Why Democrats Might Regret Student Debt Relief



(Photo by Stefani Reynolds/AFP/Getty Images.)

When a dog gets a car, things don’t always end well. In politics, some victories that are exalted for true believers can make many would-be allies sigh, “That’s not what I had in mind.”

This seems to have been the case, for example, with the Supreme Court Dobbs decision This verdict, which was initially expected to be more or less a political wash, now appears to be giving Democrats a big boost. Although politics may matter little to committed pro-lifers grateful to be undone Roeis a major headache for many Republicans trying to legislate or campaign in the post-Roe was

Democrats could be in a similar situation when it comes to President Biden’s massive, illegal and regressive student loan jubilee.

The idea that Democrats might regret Biden’s loan scheme may seem far-fetched. After all, the abortion debate is intimate in a way that loan forgiveness is not. And a new Quinnipiac poll find that Biden’s scheme is more popular than not, winning the general public and independents by identical 53-43 margins. But there may be more to the story.

First, for those who have doubts about the details, Biden has tried to embezzle a minor provision of the post-9/11 HEROES Act (a provision intended to give the executive branch a little more flexibility to help families of the military and victims of terrorism). ) to state that people who borrowed taxpayer funds to attend college no longer have to pay roughly 500 billion dollars in federal loans.

There is a list of substantive criticisms of this maneuver. It is regressive, directing large sums to college students who are generally disproportionately wealthy. It is inflationary, injecting hundreds of billions of unearned dollars into the economy without even pretending it has been paid. It’s unnecessary, since income-based loan repayment and forgiveness options already exist to accommodate borrowers who need it. It creates immense moral hazard, encouraging universities to be ever bolder in raising tuition and future borrowers to take on student debt. And it’s ridiculously designed, with up to $20,000 in benefits flowing to borrowers who racked up their debt at Harvard Law or Stanford Business School.

The justification is also laughable. Biden’s legal rationale isn’t even coherent on its own terms. This spring, when his administration sought to end Title 42, enacted as a public health measure to keep asylum seekers in Mexico, the White House asserted that there was no longer a COVID-19 emergency to justify this policy. And Biden brags about our 11 million open jobs and insists the economy is singing. Yet is the White House now claiming that COVID-19 is a national emergency with economic ramifications that require an extraordinary gift to the nation’s most educated workers? This was an idea that Biden mocked on the campaign trail in 2020 and that Speaker Nancy Pelosi in 2021 said was outside of Biden’s authority.

Biden’s calculation is simple. It’s giving up to $20,000 in taxpayer money to millions of college-educated borrowers, whom Democrats trust will thank them properly. In the meantime, the cost will be borne by, well, everyone, including the children and grandchildren who are not yet with us. The politics here is that of sugar subsidies: concentrated, visible benefits and scattered, ephemeral costs. More often than not, this kind of policy pays off.

Is there any reason to think things might work differently in this case? May be.

We remember that it took some time for the political consequences of Dobbs shake off In fact, the same reasons as Dobbs Democrats could suggest why loan forgiveness could go down the other way.

Both of us Dobbs and loan forgiveness raise difficult questions about the motives of those who overturned the status quo. Democrats have used it effectively Dobbs suggest that the right is willing to trample on individual rights in the pursuit of some kind of The Handmaid’s Tale– Theocracy of style. Biden’s loan maneuver was tailor-made to feed the suspicion that Democrats despise personal responsibility and are intent on catering to kids with graduate degrees.

Both hint at slippery slopes. Dobbs raised the specter that the Supreme Court might review other decisions governing gay marriage and privacy. The audacious illegality of Biden’s move and calls for more from progressive lawmakers fuel suspicions that Democrats will be eager for a repeat in the future.

Both undermine core messages. At a time when the right had been benefiting by defending freedom of expression and religious freedom from awakened excesses, Dobbs it allowed Democrats to argue that Republicans are the party of Big Brother. Well, just as the “Inflation Reduction Act” seemed to help Democrats make some headway in addressing concerns about inflation and runaway federal spending, loan forgiveness risks making them look bogus .

The political cracks are not hard to see. Jason Furman, former chairman of Obama’s Council of Economic Advisers shattered Biden’s maneuver is inflationary and misguided. In fact, it’s hard to find serious left-wing economists who think the pardon was a good idea. Centrist Democrats have tiptoed over it, recognizing that it’s a mixed bag. The move was even achieved denounced by Washington Postfor god’s sake.

This wouldn’t be the first time progressives have led Democrats down a path they would regret. Remember “defund the police”? Or the consequences of progressive enthusiasm for tackling illegal immigration through amnesty and an open border? Progressives argued that this would help Democrats win over the broader Latino community. However, it turned out that Latino immigrants who came here legally weren’t so excited about rewarding line jumpers.

Such a reaction is not hard to imagine. Consider that fewer than two in five Americans have a high school degree, and that of those who have borrowed money for college, only 7 percent owe more than $100,000. The beneficiaries are a relatively privileged small portion of the nation. And the public’s legitimate concerns for the unemployed, the struggling, or those who ended up with student loans but no degree can already be addressed by existing income-based repayment programs.

What will it take for Democrats to regret taking the student loan car? The answer must be guided by three principles: Make taxpayers whole. Prevent schools from draining the public treasury. And help student borrowers in need without rewarding the rich. In short, Republicans must offer policy answers that clarify the sides and the stakes.

Republicans should aggressively defend measures that treat loan forgiveness for what it is: a college bailout. Colleges with multimillion-dollar endowments have charged outrageous tuition (especially for graduate school) and then encouraged students to take out student loans while building up their endowment funds for buildings and bureaucracy. If that was worrisome before, it’s inconceivable in light of Biden’s plan, under which colleges that have been saddled with ridiculous tuition bills can now gleefully watch their customers collect a taxpayer-funded refund. If there are to be refunds, they should be paid by these same institutions.

Policymakers should insist that any institution with an endowment of more than $50 million return to taxpayers all funds “forgiven” to its graduates before it can again participate in federal loans or be eligible for any federal funding. From now on, an annual “student loan repayment assessment” should be a condition for endowed institutions to participate in federal student loans or other federal aid programs.

Colleges and universities that want to remain eligible for federal loans should adopt appropriate austerity measures, similar to those imposed during the bailout of General Motors during the Great Recession or the savings and loan bailout of the 1960s. eighty At the very least, Congress should insist that Biden’s plan not apply to those who voluntarily used the funds to earn graduate degrees or attend expensive private universities.

Giving things away is usually a winning political strategy. But this is not an iron law. A little over a decade ago, in early 2009, the Tea Party movement was ignited by CNBC reporter Rick Santelli’s outrage over the Obama Administration Homeowner Stability and Affordability Plan. That initiative came in the midst (not after) of a raging crisis to which the solution (restructured mortgages) was at least plausibly related and where the beneficiaries (who had to meet certain requirements) could at least be presented as vaguely responsible or deserving. . And yet, the backlash was still enough to turn the political landscape upside down.

Biden’s massive giveaway is broader and far less defensible than the one that spawned the Tea Party. But making Democrats pay will require a credible messenger and a consistent message. Unfortunately, none of these are strong points for the GOP right now. Indeed, it is unclear whether Republicans are capable of (or even interested in) mustering the necessary discipline. If they aren’t, it risks sending the signal that Democrats are sure to buy into the Warren-Sanders bandwagon even more shamelessly and cynically. And that would be an unfortunate lesson.





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Jamie Lynch

Jamie Lynch