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The moral cost of student loan policies

Related: US debt clock

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In 2010, Obama eliminated the federal guaranteed loan program, which let private lenders offer student loans at low interest rates. Now, the Department of Education is the only place to go for such loans.

Obama sold this government takeover as a way to save money — why bear the costs of guaranteeing private loans, he said, when the government could cut out the middleman and lend the money itself?

Ann Althouse:

The answer to the question in the post title is Paragraph 16. The answer to the question in boldface at the beginning of the post — What legal basis did President Biden cite for his power to cancel student debt? — is that this article never says whether he said anything at all about the need for power. 

I suspect the answer to that question is “none,” so I’m going to let go of my suspicion that “less than 1% of Americans, if surveyed now, could correctly answer the question.” I think a good chunk of Americans are savvy — or cynical — enough to say: NONE! 

But is that the correct answer? Must I comb through the President’s speech? 

ADDED: No, “none” is not correct. Here‘s an AP stating clearly what Biden is relying on:

[I]n a legal opinion released Wednesday, the Justice Department said that the HEROES Act of 2003 gives the administration “sweeping authority” to reduce or eliminate student debt during a national emergency, “when significant actions with potentially far-reaching consequences are often required.”

The law was adopted with overwhelming bipartisan support at a time when U.S. forces were fighting two wars, in Afghanistan and Iraq. It gives the Education secretary authority to waive rules relating to student financial aid programs in times or war or national emergency.

Houston Keene:

“Just at the White House, nearly 71% or 336 White House officials earn under the $125,000 threshold and potentially even more could be eligible under the household income cap. Counting the agencies, Inside Biden’s Basement has identified over 200 officials who may be eligible for this Biden handout on the backs of taxpayers,” Hollie continued.

“Knowing that hundreds of financial disclosures exposing potential student loan debt have yet to be made public by the White House and federal agencies, the number of Biden officials set to benefit from today’s EO is staggering,” he said. “And the people who will be footing the bill are those who scraped, saved, and sacrificed to pay off their debt, or avoided taking out loans altogether, and those who did not attend college but still have to deal with Biden’s record-high inflation and recession-laden economy.”

White House spokesman Andrew Bates told Fox News Digital he is “unfamiliar” with Inside Biden’s Basement, which he called a “club,” saying “the relief the President just delivered applies to millions of Americans regardless of workplace.”

“Whether they are employed by Fox News, another private business, or a Republican Senate office, 43 million eligible borrowers now have help available to them,” Bates said. “Almost 90 percent of the benefits will go to people earning under $75,000, and none will go to those earning over $125,000.”

political commentary.

Susan Dynarski:

This bureaucratic, government-created mess of a system has actively harmed student borrowers, driving many into default. Delinquency and default leave a longstanding blot on credit records, keeping borrowers from buying homes and cars, renting apartments and getting jobs. By allowing borrowers to once again get access to credit, housing and job markets, forgiving loans can therefore have a real effect on lives and the economy.

Some worry that debt forgiveness will drive up inflation. This strikes me as implausible, since borrowers have not had to make payments for more than two years. The planned resumption of loan payments will tend to reduce disposable income, which will cool inflation. All that said, I am not in favor of framing student-loan policy as a lever for managing inflation. Eliminating food subsidies for poor families — SNAP, as the food stamp program is known today — would definitely slow the economy, but that doesn’t mean we should do it. Loan forgiveness does nothing to repair fundamental weaknesses in postsecondary education: underfunded public schools, rising tuition and for-profit colleges that deny students a quality education.

A third of borrowers hold less than $10,000 in debt. An additional 20 percent have debts below $20,000. Mr. Biden’s plan could clear the debts of about half of borrowers. This will not only improve lives but also reduce stress on the loan system when the remaining borrowers restart paying in a few months.

I once thought forgiveness to be an expensive Band-Aid, a distraction from fundamental reform. But I have seen so little progress on these issues that I now think we must make amends to those we have harmed. It’s time to erase the debts of those millions who borrowed modestly for their education but wound up in financial distress because of our disjointed loan system.

Loan forgiveness is not just warranted; it’s fair: Government policy did harm, and it is government policy that should work to reverse it.