Who Does Student Loan Forgiveness Benefit?

On Sunday, The American Thinker posted an article about President Biden’s plan to forgive approximately $5 billion more in student debt. The article reminds us that forgiving student debt is simply transferring wealth from those who could not afford to go to college to those who took out loans to go to college.

The article reports:

In a desperate attempt to win votes in the upcoming presidential election in November, President Biden has transferred $153 billion in wealth from middle and lower income-earners to the rich.  How has he done that? Student loan forgiveness is the answer.

In January 2022, Forbes conducted a study that found that a significant portion of student debt belongs to high-wealth households.  Additionally, an article from Brookings emphasizes that student loan forgiveness tends to be regressive, which benefits higher-income individuals more than lower-income ones.  Some studies indicate that students from high-wealth families owe at least 60% of the total student debt.

Students from wealthy or affluent families can qualify for student loans more easily than those from less affluent families.  In the past few years, Biden has forgiven $153 billion in student loans, mainly benefiting high-wealth households.

The article concludes:

So long as we have an authoritarian, Constitution-ignoring dictatorship running this country, we will have no control over our financial well-being.  The Constitution provides that our elected officials rule with the consent of the people.  I didn’t give my consent, nor did my representative in Congress, nor did anyone’s representative in Congress.  This is an authoritarian act solely by President Biden without the consent of the Legislative or Judicial Branch of government.  So much for checks and balances.

This administration continues to add more debt for us to pay and spends our money without limitation, increasing inflation and the national debt with every dollar spent.  Remember, the government has no money of its own.  What it spends is money it collects from the American taxpayer in the form of taxes.  It just spent $153 million without consulting Congress, which the Supreme Court has ruled is unconstitutional.

In pre-Revolutionary times, the people declared that taxation without representation was tyranny.  Will America wake up?

Is The U.S. Constitution Relevant In America?

On February 27th, Issues and Insights posted an article about a recent statement by President Biden.

The article reports:

The Supreme Court told President Joe Biden that he didn’t have the authority to forgive student loan debt. But he did anyway, bragging that the Court “didn’t stop me.” So why do we even have a legislative branch and a high court if the president is going to make law as if he were a king?

Does Congress have the intestinal fortitude to insist that the President abide by the Constitution? Frankly, I doubt it.

The article continues:

It’s Biden’s party, and its activist media, that has been carping for years about losing “our democracy.” Yet when a Democratic president bypasses the checks and balances that are the backbone of our republic, the three co-equal branches framework of government that is intended to guard against descending into a dictatorship, they celebrate rather than condemn.

Maybe it’s because they care about the integrity of our system of government only when it’s making policies they want.

In June 2023, the Supreme Court, in a 6-3 decision, struck down the Biden administration’s plan to cancel up to $400 billion in student loans, which it had announced in August 2022. In her concurring opinion, Justice Amy Coney Barrett noted that “when it comes to” national policy, “the Constitution gives Congress the reins — a point of context that no reasonable interpreter could ignore.”

But high court rulings apparently don’t apply when a Democratic president decides they don’t. Last week, the White House played the role of unreasonable interpreter and announced “$1.2 billion in student debt cancellation for almost 153,000 borrowers.”

“The Biden-Harris administration has now approved nearly $138 billion in student debt cancellation for almost 3.9 million borrowers through more than two dozen executive actions,” according to a White House fact sheet.

Biden acknowledged last week that “my MAGA Republican friends in the Congress, elected officials, and special interests stepped in and sued us,” and that “the Supreme Court blocked it.”

The government does not have the power to step between a lender and a borrower. That is a private contract and should not be interfered with by the government. How would you feel if the government stepped in and forgave your neighbor’s mortgage while requiring you to pay off your mortgage? That is what the Biden administration is trying to do.

This Might Backfire

On Thursday, The U.K. Daily Mail posted an article about President Biden’s new plan to forgive student loan debt.

This is the headline from the article:

American workers – are YOU happy to pay $1,800 EACH to wipe the student debt of the privileged elite who’ll earn $52,000 a year? Because BRAD POLUMBO reveals that’s your bill for desperate Joe’s naked bribe for votes

The article reports:

‘Congratulations! I erased your student loans. Now will you vote for me?’

That’s what President Biden should have said in an email to more than 800,000 student loan borrowers – because his latest scheme to ‘forgive’ some of their $1.78 trillion in outstanding debts is nothing more than a bribe.

‘Your student loan has been forgiven because of actions my Administration took to make sure you receive the relief you earned and deserve,’ read the White House message sent to in-boxes on Tuesday.

Gee – Democrats are so generous with other people’s money.

What had these lucky few done to ‘earn’ and ‘deserve’ this multi-billion dollar ‘relief?’

Very little.

In a bit of bureaucratic sleight of hand, Biden and his dutiful ministerial assistants transformed an obscure Education Department repayment program into a brand new entitlement program.

The monthly payments of hundreds of thousands of borrowers will be capped at five percent of discretionary income, and if they pay these tiny installments for 10 to 20 years their entire remaining loan will be wiped away.

This move is aimed at college students and graduates ages 18-34. This is a demographic that is not generally supporting President Biden.

However, according to the Census Bureau, only 35 percent of people between the ages of 18 and 29 vote, and 48 percent of people between the ages of 30 and 44 vote. Almost 60 percent of people between the ages of 45 and 64 vote, and 66 percent of people over 65 vote. It is quite possible that those over the ages of 45 learned critical thinking in school–something that is rarely taught now. If the people over 45 realize that they are paying for this student loan forgiveness program, it is very possible that they will turn out to cancel the votes of the younger people benefitting from the program. It is also possible that those in the age group that will benefit will include enough people who didn’t go to college that are angry about paying for someone else’s education that they could not afford for themselves.

At any rate, please follow the link to read the entire article. It will be interesting to see if this actually works or backfires. Meanwhile, we should mention that it is entirely unconstitutional.

Heading To The Supreme Court

On Sunday, John Hinderaker at Power Line posted an article about the Biden administration’s plan to forgive $400 billion in outstanding student debt. The plan is being challenged and will make its way to the Supreme Court at the end of February.

The article notes:

On Friday, a group of amici filed a brief urging the Court to invalidate Biden’s order. It is probably the most impressive group of amici I have ever seen, including top constitutional scholars like Michael McConnell and political figures including William Barr, Mitch Daniels, Mick Mulvaney, and others. These amici are represented by Sidley and Austin, a major law firm.

The brief is included in the article.

The article concludes:

In recent years, as the brief documents, presidents of both parties have used strained interpretations of broadly-worded statutes to justify unconstitutional usurpations of power, sometimes spending money that Congress had specifically refused to appropriate. Biden’s debt forgiveness continues this trend under particularly absurd pretenses, and on an unprecedented scale. As the brief argues, if the Biden administration can get away with this, there is really no check on executive power, going forward.

As a condition precedent to the merits, the case also raises a standing issue. I have not studied that issue, and have no idea whether it has merit under current law. I would only say that if a president acts unconstitutionally to deprive the taxpayers of $400 billion in revenue, there had better be someone who has standing to challenge his illegal action.

Let’s pray that the Supreme Court understands the checks and balances our Founding Fathers put in place.

The Pandering Continues

One friend on Facebook commented that the last Democrat debate looked like an auction to see who could give away more of other people’s money. We have a debt problem in America. So far, neither the Democrats or the establishment Republicans have been willing to address Washington’s addiction to spending. However, based on the Democrat debates, the Democrats would increase the debt rapidly. The Republicans are only leading us off the cliff slowly.

The Federalist posted an article today about the Democrat plans to forgive all student loans.

The article reports:

Of all the pandering showcased during Democrats’ attempts to win back the presidency, wiping out student debt ranked at or near the top.

“I believe that education is the future for this country,” socialist Sen. Bernie Sanders barked during the first round of Democratic primary debates, explaining that’s why we must “eliminate student debt and we do that by placing a tax on Wall Street.” Sen. Amy Klobuchar spoke similarly. “I can tell you this,” the Minnesota senator demagogued, “if billionaires can pay off their yachts, students should be able to pay off their student loans.”

There can be no serious discussion of this issue, however, in 60-second sound bites. So, beyond the soak-the-rich shtick that shades every Democratic economic debate point, the candidates resorted to two tactics: shock and sob stories.

The article reminds us of some basic reality that reveals the absurdity of the sob stories:

There are many ways to counter these arguments, based on both economics and equity. But it’s hard to counter soundbites with sense, so instead, here are my inquiries for these politicians, the press, and all the students demanding relief from the burdens of their debt: Tell me your sob stories from age 12 on, not what you can’t do now, but what you couldn’t do then. Tell what you had to do then and through college to avoid what is now, to you, crushing student debt.

What time did you get up to deliver papers in junior high? How many hours a week did you work since 14 to save for college? How many toilets did you scrub? How many high school football games did you miss because you were working? What dream college did you forgo to avoid taking out student loans?

Which 8 a.m. class did you take so you could complete your major’s requirements and still work in the afternoon? Which bus line did you take to get to your job because you didn’t borrow to buy a car? What job did you work full-time while completing your MBA at night?

What did you do to afford college? What didn’t you do because of the cost of college? Were you getting tattoos and traveling your way through college? Were you pledging and partying? Did you go to your top-choice university? Maybe an out-of-state public university with higher tuition rates? Which spring break and study abroad destinations did you visit along the way?

The article concludes:

Did you splurge on your fairytale wedding instead of paying down your student loans? What cars did you buy or lease? Where did you live? What electronics did you own? What clothing and other personal expenditures did you have? In short, show me the money and how you spent it!

None of my business? You’re right. Nor is your student debt my business or my problem.

Putting Your Money Where Your Mouth Is

The New York Post reported yesterday that in a commencement speech at Morehouse College in Atlanta, Georgia, billionaire tech investor Robert F. Smith promised to pay off the student loans of the graduating class. Wow.

The article reports:

Billionaire tech investor Robert F. Smith stunned college graduates on Sunday as he gave their commencement speech — offering to pay their student debts despite it costing an estimated $40 million.

“On behalf of the eight generations of my family that have been in this country, we’re gonna put a little fuel in your bus,” Smith told the 400 graduating seniors at the all-male Morehouse College in Atlanta.

“This is my class, 2019. And my family is making a grant to eliminate their student loans.”

The announcement was initially met with stunned looks — before the graduates broke into cheers and tears at the largest gift ever given to the historically black college.

This is brilliant. The students were graduating–they had completed their studies–they had not dropped out. Now the students were faced with serious debt that they had accumulated in order to pay for their college education. Now they are free to pursue whatever career they choose without having that debt hanging over their heads. Paying off these debts not only helps the students, it helps America by making sure those student loans were quickly paid off. Wow.

The Latest Economic Numbers

On Friday, Market Watch reported that the U.S. economy did better than expected during the first three months of 2019.

The article reports:

Reports of the demise of the U.S. economy proved unfounded as first-quarter activity showed surprising strength. The U.S. economy expanded at a 3.2% annual pace in the first three months of 2019, the government said Friday.

The gain was well above forecasts. Economists polled by MarketWatch had forecast a 2.3% increase in gross domestic product. The economy grew at a 2.2% rate in the final three months of 2018.

Inflation moderated a bit in the first quarter.

The article includes other good economic news:

Final sales to domestic purchasers, which excludes trade and inventory behavior, rose 2.3% in the first quarter, the smallest gain in three years, but still well above what economists were expecting.

The value of inventories increased to $128.4 billion from $96.8 billion, adding to GDP.

The trade sector added a little more than 1% to growth in the first quarter. Exports rose 3.7%, while imports dropped by the same amount, leading to a smaller trade deficit.

Offsetting these gains, consumer spending decelerated to a 1.2% gain, the slowest increase in a year.

Business fixed investment decelerated to a relatively slow 2.7% gain, down from a 5.4% gain in the prior quarter. Investment in structures fell 0.8%, the third straight decline.

Investment in new housing was another weak spot. Residential investment dropped 2.8%, the fifth straight quarterly decline.

I believe that the weakness in the housing market is being caused by a number of things. The millennials, the generation that would currently be entering the housing market, are weighed down by student debt. There is also a different attitude among young Americans about owning a house that there was a few generations ago. In the past, many Americans looked at their home as an investment–something that would grow in value over the years. Many older people began with a ‘starter house’–a small house that allowed them to enter into the housing market. Today, couples are having children later than previous generations. Their first house is paid for by two incomes, and they are not dealing with the expense of having children. The concept of a ‘starter house’ is no longer with us. Those facts, along with the price of the home most young people want to own are working to slow down the housing market. I am not convinced any of those factors are going to change.

Bad Policies Have Consequences

On Friday, Investor’s Business Daily posted an article about the results of the government’s takeover of the student loan program. The results of that takeover have not been good.

The article reports:

A report from the Department of Education notes that the net cost of the federal government‘s direct loan program is quickly heading into the red. This program, mind you, was supposed to be a moneymaker for the government, as students paid back federal loans with interest.

But as it turns out, borrowers have been flocking toward various loan forgiveness programs, by which the government will lose money, erasing gains from other loans. The report shows that the direct loan program went from a $25 billion surplus in 2012 to less than $5 billion by 2015.

A separate report says that this program ran a $36 billion deficit last year, up from $8.4 billion in 2016.

One of the problems with the government’s takeover of the student loan program is that the government did not have any interest in limiting the loans to people who might be willing and able to pay them back. When the program was privately granted, banks had an incentive to use good business practices in granting student loans–in order to stay in business, the banks needed the people borrowing the money to pay it back. This is another example of the private sector being able to do something better than the government.

The article concludes:

One program, called “income-driven repayment,” lets borrowers avoid payments if their income falls below a certain threshold, and then caps payments as a percentage of total family income. Any debt left over at the end of 25 years is forgiven.

Not surprisingly, students flocked to these and other programs that let them avoid paying back all their loans, even though the interest rates they had to pay were already subsidized.

Between 2011 and 2015, the portion of loans being repaid through these IDR plans shot up 625%, according to the report.

The direct lending program even earned the nickname “Obama Student Loan Forgiveness,” and surveys of student borrowers by LendEDU found that half of them don’t expect to have to pay back all their debts because the federal government would forgive them.

The rising expectation that loans wouldn’t have to be paid back in full also had the perverse effect of making students increasingly indifferent to college costs, thereby fueling tuition inflation.

As the Education report says, “Decision makers and others may not be aware of the growth in the participation in these IDR plans and loan forgiveness programs and the resulting additional costs.”

Given the $1 trillion in loan debt on the federal books, one hopes that awareness comes soon. Otherwise, the student loan program will quickly turn into one of the most regressive taxes on the books.

This is one example of the need to shrink the government. Taking over a program that has been run successfully in the private sector and moving it to government control is simply not wise. Free market capitalism is always the best way to run anything.