Today, the Supreme Court stopped the Biden administration from writing off $500 billion in student loans at taxpayer expense, in Biden v. Nebraska, because that exceeded its powers under the HEROES Act. In response, President Biden denounced Republicans and the Supreme Court, and promised to eventually write off student loans all over again, this time using a different statute, the Higher Education Act of 1965.
The Supreme Court’s ruling against Biden was expected by most observers. Some of them accused Biden of currying favor with young voters by promising student loan forgiveness that he knew was illegal and would be struck down, thus giving them false hope. Biden sought to deny this, saying “I didn’t give any false hope. The Republicans snatched away the hope that they were given.”
But that was dishonest on Biden’s part. Earlier, he himself had admitted he lacked the power to forgive student loans en masse. The president said of student loan cancellation during a 2021 CNN town hall, “I don’t think I have the authority to do it by signing with a pen.”
Other Democratic Party leaders used to admit that Biden lacks the power to forgive student loans, the very ones denouncing today’s Supreme Court decision. On July 28, 2021, “then-Speaker of the House Nancy Pelosi explained: ‘People think that the President of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress.”
As journalist Charles Cooke notes, “Biden knew this was illegal. Everyone knew this was illegal. That he tried to do it anyway, in violation of his oath of office, remains a monumental disgrace.”
But illegal or not, Biden’s action was somewhat popular. Polls show that between 43% and 63% support his cancellation of $10,000 in student loan debt, while a smaller percentage oppose it.
So he will try to forgive student loan debt all over again, using a different statute this time, in hopes of winning the 2024 election. People like getting free stuff, even if they have no right to it, and even if it costs taxpayers a lot. Student loan forgiveness is free stuff. As the Washington Post’s Megan McArdle observes, “I am skeptical that anyone in the administration believed this would stand; rather, the point was to be able to complain about it in 2024.”
As the Associated Press reports,
Biden said his administration had already begun the process of working under the authority of the Higher Education Act of 1965, which he called “the best path that remains to provide as many borrowers as possible with debt relief.”…
The new approach uses a provision allowing Education Secretary Miguel Cardona to “compromise, waive or release” student loans. The Biden administration used the same basis last year to forgive $6 billion in loans for borrowers who were deceived by their colleges.
The details of the new forgiveness will be negotiated through a federal rulemaking process that the administration launched Friday. The process allows the Education Department to write or change federal regulations with the weight of law.
But there’s no guarantee that the plan could survive another legal challenge.
The Higher Education Act has been used to cancel student debt but never at this scale, and lawyers for the Trump administration concluded in 2021 that the education secretary “does not have statutory authority to provide blanket or mass cancellation” under the act.
Former Vice President Mike Pence praised the Supreme Court’s decision, saying he was “pleased that the court struck down the radical left’s effort to use the money of taxpayers who played by the rules and repaid their debts in order to cancel the debt of bankers and lawyers in New York, San Francisco, and Washington.”
Even Democratic economists agree with Pence that student loan forgiveness is a bad idea. Canceling student loan debt is “regressive and unfair,” notes Katherine Abraham, a former adviser to Obama who served as Commissioner of the Bureau of Labor Statistics during the Clinton administration. As Greg Price points out, “Only 37% of Americans have a 4-yr college degree, only 13% have graduate degrees, and a full 56% of student loan debt is held by people who went to grad school. Biden’s plan to cancel it would be like taking money from a plumber to pay the debt of a lawyer.” Even the liberal Washington Post called Biden’s student-loan bailout “a regressive, expensive mistake.”
Student loan forgiveness also is inflationary. Jason Furman, chairman of President Obama’s Council of Economic Advisers, who called Biden’s plan “reckless.” Furman says “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.” Biden’s student loan forgiveness will increase inflation, inequality, tuition, and the national debt.
Writing off student loans will encourage colleges to jack up 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 raising tuition. 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.
