Biden Setting Up Student Loan ‘Forgiveness’ For Well-Off Borrowers, After Pelosi Said He Has No Such Power

biden student loan forgiveness
Smithsonian Institution, No restrictions, via Wikimedia Commons

President Biden is rumored to make a long-awaited announcement on his plans to push forward with student loan “forgiveness” and an expected extension on the federal student loan payment pause set to expire at the end of this month.

However, this announcement comes with mixed reviews from his party, who always seem to want more.

The announcement is rumored to entail the cancellation of $10,000 in federal student loans for borrowers who make less than $125,000 a year. (Yes, $125,000!)

However, many wanted various plans that included $50,000 versus $10,000 with no income cap, to complete student loan forgiveness across the board.

So what would the ramifications be in the likely event that Uncle Joe forgives student loans? First, let’s see what this ‘gift’ would cost Americans.

Remember The Poorly-Named Inflation Reduction Act?

While I know financial principles and economics aren’t everyone’s cup of tea, particularly those who work in the White House, it’s essential to understand some basic principles when attempting to govern. The biggest lesson you can teach your children about economics and life, in general, is that nothing is ever “free.”

Student loan ‘forgiveness’ or ‘cancellation’ doesn’t do either. It merely transfers the liability to another party – in this case, the American taxpayer as a whole. It’s not as if there is a money tree in D.C. that sprouts dollar bills that can be plucked indefinitely. (Actually there is – the Federal Reserve. But that free money printing is inflation.)

According to the Penn Wharton budget model, the rumored plan of $10,000 would cost the taxpayers $300 billion. The Committee for a Responsible Federal Budget believes that the plan would consume nearly ten years of deficit reduction and eliminate any disinflationary benefits from the Inflation Reduction Act (IRA).

Not that this matters much since, overwhelmingly, experts argued that the Inflation Reduction Act wouldn’t reduce inflation. But then again, Team Biden isn’t known for economic acumen; perhaps they should’ve phoned a friend on this one.

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Larry Summers And Nancy Pelosi Rain On The Parade

Larry Summers, former Treasury Secretary under President Clinton and economic advisor to President Obama, is not a fan of student loan forgiveness. As the money man says:

“Student loan debt relief is spending that raises demand and increases inflation.”

But, Larry, how can that be? 

To illustrate how this ‘forgiveness’ would lead to inflation, Arthur Laffer, who served on President Reagan’s economic policy advisory board, explains:

“[Forgiving student loans] will reduce the number of goods, which is inflationary. It will increase the size of the monetary base, which is also inflationary.”

Mr. Summers went on to say about the plan:

“Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college.”

I hate to tell you this, Larry; the Democrats no longer are the party of the middle-class, blue-collar workers; they are the party of the elite. So who will benefit from this ‘forgiveness’? 

And there’s another question we no longer ask in this country: Where in the world does the President get the authority to cancel student loan debt? 

Is there a section of Article II of the Constitution written in invisible ink? 

Proving that even a broken clock is right once every 82 years, House Speaker Nancy Pelosi told reporters last July that Biden has no such authority to unilaterally “cancel” student loan debt. 

“That’s not even a discussion,” Pelosi said.

So we can expect Congress to put a stop to this, right? 

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What About The 80%?

There are an estimated 45 million Americans who have student loan debt. Of those, about one-third owe less than $10,000, and more than half owe less than $20,000. It doesn’t sound all that crippling to me when you compare those amounts to mortgage loans, credit card debt, and car loans. 

My favorite statistic, however, is the percentage of Americans with student loan debt. There are about 250 million adult Americans. So if you do the math (which I know the White House doesn’t like to do), that means about 20% of Americans have student loan debt.

So that means 80% of Americans who don’t have student loans either because they were adults and paid them off or didn’t go to college for various reasons get to foot the bill for the other 20%. Additionally, the average college-educated student earns a higher income than Americans who didn’t attend college.

Do you know what that’s called? Wealth distribution. Add to that the President’s expectation to extend the moratorium on student loan payments. Those who will benefit will be the well-to-do.

Don’t believe me? Take Mr. Summers’ word for it:

“The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers.”

With the median household income in the United States sitting around $67K, having the income cap for loan forgiveness twice that amount means a lot of well-off Americans will reap the rewards of this ‘cancellation.’ So much for helping to raise those who are most in need.

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Adulting Is Hard, I Know

You’d think the concept of paying one’s debts and personal responsibility wouldn’t be so hard to understand. As the Boston Herald editorial board so perfectly said on the subject:

“…adults who assume debt are supposed to be responsible and pay for the things they purchase.”

They say that student loan forgiveness is a “slap in the face to all who sacrificed and worked extra jobs to pay off their student loans.” Even the New York Times editorial board got in on the action, stating:

“Such a move is legally dubious, economically unsound, politically fraught and educationally problematic.”

I might have to take my temperature because I agree with the New York Times! The article quoted above discusses something I think many parents like myself wish the focus would be on; making college more affordable and worth it.

I’m a parent of two kiddos. I think part of my job as a parent is to have to work hard to provide the best possible future for my kids. It should be challenging, but it shouldn’t be impossible.

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And I’m not going to work myself to the bone to save up for my kid’s college education so they can be brainwashed by professors who want to tell them they are oppressors because they are white or not the gender they were born in.

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What About Me?

Former White House Press Secretary turned political commentator Dana Perino asked on Fox News’ “The Five”:

“So what happens to the guy who took out a loan to get an F-150 so that he could take his tools around?”

Well, Dana, he gets to pay off the student loans of the doctors, lawyers, and gender studies graduates with higher taxes. She brings up a great point, though.

I’m a college graduate, but I never had a student loan. My parents couldn’t afford to send me to school, so I joined the military.

It took me at least twice as long to get my college education because I had to juggle serving in the military and school work and family. That meant late nights, weekends, and much schoolwork completed in war zones. 

With military recruitment suffering, perhaps the DOD and the White House should look at incentivizing college graduates to put on the uniform for a while to pay off their loans. Also, I hear the military has excellent housing and medical benefits. 

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USAF Retired, Bronze Star recipient, outspoken veteran advocate. Hot mess mom to two monsters and wife to equal parts... More about Kathleen J. Anderson

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