President Joe Biden is considering, and is likely to implement, a plan to relieve student loan debt for many Americans. Recent reports suggest he will forgive each debtor $10,000.
Democrats are counting on this move to energize their base and drive voters to the polls in November. But it’s not just bad policy, it’s politics. bad.
Here are five reasons why:
1. It makes the problem worse.
The biggest advocate of mortgage loan disbursement, Democratic Senator Elizabeth Warren, often talks about how it was so much cheaper for her to go to college in the 1960s, but her solution That would make things exponentially worse for the generation ahead.
Universities are increasing tuition costs to levels that are almost unattainable without generous support. But getting rid of student loans without addressing the root cause of the problem is just poor governance. Banks will raise rates, colleges will raise tuition, all knowing that the next Democratic government will bail out the system again.
And it’s not like the university is inferior. Harvard is ahead of all competitors with a $53 billion endowment, but even the State University of New York at Buffalo is standing over a billion dollars.
Public and private institutions are making it more difficult to buy their products, while still sitting on the gold mines. There is nothing in this bailout that will encourage them to reduce costs. In fact, it is the opposite. Costs will increase knowing that they are likely to be covered by future executive action, and higher education will be further out of reach for working-class families.
In contrast, younger borrowers will feel encouraged to take out loans that may fall outside their potential future income range. And why wouldn’t they? If a student loan bailout happens now, there is always hope that they will also benefit from the relief in the future.
By eliminating lending in the past, we will encourage more irresponsible lending now and in the future.
2. It has no political significance.
President Biden is languishing with low approval numbers, Congress stagnating, and facing dire midterm election prospects — Democrats are looking for a Hail to bolster their chances next month. 11. But writing off debt will make matters worse for them.
The Democrats have a hard time winning over college-educated suburbanites, as Virginia’s year-long election for chief executive officer has demonstrated. But they have a much bigger problem with the uncollege masses who were once the cornerstone of the Democratic establishment.
In a recent NPR/Marist poll, they have a 12-point advantage with college-educated voters, but a 14-point advantage over non-college-educated voters. A minority of the public supports some measures of forgiveness, but even these are divided into smaller groups — depending on whether student amnesty will be experimental or just a relief package for everyone (including the well-to-do).
Democrats asking truckers to pay off college graduate loans – to be able to move those numbers up a percentage point or two in favor of Democrats – only makes them away from the party’s working-class roots.
Biden’s biggest political issue in November will be inflation, as he presides over historic price spikes in goods and services not seen since Jimmy Carter’s presidency.
Much of this is driven by historic government spending in response to the COVID-19 pandemic, which can certainly exacerbate inflation. Giving the markets six months before the election to react to the move would likely backfire and make voters more worried about their financial future. As inflation drives your political choices, any signal that it is or will get worse is bad politics.
3. Biden has no power.
The current test ball floating in the political wind will get President Biden to pardon a $10,000 student loan—which doesn’t mean testing the aid.
That proposal would raise more than $400 billion. In a word, Congress is currently debating a $30 billion aid package for Ukraine to combat Russia.
Presidents should have faced congressional scrutiny for spending nearly half a trillion dollars in taxes. The Constitution clearly gives them power to pay their bills, even if members like Representative Alexandria Ocasio-Cortez ready to cede their own powers.
Senator Joe Manchin – who has been opposed among progressives for blocking Biden’s hugely expensive Build Back Better spending package – has said his problem with Biden’s legislative program is it spent too much during the inflationary period. This executive action all acknowledged that Congress would not support the plan if put to a vote.
The proposal will also face enormous regulatory challenges and scrutiny, potentially creating havoc in the lending market, as banks and lenders try to figure out the outcome. College students coming to school in the next two years will be faced with a chaotic situation – uncertainty about exactly how they will fund their degrees.
“College is not for everyone. But the constant running of student loan funds makes it seem like only a fool could go to college.”
4. It’s not fair.
Advocates like the AOC point to other federal programs that redistribute wealth to make the case for cancellation of student loan debt a perfectly normal function of government. But the programs they target — like Medicare, Social Security, and housing programs — aren’t built on choices.
You can’t help but be old or, in many cases, poor. However, college loans are taken by willing adults (and often their willing adult parents) in a gamble that will accelerate their earnings down the road.
This gamble often pays off. College-educated adults earn at least twice what their peers earn in the workforce. Aside from the earning potential, there are other choices to be made throughout the process. Whether parents sacrifice to save or students choose different paths based on income – choices are made within a transparent system.
I personally took advantage of night classes and part-time instruction to cover my degree. Many people choose commuting colleges or give up their passion for a degree that will pay more. If you paid for your college education in full before or after this bailout, you may feel bitter that a moment of political opportunism has benefited some — while leaving you to eat ramen to pay someone in ancient Greek.
Furthermore, college is not for everyone. But the constant running of student loan funds makes it seem like only a fool could go to college.
On the contrary, we should encourage more people to enter professions and vocational education — not to be assumed that it is not on the same level as an Ivy League philosophy degree.
5. It’s receding.
Many advocates say the student loan amnesty will help low-income adults. It is true that some will benefit — but to a much smaller extent than those who do quite well, financially.
According to the Brookings Institution, the majority of student debt is held by the highest earners. The lowest 40 percent of households hold less than 20 percent of outstanding student debt.
This is not a program to help those in need rise to their own with their spoils, but rather a gift for those who have accelerated past them in the workforce. Democrats are actually proposing to tax the middle class to pay for the “Sociology of Miley Cyrus” class (it’s the real thing) and say it’s in the name of fairness.
College students make choices, and if their choices don’t produce the results they expected, this is a terrible way to encourage better choices. There are cheaper ways to help lower-income households in America with existing programs authorized by Congress — and not giving $10,000 to people earning six-figure salaries.
Switching to Bernie Sanders as governor would be a bad political move for Biden in a midterm year in which he’s tied to the center and independent agencies. But it’s also bad policy.
If Democrats want to go down this path, they should commit to doing so only after we first debate and institute reforms to lower the cost of college and create mechanisms to force colleges that accept federal aid to comply.
And colleges must be willing to acknowledge their role in creating more access and affordability opportunities and commit to that path. By helping to solve this problem for future generations, you will have more power to address those who have been harmed by it in the past.
https://www.thedailybeast.com/5-reasons-bidens-college-loan-amnesty-is-bad-policy-and-bad-politics?source=articles&via=rss 5 Reasons Biden’s College Loan Amnesty Is Bad Policy and Bad Politics