Beth Akers of the American Enterprise Institute assesses President Biden’s latest plan for college student loans.
First, he plans to cancel up to $20,000 of accumulated unpaid interest, regardless of the borrowers’ income. Second, the administration plans to automatically cancel debt for borrowers eligible for SAVE, Public Student Loan Forgiveness (PSLF), closed school discharge, and/or other federal forgiveness programs without them needing to apply. And lastly, Biden intends to forgive student debt for other categories of borrowers, ranging from those “experiencing hardship” to those who entered repayment over 20 years ago. Details on these plans were thin.
And these efforts are all in addition to his expansive SAVE Plan —that transforms income-driven repayment into an entitlement program—and his efforts to use the negotiated rulemaking process to forgive even more student debt.
Here’s the thing: Biden knows better. Less than a month into his presidency, he declared “I will not make that happen” in response to a voter asking whether or not he’d back progressives’ proposal to broadly forgive student debt. “I don’t think I have the authority,” he wisely said. And beyond the question of authority, he seemed to acknowledge the ill-conceived nature of broad-based student loan cancellation when he offered that he didn’t want taxpayers to pick up the tab for graduates of “Harvard and Yale and Penn.”
But now, his administration has explicitly “vowed to use every tool available to cancel student debt for as many borrowers as possible, as quickly as possible.”
As the President himself suggested just a few years ago, such broad forgiveness is simply bad policy. Not only is it regressive, it also provides colleges and universities with precisely the wrong incentives. When students don’t have to pay back the money they borrow to pay for college, colleges don’t have any reason to keep prices low. On the contrary, some students will necessarily benefit from paying and borrowing as much as possible.
