Biden student loan forgiveness is wrong way to go

Published 11:47 am Friday, February 23, 2024

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Among the nearly 153,000 borrowers who are receiving $1.2 billion in forgiveness under President Biden’s student loan forgiveness plan announced this week are 3,340 Tennesseans who will be forgiven $25.7 million in student debt.

It is estimated that more than 90 percent of the 45 million Americans who are burdened with federal student-loan debt will see some form of relief with Biden’s plan which goes back to 2022.

America has turned higher ed into a lavishly expensive sacred cow, and now we’re all footing the bill. But what about students who worked and paid their way through college, and students of the past who received college loans, but worked and paid them off? Are today’s students any better? Should these students who have worked and paid off their college loans foot the bill for today’s students? The government is good at handouts, but unless we do it for all, we shouldn’t do it for some.

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With the stroke of a pen, President Joe Biden made thousands of Americans richer by excusing them from repayment of money they had borrowed, costing taxpayers hundreds of billions of dollars.

The recipients aren’t the poorest Americans, the neediest, the unluckiest, the most indebted or those serving our nation most nobly. They qualify, rather, because they borrowed money for college.

Notably, many of those receiving relief borrowed to finance graduate degrees like JDs and MBAs – a group hardly in need of financial help, but one that will remember this give away come November, at least that is what President Biden is hoping.

According to one study, fewer than one in four households have student-loan debt and it is more common among those with higher incomes. 

It is estimated that every child in America can pay his or her own way at a perfectly good college for about half the income from a part-time, minimum wage job.

In Tennessee a high school graduate can attend a community college such as Northeast State for two years tuition free and then transfer to ETSU or some other college and pay tuition. Many students secure scholarships to help with payment.

There’s a deep contradiction in our national beliefs about college, and it’s perfectly embodied in the thinking that drove Biden’s decision.

On one hand, under the presumption that degrees are precious and consistently produce a high return on investment, American law uniquely excludes student loans from discharge through the traditional bankruptcy process. We are so confident in the wisdom of unconstrained spending on higher education that we create a public guarantee for student loans – a form of credit that would otherwise make little sense to extend – and, to protect the lenders, we eliminate the recourse that borrowers traditionally have when their investments disappoint, or they spend beyond their means.

You can run up tens of thousands of dollars of credit card debt taking vacations and walk out of bankruptcy court owing nothing. But the debt you incurred for the life-changing wonders of time on a college campus? That must stay with you until death.

No one ever explains what makes the student-loan borrower more deserving of government largesse than the family that took on an auto loan for the car that gets dad to work. Rather, the implicit judgment seems to be that the nation must, having sanctified the borrowing, collectively assume responsibility for the result.

Public support should come at the state level through funding of state university systems and at the federal level through a simple, means-tested grant that covers, say, 50 percent of the median state’s four-year public university tuition. Tying the grant value to the median state would prevent individual schools from extracting more money by raising tuition. Costs of room and board would be excluded. Young adults not enrolled in college do not expect the public to pay for their housing or food; neither should those enrolled.

Just as sellers provide financing for cars, capital goods and sometimes real estate, colleges should be expected to finance the education they provide. Students who borrow money for tuition or receive grants have an obligation to pay. It’s a debt just like any other debt.