President Joe Biden is expected to announce a $10,000 — and possibly more — student loan forgiveness for low-income debtors on Wednesday, in a move that is unconstitutional, unfair and dangerous to the stability of our economy and our democracy.
There is no doubt that some borrowers would benefit from student loan relief – especially young, low-income, black community borrowers. This would help them avoid defaults and perhaps allow some to enter the housing market.
Some of these debtors can really be seen as victims of a system that pushes young people to go to college when other paths might better suit their talents and interests; that increases federally subsidized tuition fees; and that steers students toward highly ideological majors that provide few marketable skills but groom them as future voters and left-wing activists.
However, most borrowers have taken out student loans quite voluntarily, and there are several strong arguments against relief:
1. Equity. Rewarding those who don’t repay their loans is unfair to those who worked hard — and sacrificed — to pay off their own student debt. It’s also unfair to people who chose not to go to college — often because of the prospect of debt — who now have to pay, as taxpayers, to subsidize other people’s student loans, even though they may have their own debts (such as mortgages and car payments). Plus, despite the income caps, wealthier borrowers will find ways to take advantage.
2. Inflation. Providing $10,000 in loan relief to millions of American borrowers, along with continuing a pause in student loan repayments for others, will increase the amount of money available to consumers in economy, creating more inflationary pressures and undoing everything good the recent so-called “Cutting Inflation Act” could have hoped to achieve. The rest of society will pay higher prices for goods and services, thereby indirectly subsidizing student borrowers through inflation.
3. Moral hazard. Bailouts create the expectation of more bailouts in the future, distorting the incentives for future borrowers and removing the risk consciousness that theoretically guides rational decisions in the market. Once the credibility of the student loan market – and other capital markets – is sufficiently eroded, people begin to lose faith in economic institutions and abandon the traditional habits of frugality and hard work that are necessary for survival. and the growth of any free market economy.
4. No academic reform. There is nothing in Biden’s impending proposal that will reform how colleges and universities charge for higher education. Currently, many institutions offer substandard degrees while suppressing all but the most left-leaning views. Professors of certain disciplines are little more than permanent political activists, training foot soldiers for radical causes. Universities do not bear any of the costs of students who do not repay their loans, so they will continue as before.
5. Executive usurpation. The president does not have the power to make sweeping decisions about federal government spending or debt. The only way he can hope to forgive $10,000 per borrower — for incomes of up to $125,000, according to initial reports — is through the kind of aggressive executive action that President Barack Obama has introduced into policy. ‘immigration. Rather than work with Congress and compromise on higher education reforms, Biden is mocking the separation of powers.
6. Banana Republic. The hallmark of Third World banana republics is that demagogues promise massive redistributions of wealth to secure their re-election. Biden’s impending announcement, so soon before a midterm election that Democrats could lose, smacks of cheap left-wing populism. Once a president begins to play the role of Santa Claus, spending other people’s money without any constraint, there is no end, and future presidents – left and right – will do the same for appease voters.
Joel B. Pollak is editor of Breitbart News and host of Breitbart News Sunday on Sirius XM Patriot Sunday nights from 7-10 p.m. ET (4-7 p.m. PT). He is the author of the recent e-book Neither Free Nor Fair: The 2020 U.S. Presidential Election. His latest book, RED NOVEMBER, tells the story of the 2020 Democratic presidential primary from a conservative perspective. He is the winner of the 2018 Robert Novak Journalism Alumni Fellowship. Follow him on Twitter at @joelpollak.