Federal Student Loan Hand-Out

Hoping to secure the votes of debt-holding former university/college students, their families, as well as Progressive voters in general, Mr. Biden has finally pulled the trigger on partial-forgiveness for federal student loan debt.  We can at least be thankful that he didn’t wipe their debt-slate completely clean, the fervent hope of the persistent Progressive gaggle.  And while providing some relief for the collegiate indebted (borrowers making less than $125,000/year), his order carries with it a great number of issues.

Overall, by the way, total federal student debt in America now exceeds $1.6-trillion, with more than 43-million citizens holding at least some of that debt.  Said Mr. Biden yesterday: “In keeping with my campaign promise, my administration is announcing a plan to give working and middle-class families breathing room as they prepare to resume federal student loan payments in January 2023”

First and foremost among those key issues, is whether his sweep-of-the-hand, $10-thousand (regular student loans) or $20-thousand (Pell Grant holders) forgiveness, is even Constitutional, not that this administration seems to pay much attention to our brilliant founding and guiding document.  To that key question, many legal scholars will argue, No, since expenditures are relegated to, and reserved for, acts of Congress, not the whim of the Executive branch.  We can presume that, on those grounds, this presidential order will be challenged in court.

What about any impact on our current inflationary strain and the federal debt?  According to the Committee for a Responsible Federal Budget (CRFB), this Biden federal debt forgiveness package “will cost U.S. taxpayers between $440- and $600-billion, as we absorb those billions on behalf of the students’ forgiven debt.  And then there’s the unspoken (by the feds) issue of inflationary impact.  Said Senate Majority Leader Mitch McConnell: “This program is yet another way to make inflation even worse, rewarding far-left activists, and achieving nothing for millions of working American families who can barely tread water (in the current environment).” A CRFB (referenced above) spokesperson echoed: “This announcement is gallingly reckless, with the national debt approaching record levels ($30-trillion+) and inflation surging, it will make both worse. Policymakers have already spent $300-billion on student debt relief (repayments suspended during COVID), none of it paid for – and this would add another $500-billion (estimates averaged), none of it paid for.”  So then, this debt relief action by the president will both add to the national debt and do nothing to reduce inflation, perhaps making it even worse.  The projected cost of this federal student forgiveness is said, then, to average about $500-billion, which will likely hit our federal debt now. Meanwhile, the administration touts the about $50-billion annually in student loan repayments, set to begin again in January. Doing the math, you can quickly see that those student loan repayments will take 10-years to equal the approximate cost of the debt forgiveness plan’s cost to America now.  So, despite what may be said in defense, it is at least 10-years away from a wash as far as covering this new and added federal debt is concerned.

Then there is the delicate issue of whether parents who took out loans for their son/daughter’s college expenses will be eligible for the stated debt forgiveness.  There was a loan category known as “Parent PLUS” that is available for parents to cover collegiate expenses not covered by campus student aid.  There are currently 3.4-million such borrowers, reportedly now owing about $87-million.  Whether or not such parental loans will be covered, by Mr. Biden’s announcement, has yet to be determined.  It may depend on how much political pressure is exerted on either side of the issue before a final WH determination is made.  If yes, that shoots the national debt load up even higher!

And what about the college/university financial end of this forgiveness plan?  According to a Penn Wharton study, “the colleges may profit from a decrease in student debt defaults, and some benefits of the (federal) hand-out for student loans ‘might be captured by colleges themselves in the form of higher prices (tuition).’” A complaint voiced for many years is that the federal student loan availability enabled students to take out higher loans to attend more prestigious schools, while then enabling those colleges/universities to continually raise their tuition, etc. costs year after year.  That pattern has not been true of all higher education schools, by any means, but there’s no question that some did take advantage of the federal loan largess. All students had to do was simply increase the size of their loans, presenting no problem, of course, until post-graduation reality came due!  And then there’s this reported move on the part of some colleges and universities, which is certain to have had an impact on the just-announced loan forgiveness program. “According to Open Secrets, more than $130-million has been spent lobbying on education policies since 2021 by numerous prominent colleges.”

Who is expected to benefit the most from this federal student loan forgiveness program?  Again, citing the Penn Wharton School of Business analysis, the benefit “will mostly go toward top earners.  Between 69% and 73% of any debt forgiveness would accrue to households that are in the top 60% of income distribution in the U.S.”  That would seem to fly in the face of the statement by Mr. Biden that the forgiveness plan would “give working and middle-class families breathing room.”  The Wharton findings are based on analysis.  The WH statement would seem to be more political and vote-attracting in nature.

Will those who have done the responsible thing and paid-off their college federal loans now be able to claim the forgiven ten or twenty thousand in the form of a federal rebate?  The answer is pretty clearly NO.  Those who have paid off their loans have done the responsible thing and have every reason to be miffed.  As should those families who scrimped and saved to afford college for a child and avoided having to take out a federal loan.  Those folks, and all of those Americans who did not go to a four-year-or-more college at all, will now be tax-paying for those who are set to receive this student debt relief.  Speaker McConnell: “President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, and every graduate who paid off their debt.”  Said former U.S. Treasury Secretary Lawrence Summers: “Student loan debt relief is spending that raises demand and increases inflation.  It consumes resources that could be better used to help those who did not, for whatever reason, have the chance to attend college.  It will also tend to be inflationary by raising tuitions.”

Writer Rick Manning sums it up this way: “Today it is a fight over whose ox got gored, as winners and losers were picked by the President with little to no recourse for the losers.  Big government begets more big government.  And the more people get ‘free money’ whether it be in the form of helicopter payments with Covid as the excuse, or sprinkling fairy dust on the student loan balance sheets and making debt disappear without showing where it reappears on the national debt, big government excels at perpetuating itself.”

What this seems to boil down to is that being irresponsible, first by choice of extra-expensive institution to attend, naïve or foolish choice of major, one with little chance of then becoming employed at a salary with a prayer of loan payback in this lifetime, and then, after graduation, facing difficulty repaying one’s federal student debt, either by under-paying, stalling payment, or even defaulting, has seemingly just been partially (and politically) rewarded by this administration via partial debt forgiveness. Responsibility for ones’ actions, in this government-assisted instance, must simply become just a source of personal resolve, satisfaction, and strength.

Responsible citizens are, and have always been, the very best of America, whether by working hard, raising a family, and by successfully handling their own personal finances, regardless of personal sacrifice.  Always meeting their commitments to family, as well as to local, state, and federal expectations.

It’s pretty obvious to see that, overall, our nation is currently in crisis, certainly domestically, and with the uncertainties of our international relations and the unknown true intentions of others.  One of our most precious rights is that of voting.  May all responsible citizens remember that mandate when it comes time to vote in November.  Vote to reclaim our nation.  Vote to change the course of current events back to true responsibility, respect, security, and personal freedom, in order to maintain an America that is truly the greatest, freest, nation on earth.

ADDENDUM:  Also announced this week:  The U.S. Department of Education said that it would be cancelling about $4-billion of the outstanding 208,000 federal student loans for those who attended ITT Technical Institute from 2005 until the for-profit chain disbanded in 2016.  “Officials said the debt forgiveness comes after the department reviewed extensive internal records, testimony from ITT managers and recruiters, and first-hand accounts from borrowers allegedly defrauded by the quality of the institute’s programs.”  Possibly cancelling, in their entirety, ALL outstanding student loans associated with this for-profit school group.  The article isn’t totally clear.  “Smaller” amount in total, but it all adds up.  (Source: Brandon Drey, daileywire.com, 8-16-22)


(Federal student debt status & Biden quote via foxnews.com, Brooke Singman, 8-24-22;  Public cost estimate of the forgiveness pan & McConnell quote via foxbusiness.com, Anders Hagstrom, 8-25-22; CRFB quote re: national debt via foxbusiness.com, Megan Henney, 8-24-22; Parent PLUS loan issue via foxnews.com, Deirdre Reilly, 8-25-22; College federal lobbying expenditures via foxnews.com, Aubrie Spady, 8-24-22; Benefits from the forgiveness plan via foxbusiness.com, Megan Henney, 8-24-22; McConnell quote via dailymail.com, Katelyn Caralle, 8-24-22; Summers quote via dailywire.com, Ben Zeisloft, 8-23-22; Manning quote via dailytorch.com, Rick Manning, 8-24-22).