001 HEROES Act, which provided debt relief to Americans in uniform after 9/11, to justify universal debt forgiveness represents an unconstitutional act of stolen valor. But Dayen and his stable of activists don’t dwell on the means to the end they want. They dwell only on the end.

 

Indeed, when student-debt forgiveness is likened to the backdoor expansion of Medicaid that was temporarily facilitated by the pandemic, the author demonstrates genuine contempt for the law. With the end of the emergency, states have begun to purge the rolls of otherwise-ineligible Medicaid beneficiaries or individuals who simply didn’t complete the enrollment process. This is a “disastrous situation” executed primarily by heartless “states that aren’t interested in paying for poor people’s health care.” Much like student-loan forgiveness, at no point is a legislative (and, therefore, legitimate) remedy to this nightmare suggested or even envisioned.

 

The Prospect’s piece is shot through with sentiment. The author and his sources do not conceal their sense of betrayal. And, yes, they were lied to by the Biden White House. They were told by the president and his allies that the administration could use authority it did not have to do something it could not. They’re justified in their anger, but they were also willing marks for the White House’s con.

 

The Biden administration should pay close attention to this campaign of emotional blackmail. It serves the Biden administration right for courting a constituency this self-righteously rapacious. Here’s hoping the young people for whom it presumes to speak actually make good on their threats next November.