Student-debt cancellation order: Bad policy, overtly political

Editor’s note: The Bluegrass Beacon is a weekly syndicated newspaper column posted on the Bluegrass Institute’s website after appearing in publications statewide. Sometimes edits apply.

President Joe Biden’s message accompanying the recent rollout of his student loan-forgiveness plan unwittingly included a severe indictment of the federal program.

Biden claims his executive order canceling hundreds of billions owed taxpayers by borrowers is necessary because an entire generation is now saddled with “unsustainable debt,” creating “a burden so heavy that even if you graduate, you may not have access to the middle-class life that the college degree once provided.”

The left-leaning Kentucky Center for Economic Policy supports Biden’s move, claiming it’s a reset, offering the “chance to begin fixing a broken and unsustainable system and recommit to education as a public good that benefits us all.

Alas, nothing was offered to address how the loan system led to the fiscal foolishness in the first place.

In fact, the Committee for a Responsible Federal Budget, whose bipartisan board includes former Indiana Republican Gov. Mitch Daniels and Democrat President Bill Clinton’s former budget director Leon Panetta, estimates the cumulative level of student debt will return to current levels within the next decade.

If, as sound research indicates, colleges previously jacked up prices in response to government subsidizing student borrowing, how will Biden’s precedent disincentivize future borrowers from taking out more and even-larger loans to attend schools they would otherwise never consider?

Certainly, the president’s order provides no incentive for colleges and universities to lower – or even contain – costs.

Also, which students will really benefit?

According to the Urban Institute, although lower-income households comprise a larger number of college borrowers, higher-income borrowers hold a greater share of outstanding student-loan debt.

Nearly half of all such debt belongs to borrowers with graduate degrees who have significantly higher incomes than those who didn’t attend college or graduate.

The University of Chicago estimates that Biden’s loan forgiveness will benefit the top 10% of income earners as much as the bottom 30% combined.

Talk about forgiving student debt as being foundational for once again making public education “a public good” is almost as rich in irony as the fact that those upper-income debtors receive bailouts even though they can easily afford their payments.

This order incentivizes universities to raise their costs still more, making it even more challenging for lower-income Kentuckians to afford a college education.

Then, there’s the fairness factor.

How is this order fair to families who sacrificed to send children to college or whose kids signed up for military duty to avoid incurring debt?

Supporters are particularly trying to minimize the unfairness of Biden’s policy to the people who paid their debts.

It’s the price of progress, they spin!

Yet how does it get more unfair or more regressive than forcing those who worked hard and paid off their college debts to pay again to cover debts for others who weren’t as responsible?

Call it what you want, but it's not "progress."

I asked Lindsey Burke, who directs education policy at the Heritage Foundation, what she calls it.

“It’s a regressive moral hazard that asks Kentucky waitresses, truck drivers, home health care providers and electricians to pay for the Wellesley graduate student’s master’s degree in gender studies,” Burke said.

Neither is Biden’s plan “forgiveness.”

Instead, call it “The Great Transfer” because in one fell swoop, the president’s pen transferred debt from college graduates who signed an agreement to repay their loans onto the proverbial backs of millions of taxpayers who never agreed to take on such debt for others.

Neither did those taxpayers’ representatives agree to such a scheme.

Biden’s plan is bad policy which doesn’t address the real issues of college affordability, pits Americans against one another based on socioeconomics, is overtly political and perhaps even unconstitutional.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free market think tank. Reach him at jwaters@freedomkentucky.comv and @bipps on Twitter.