Now that the Supreme Court has rejected the White House’s attempt to use the Higher Education Relief Opportunities Act to forgive student debt, President Biden has come up with a different justification. This new approach changes the legal landscape. It will take considerable time to adjudicate—no doubt pushing beyond the 2024 election. From a political-economic standpoint, however, nothing has changed. All the considerations that troubled Biden’s first debt-relief scheme bedevil this effort as well.
The original plan would have forgiven $10,000 in outstanding student-debt relief for individuals below a certain income level and an additional $10,000 for Pell Grant recipients.It would have cost the Treasury some $400 billion in foregone revenue flows. The revised approach is more piecemeal. Already, the Department of Education has decided to give credit for debt repayments even during periods when payment obligations were waived and no payments were made. The department has also decided to extend and enhance the public-service loan-forgiveness provision, in which those who choose public-service careers saw their debts erased after a certain time. Broadening eligibility for forgiveness further, this tactic also excludes certain sorts of income from the maximum amount allowed under the program. It would reduce the allowed maximum payment to 5 percent of disposable income.
The costs of the new plan would likely exceed those of the original effort. According to the DOE, granting credits even when debtors made no payments would deny the Treasury some $39 billion in revenue that it would otherwise have received. Other changes, according to the nonpartisan Congressional Budget Office, would raise the proportion of debtors getting relief from 50 percent of the total to 66 percent. Over a longer time frame, the Penn Wharton Budget Model estimates that the changes would cover some 91 percent of all student debtors and deny the Treasury about $470 billion over the next decade—and still more after that.
Aside from this dollar difference and the authority claimed by the White House, the economic, political, and social issues are unchanged from the effort that the Supreme Court just rejected. The beneficiaries will take a straightforward position: they will clamor for its acceptance, even as they complain that it is insufficiently generous. Arguments against the plan are more nuanced: questions of equity dominate, while the need to address the underlying problem remains.
The most immediate aspect of the equity issue concerns those who paid for their education out of savings or borrowed but have already repaid the debt. While those who have slow-walked repayments would receive relief, those who depleted their assets or were more diligent about repaying their debt would get nothing. There is also the question of equity to taxpayers: the denial of repayment revenues to the Treasury would mean that all taxpayers would have to fill the financing gap. That burden would fall partly on people who, for various reasons, including financial, never received a university degree. The plan would force degreeless taxpayers to pay for other people to secure a credential that presumably increases their earning power. In this sense, it would be doubly unfair to those who paid for their education out of savings or who have repaid their loans.
Beyond these serious equity questions lies the problem of underlying causes. Student loans are as large and unsupportable as they are because college has become insupportably expensive. It has done so in large part because public monies (often in the form of loans) have become readily available for such expenses. By paying those debts with taxpayer monies, the new White House plan, like the old one, would do nothing to slow or stop the oppressive pattern of rising higher-education costs that burden students, family savings, and taxpayers—to the benefit of university administrations and faculties, already among the most privileged classes in society. Indeed, far from correcting this ugly trend, the debt-relief plans extend and enlarge it.
To be sure, this White House has made no claim that it is attempting to address “root causes.” Perhaps it would be asking too much to expect the administration to try to do so. But if it is unreasonable to ask the White House to solve all aspects of this national problem, it is nonetheless entirely reasonable to ask it not to make it any worse.
Photo: Stefani Reynolds/Getty Images