Student Loan Cancellations Continue: But Who Will Actually End Up Paying?
President Biden is relentless in his quest to wipe out student loan debt, now targeting up to 25 million borrowers with a new strategy after the Supreme Court shot down his initial attempt last year. This time, Biden’s team is banking on a different legal angle, hoping to outmaneuver the courts.
If Biden gets his way, the government will be slashing the student loan balances of the majority of Americans by $5,000 to $20,000. While some may see this as a financial relief, economists warn that it could spur spending and growth, potentially fueling inflation.
But let’s not kid ourselves – this isn’t free money. By canceling debt, the government is sacrificing future revenue, adding to deficits and the monstrous national debt. Guess who foots the bill? Future taxpayers, that’s who.
The Biden administration conveniently sidesteps putting a price tag on this latest scheme, which consists of various forgiveness programs mostly aimed at those who’ve been paying off loans for two decades or more. If all goes as planned and the forgiveness averages $5,000 per borrower, we’re talking about a whopping $125 billion in lost revenue over several years. Ramp that up to $500 billion if the average hits $20,000 per borrower.
That’s chump change, you might say, but in budget terms, it’s a big deal. Remember when the Congressional Budget Office (CBO) estimated that Biden’s first forgiveness plan would cost a staggering $400 billion over 30 years? Now, Biden’s back for more, but this time it could be even pricier.
While $400 billion might seem like peanuts in the grand scheme of things, it’s a significant chunk of change. But don’t expect Congress to pass such a hefty bill without a fight – unless, of course, it’s a crisis like COVID or one party holds all the power.
Take a look at the 2022 Inflation Reduction Act, which aimed to slash deficits by $275 billion over a decade. Biden was quick to boast about it, yet his current student debt plan could wipe out those savings in one fell swoop.
Why is Biden resorting to executive action? Simple – because Congress won’t touch this issue with a ten-foot pole. Even when Democrats held sway, there wasn’t enough support to pass debt cancellation legislation. Republicans oppose it, and many Democrats agree there are better uses for taxpayer dollars.
When it comes to federal aid, the focus should be on those in genuine need – not college graduates who are typically better off financially. Let’s face it, there’s no equivalent aid for those who skipped college or worked their way through.
Plus, without reforms, this debt cancellation is just a band-aid solution. It won’t tackle future debt or help those who’ve already paid off their loans. According to the Committee for a Responsible Federal Budget, after a one-time cancellation, we’ll be back to square one within five years.
But Biden made a promise, and now he’s got to deliver. Republicans are up in arms, labeling his plan as “lawless” and a taxpayer-funded giveaway. But let’s not forget, both sides can be guilty of fiscal irresponsibility when it suits their agenda.
