President Joe Biden’s Department of Education has proposed a student loan forgiveness plan that could cost $600 billion, according to The College Fix.
It is slated to fully “take effect after President-elect Donald Trump takes office in January.” While the Education Department claims it will cost around $112 billion, an analyst says that’s a “gross underestimate” and that the cost could easily be five times that big.
The Education Department formally issued the proposed plan and allowed the public to submit comments about the proposal on October 31, less than a week before the election. The comment period for the proposed plan ended this Monday. The plan has been in the works since February, if not earlier.
According to the proposed plan, the Education Department would have the “authority to waive all or part of any student loan debts owed to the Department based on the” Department’s “determination that a borrower has experienced or is experiencing hardship related to such a loan.”
The Education Department uses a sweeping and vague definition of “hardship” including anything that is “likely to impair the borrower’s ability to fully repay the Federal government” or “renders the costs of enforcing the full amount of the debt not justified by the expected benefits of continued collection of the entire debt.”
Because of the definition’s vagueness, the costs of the plan cannot be calculated with precision, says economist Preston Cooper of the American Enterprise Institute.
“The subjective nature of the proposal is worrisome. Whether a borrower is in ‘hardship’ is left up to the discretion of Education Department bureaucrats.”
While the official cost estimate of the proposal is $112 billion, Cooper notes that “independent analysts at the Committee for a Responsible Federal Budget have estimated that it could cost as much as $600 billion [over the coming decade].”
The CRFB submitted its economic analysis as a comment to the proposed plan. Cooper predicts that Education Department officials “will adopt a maximalist standard of ‘hardship’ in order to forgive as much debt as possible,” if the incoming Trump administration does not stop them.
The moderately liberal Progressive Policy Institute said the proposal “creates a back door for blanket debt cancellation,” and that the estimated $112 billion cost is a “gross underestimate.”
The Biden administration has also attempted to cancel billions of dollars of student loans in secret.
Earlier, a watchdog group accused Education Secretary Miguel Cardona of violating federal law by sending a mass email attacking Republicans for questioning the legality of the Biden administration’s cancellation of student debt. Protect the Public’s Trust (PPT) called the email “glaringly political” and filed a complaint with the Office of Special Counsel (OSC) and the Education Department inspector general accusing the education secretary of violating the Hatch Act, which prohibits federal employees from using their office to engage in partisan political activities intended to influence the outcome of an election.
Several high-ranking members of the Biden-Harris administration have violated the Hatch Act. The OSC determined that Energy Secretary Jennifer Granholm and Secretary of Housing and Urban Development Secretary Marcia Fudge broke the law by wading into partisan politics while using public property.
On July 18, a federal appeals court in St. Louis blocked the Biden administration’s attempt to illegally write off billions of dollars in student loan debt — such as allowing certain borrowers to have their debt forgiven after ten years.
After the Supreme Court ruled last year that Biden’s attempt to cancel $500 billion in student loan debt was illegal, Biden canceled some of the same debt using new excuses, writing off billions more in student loans. In April, 17 states sued the Biden administration over its new plans to cancel student loans, arguing that Biden’s new plan was illegal, too.
An April 2024 report by the Committee for a Responsible Federal Budget estimated that Biden’s student loan bailouts, put together, “will cost a combined $870 billion to $1.4 trillion.”
Canceling student loans is a bad idea. It encourages 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.
Canceling student loan debt is “regressive and unfair,” says 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.”
The Wall Street Journal criticized Biden’s new plan to write off student loans after the Supreme Court ruled against his old plan, arguing that the new plan “will encourage colleges to raise costs, especially in graduate programs for which there are no federal loan limits. Who cares if students can’t repay? They will be forgiven one way or another.”
The Supreme Court’s 2023 ruling against Biden’s earlier loan-forgiveness plan 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. 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 who later denounced the Supreme Court for ruling that Biden generally lacks that power. 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 noted in 2023, “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.”
