Even if its legal — and that’s a big if — for Joe Biden to forgive hundreds of billions of dollars in student loan debt, it’s a terrible idea.
The best thing you can say about the Democratic president’s plan, announced Wednesday, is that it’s not as extravagant as some of the more profligate members of his party wanted.
Letting an estimated 43 million borrowers off from paying up to $20,000 in student debt is unfair to those who are not beneficiaries of the giveaway: those who got through college without taking out loans; those who already paid back their student debt; and those who didn’t go to college. They are being asked to subsidize those who either borrowed too much, who didn’t take the time to analyze whether their choice of major would pay for the debt they were taking on, or who have been poor about managing their finances since they got out of college.
Student debt is burdensome. No argument there. But so are other kinds of debt, from car loans to home mortgages to credit cards. If the government is going to absolve student loan debtors from a chunk of the contract they willingly accepted, why shouldn’t it do the same about all the other debts that people — college-educated or not — take on?
Perhaps the most misguided part of Biden’s plan is that it’s probably only going to make the problem of student debt worse in the future. That’s because it further feeds the forces that have caused higher education for decades to rise in price much faster than the rate of inflation.
Colleges and universities are notoriously bad about reining in their costs. In the competition for students, they have added amenities to the college experience that are, in some cases, better than what students have in their own homes or what they will be able to afford when they start looking for a job. They create majors and programs for which there is little real-world demand. And the universities are able to get away with all of this because of the government grant money or government-guaranteed loans that underwrite the expense.
A massive forgiveness of student loans, such as Biden has unveiled, will only further prevent colleges and universities from experiencing the normal market forces that would drive down what they charge.
When the cost of a college education gets more expensive than students and their families can afford, fewer students enroll, or they enroll at less expensive alternatives, such as a two-year college. Fewer students means fewer dollars for overpriced schools, forcing them to get their price down in order to stay viable.
As long as students believe, however, that they may not have to pay back what they borrow, there is little restraint on them, the institutions they attend or the banks whose loans are guaranteed by the government.
Biden’s plan not only forgives the debt of those who are currently struggling to pay off their student loans but even students who are still in school and haven’t yet been asked to pay back the first nickel. As long as current students received their loans by July 1 of this year, they qualify for loan forgiveness if they or their parents fall below generous income limits.
The president is unleashing party city on America’s campuses with this plan, and he’s doing it partially on the backs of people who may not have had the benefit of a college education.
He is hoping the fulfillment of this campaign pledge will boost Democrats’ slim chances in November. What it’s likely to boost is the nation’s debt, personal irresponsibility and the future cost of a college education.
