What should Republicans do if Biden forgives student loans?

President Biden has privately signaled to Democratic lawmakers that he is prepared to cancel “certain” federal student loans by executive order, according to the Washington Post and CBS News. It’s a fundamentally terrible idea, because canceling student loans would primarily benefit wealthier households and create perverse incentives for colleges to push more student loans on the credible assumption that they will be forgiven. Biden’s power to cancel loans by executive decision is also legally dubious, but that may not stop him.

However, the most glaring aspect of the whole idea is that if President Biden can provide loan forgiveness to millions of current borrowers, the federal government would have to provide over $1 trillion in new student loans to the course of the next decade. The White House has not presented any plans to reduce the volume of new student loans, although it is actively considering canceling part of the existing loan portfolio.

The Committee for a Responsible Federal Budget calculates that if Biden forgives $50,000 per borrower and does nothing to curb new loans, overall student debt will rise to current levels by 2030. Forgiveness advocates will no doubt call for a second debt jubilee long before then. The student loan program will continue, disbursing a hundred billion dollars of taxpayers’ money each year, punctuated by new forgiveness periods each time a Democratic president takes office.

Universities will take this state of affairs as a carte blanche to raise tuition fees. A loan program with regular jubilees is not a loan program, but an indefinite grant. Little will limit colleges’ ability to raise tuition when they can credibly tell students not to worry about taking out huge loans; the feds will forgive them anyway. We’ve seen this movie before: Some law schools marketed six-figure federal loans to their students on the explicit promise that they would be forgiven under the civil service loan forgiveness program.

Congress cannot conscientiously allow this to become the status quo. Therefore, if President Biden chooses to cancel student debt by executive order, Republicans in Congress should act immediately to curb — or abolish — the federal student loan program.

The political response from congressional Republicans should be commensurate with the amount Biden decides to pardon. If the president does not go further than his campaign promise to forgive $10,000 per borrower ($380 billion in total), Congress should end federal loans to graduate students and parents of undergraduates; loans to both groups of borrowers are currently unlimited. Strict new controls should be imposed on undergraduate loans; only programs where typical graduate earnings are high enough to pay off their debts should be eligible for ongoing loan funding.

These policies would be good ideas even if Biden doesn’t forgive student loans, but a cancellation event would be a great reason for Republicans to bring them to the fore.

However, if Biden gives in to progressive demands and cancels $50,000 per borrower (more than $1 trillion in total), Republicans should take action to end the federal student loan program altogether, with no replacement. If student loans have become such a disaster that it is justified to write off the majority of outstanding debt, the federal government cannot, in good conscience, continue to provide loans. The only reasonable option is to completely stop new lending.

This decision would be disruptive, but not catastrophic, for higher education. Some students, especially those enrolled in programs that offer good financial returns, would obtain private loans or revenue-sharing agreements to pay for their tuition. Many schools will reduce their prices. Pell grants, along with state financial aid, will always be there to help low-income students with college costs.

But without a doubt, the end of federal student loans would result in fewer post-secondary degrees and certificates being issued. Some colleges would close entirely. Other institutions would close low-return fields such as sociology and drama, for which private funding would be difficult to obtain. Thousands of dodgy master’s programs, whose expansion has been fueled by federal loans, would meet an abrupt demise.

By the loan forgiveness advocates’ own logic, that may not be a bad thing. The argument for debt cancellation rests on the premise that students have less debt, even if they used that debt to earn a degree. It follows that many debt-financed degrees and certificates are not worth it and should be scrapped. If higher education offers financial value, loan forgiveness is not necessary.

In a policy vacuum, ending federal student loans altogether might not be the optimal choice. With strict safeguards, student loans can be a useful tool to help individuals access quality higher education. But if President Biden creates the expectation that student loan jubilees will be a regular occurrence, that calculus changes. Republicans may have no choice but to end the federal student loan program.


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