Biden should resist canceling student debt. Here’s a better policy.
The Education Department announced last week that it would ease rules on certain student loan programs, forgiving 40,000 people’s remaining debts and bringing 3.6 million more borrowers at least three years closer to paying off their loans. This is far less than what student debt activists want; the administration’s changes to the income-driven repayment and Public Service Loan Forgiveness programs do not broadly cancel student debt, as they desire. But that is a good thing. The Washington Post reported Tuesday that President Joe Biden expressed openness to further moves that would cancel student debt in a meeting with House Democrats, and on Thursday, the president said he is “considering dealing with some debt reduction.” He should restrain himself.
Contrary to what many activists want, the Education Department’s
latest move tries to target federal aid to those who really need it. The incomedriven repayment program limits monthly payments to a certain percentage of borrowers’ income, enabling people who pursue their desired careers without worrying how they will pay off their student loans. After 20 to 25 years of repayments, the program cancels borrowers’ remaining debt. The Public Service Loan Forgiveness program is even more generous, canceling the debt of government and nonprofit workers after 10 years of repayments.
The problem, the Education Department says, is that many people who should have qualified for these programs did not know to enroll or did not get credit for all the months of repayments that should have counted. So the Biden administration is adjusting their accounts to give them retroactive credit.
Inevitably, such a broad waiver will still help some borrowers who do not deserve it. Borrowers who took high-paid jobs after graduating will now get credit for the months of repayment they made at that time, as long as they subsequently changed professions and entered one of these repayment programs. But at least the Biden administration’s move aims debt forgiveness at those in incomerelated repayment programs. By contrast, across-the-board student debt cancellation, which left-wing activists and politicians demand, would amount to a regressive subsidy for many high-income university graduates Biden hinted Thursday that another announcement on debt cancellation is coming, saying only that he would decline to cancel $50,000 of debt per person. In fact, even offering borrowers $20,000 or $10,000 of debt cancellation would be a major waste if mistargeted. A broad cancellation would offer huge, undeserved benefits to doctors, lawyers and others who do not need taxpayers to foot the bill for their valuable educations. The vast number of American taxpayers lacking university degrees would subsidize well-heeled, white-collar professionals. And it would be expensive. Simply extending the pandemic-era pause on student loan payments for four more months, which the Biden administration did this month, will cost some $20 billion. That could finance massive numbers of Pell Grants for poor students.
Canceling student debt has become a trendy cause in leftwing circles in part because, advocates insist, Congress delegated so much power over student loans to the executive branch that the president could make this massive change with the stroke of a pen. Biden should continue to resist these irresponsible demands, even as his administration looks for ways to offer more targeted relief. Congress, meanwhile, should make clear that high-income borrowers need no more federal help and instead put the money into college finance programs tailored to aid the needy.
A broad cancellation would offer huge, undeserved benefits to doctors, lawyers and others who do not need taxpayers to foot the bill for their valuable educations.