President Biden recently suspended student loan repayments yet again, for as much as eight more months. Interest on loan balances during that period is forgiven, costly taxpayers around $8.5 billion per month.
Adam Kissel, a former Deputy Assistant Secretary of Education, says this was likely illegal, because the pandemic no longer directly interferes with students’ ability to repay their loans, as it once did. Instead, the most recent suspension is in response to court rulings declaring illegal President Biden’s attempt to write off around $500 billion in student loans.
Kissel says that because the “latest student loan repayment extension” is “tied to litigation instead of the emergency” that used to exist, it probably violates the HEROES Act. “The HEROES Act requires that when the secretary of education” suspends student loan repayments, “the people helped must have ‘suffered direct economic hardship as a direct result of a … national emergency.'”
A national emergency arguably existed in early 2020, “with businesses and schools closed nationwide and many people no longer receiving a paycheck due to the COVID-19” pandemic, making it hard for them to “keep paying down their student loan balances.” But that is not true now, when the “number of unfilled jobs in the United States crossed 11 million and remains near that level — about 4 million more than before the pandemic was declared.”
Moreover, in “September, President Biden declared that ‘the pandemic is over.'” This followed his declaration in August that repayments would be delayed “one final time” through Dec. 31. It is hard to claim that a pandemic emergency persists, when even the Democratic-controlled “Senate approved a resolution to end the emergency.”
Even though the legal basis for suspending student loan repayments had come to an end, Biden recently delayed repayments yet again. As Kissel notes,
On Nov. 22, the Education Department abandoned the pretense that the COVID-19 response was somehow still making loan repayment difficult. Instead, it said this latest delay was intended merely to ‘alleviate uncertainty for borrowers’ while the administration asks the Supreme Court to lift the injunction against the student loan bailout.
The bailout is illegal, unfair and extremely expensive (half a trillion dollars). As of Thursday, Dec. 1, three federal courts and the Supreme Court have said that the department may not go forward with that scheme. The Eighth Circuit stopped the administration from forgiving any loans under the plan, and the Supreme Court declined to lift the injunction, scheduling arguments for February. A Texas judge invalidated the whole scheme, finding it unlawful, and the Fifth Circuit then refused to let the department move forward while the appellate court reviews his opinion.
It is now clear that the Biden administration based its decision on the litigation rather than, as the HEROES Act requires, direct financial harms due to the pandemic response. “Uncertainty for borrowers” comes nowhere near the requirements of the law.
Payments have never been set to resume at some special date calculated to be when more than 40 million Americans are all financially ready to pay, and the latest pause continues that failure. Instead, if the litigation is not resolved by June 30, 2023 (months after the emergency declaration will have expired), payments will resume 60 days after that — meaning the end of August.
The litigation could take years, and nobody should believe the Education Department anymore when it says a repayment extension is the last one. Governments love emergency powers and hate giving them up.
What’s different this time is that not only is the bailout illegal, but now even the student loan pause is probably illegal. A hard question is: Who has standing to sue? A recent estimate shows that the pause is costing $8.5 billion per month, all costs considered. But it’s virtually impossible for taxpayers to gain standing in court and sue to put an end to the administration’s extravagant largesse.
The HEROES Act was meant to help only American military members. Determined not to let a crisis go to waste, the administration has distorted it beyond recognition. Let’s hope that the U.S. House of Representatives, under new leadership in January, asserts its lawmaking prerogative and sues the Department of Education over this abuse.
Suspending student loan repayments encourages colleges to raise tuition, by making it more attractive to take out big loans to cover college tuition. When students are willing to borrow more to go to college, colleges respond by increasing tuition and hiring more unnecessary college bureaucrats. The Daily Caller notes that “each additional dollar in government financial aid translated to a tuition hike of about 65 cents,” according to the Federal Reserve Bank of New York.
Biden’s suspension of student loan repayments bothers not just conservatives, but even liberal economists. Former Harvard president Larry Summers, who was Treasury Secretary in the Clinton administration, calls suspending student loan payments the “worst idea” because it transfers wealth to “highly paid surgeons, lawyers and investment bankers.”
Inflation and inequality are getting worse due to the suspension, says Matthew Yglesias, who co-founded the progressive website Vox. In the Washington Post, Yglesias notes that the long pause in student loan payments since 2020 has disproportionately benefited the wealthy, at the expense of taxpayers who mostly don’t have college degrees. Yglesias also notes that Biden’s suspension of student loan repayments will drive up the inflation rate:
“Most Americans say the most important problem facing the country is inflation — and President Joe Biden just made it worse. His administration announced last week it would extend yet again the emergency suspension of student loan repayments, even as his frenemies on the left are urging a program of complete forgiveness of all student debt.”
Rapid inflation is already occurring due to massive government spending under Biden, he says, and suspending student loan repayments makes matters worse.
In addition to suspending student loan repayments, Biden has also attempted to forgive $10,000 or $20,000 in student loan debt for many borrowers, at a cost to taxpayers of $500 billion. That $500 billion student loan forgiveness has been declared illegal by a judge in Texas, and also was temporarily blocked by the 8th Circuit Court of Appeals. But the Biden administration has appealed these rulings, asking the Supreme Court and the Fifth Circuit Court of Appeals to reinstate the student loan forgiveness plan.
In addition to that $500 billion student loan bailout, Biden also is changing income-driven repayment plans in ways that will spur colleges to raise tuition and stick taxpayers with the tab. Biden’s changes “will make college much more expensive” for taxpayers and many students, reports Reason Magazine.
Between the student loan bailout and Biden’s changes to income-driven repayment plans, the overall cost of Biden’s plan could be over a trillion dollars, according to analysts at the University of Pennsylvania’s Wharton School, taking into account changes made by Biden to income-driven repayment plans.
Thomas Berry of the Cato Institute says Biden’s $500 billion student loan bailout is illegal. Other observers have said that Biden’s plan is illegal. As the College Fix notes, “An analysis from the Texas Public Policy Foundation concluded that an executive order bailout is likely illegal. Alan Dershowitz, professor emeritus at Harvard Law school, has also said that a student bailout through executive action would be illegal.”
Jason Furman, chairman of President Obama’s Council of Economic Advisers, calls Biden’s plan “reckless.” Furman says, “Pouring roughly a half-trillion dollars of gasoline on the inflationary fire that is already burning is reckless.” Biden’s plan will increase economic inequality and the national debt.
Even the liberal Washington Post calls Biden’s student-loan bailout “a regressive, expensive mistake.”