On August 24, 2022, President Joe Biden announced that he was taking executive action to provide a debt bailout to some Americans with outstanding student loans.
According to CNN, the President’s bailout will provide debt relief to student loan borrowers who hold loans with the U.S. Department of Education (DOE) and who earn less than $125,000 per year. Borrowers who received Pell Grants to help pay for their education will be eligible for up to $20,000 in debt relief, while borrowers who did not receive Pell Grants will be eligible for up to $10,000 in debt relief. Also, the DOE intends to propose a new rule reducing the amount of income-based repayment on undergraduate education loans by half; the new rule is expected to cause certain loan balances to be forgiven after 10 years instead of the current 20. Finally, President Biden’s plan will extend the existing freeze on student loan repayments until the end of this year.
The issue of student loan debt is a legitimate concern in the United States. According to CNBC, approximately 44 million Americans have outstanding student loans, and the total amount owed is a staggering $1.7 trillion. CNBC reports that between the 1991-1992 academic year and the 2021-2022 academic year, inflation-adjusted college tuition doubled, while household income has not increased. The average American student loan borrower needs 17 years to pay off his or her student loans. As of May 2022, the average borrower owes $30,000 at graduation, and approximately 7% of borrowers owe more than $100,000.
Unfortunately, President Biden’s method of addressing the student loan problem is unacceptable.
First, the President’s bailout is an executive overreach that improperly bypasses the authority of the legislative branch. In taking this action, President Biden is following in the footsteps of President Barack Obama, who made a series of unilateral changes to the Affordable Care Act and provided amnesty to millions of undocumented immigrants without congressional authorization.
Second, the President’s bailout is unfair, rewards irresponsible behavior, and discourages good behavior. Ultimately, the cost of the bailout will be borne by American taxpayers. It is unfair to require taxpayers who either never went to college, never took out student loans, or paid back their own student loans to relieve the debts of those who have not yet paid off their student loans. It is also unfair to require moderate-income and middle-income taxpayers to foot the bill for debt relief for persons earning the ample sum of $125,000. Furthermore, why should student-loan borrowers receive government relief when Americans struggling with other types of debt—mortgage debt, for example—do not?
Third, the President’s bailout takes a Band-Aid approach to the problem of student loan debt. As Oren Cass has pointed out in Politico, the President’s action mitigates some consequences of student loan debt without even attempting to address its root causes.
Fourth, as The New York Times pointed out last year, “college graduates are now a firmly Democratic bloc.” Given this reality, the President’s bailout smacks of political pandering to a favored group—especially given that the midterm elections are coming up in two short months.
Fifth, the President’s bailout is likely to increase inflation and to add $300 billion or more to America’s $30.9 trillion national debt.
Senate Minority Leader Mitch McConnell (R-KY) described the President’s student loan bailout as “‘socialism,’” calling it “‘a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt.’”