Inside Joe Biden’s new student loan repayment plan
https://www.politico.com/news/2023/07/05/inside-joe-bidens-new-student-loan-repayment-plan-00104723
Tag: Student Loans
The Supreme Court’s lawless, completely partisan student loans decision, explained
“Roberts’s attempts to make the Heroes Act mean something other than what it says are at times confusing and difficult to parse. But it basically boils down to this: In order to provide for the particular mix of student loan relief prescribed by the Biden administration’s policy, the secretary had to both “waive” some student loan obligations and “modify” others. That is, the policy only works if the secretary has the power to outright eliminate some obligations, while merely making changes to others.
The chief’s primary attack on the Heroes Act’s statutory language is that he reads the word “modify” too narrowly to permit these changes. As he writes, the word “modify” “carries ‘a connotation of increment or limitation,’ and must be read to mean ‘to change moderately or in minor fashion.’” And then he faults the Biden administration for doing too much, attempting to “transform” student loan obligations instead of merely making “modest adjustments.””
…
““In the HEROES Act,” Kagan notes, “the dominant piece of context is that ‘modify’ does not stand alone. It is one part of a couplet: ‘waive or modify.’” The word “waive” moreover means “eliminate,” so Congress explicitly gave the secretary the power to simply wipe away student loan obligations altogether.”
…
“Perhaps recognizing that his attempts to parse the text of the Heroes Act may not be entirely persuasive, Roberts’s opinion also offers an alternative reason to strike down Biden’s student loan forgiveness program — something known as the “major questions doctrine.”
Briefly, the major questions doctrine states that the Court expects “Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’” And, as Roberts writes, there’s little question that this student loans policy, which could forgive hundreds of billions of dollars in student loans, involves matters of great significance.
But the most important thing to understand about the major questions doctrine is that it is completely made up. It appears nowhere in the Constitution, and nowhere in any statute, and was invented largely by Republican appointees to the Supreme Court. It is true that the Supreme Court has invoked this made-up doctrine several times in the recent past — mostly in opinions joined entirely by Republican-appointed justices who wished to strike down policies pushed by Democratic presidents — but, in relying on this fabricated legal doctrine one more time, Roberts effectively cites past power grabs by the justices to justify a new power grab.
And even if you accept the major questions doctrine as legitimate, it’s not clear why Biden’s student loans program still should not be upheld. The doctrine merely states that Congress must “speak clearly” if it wishes to delegate significant authority to a federal agency. And, for the reasons explained in the previous section, Congress spoke quite clearly when it wrote the Heroes Act.”
Can Republicans Fix Student Debt?
Biden’s Student Loan Plan Could Cost Twice as Much as Projected
“A new analysis from the Congressional Budget Office (CBO) shows that Biden’s so-called income-driven repayment plan will cost at least $230 billion over 10 years—with an additional $45 billion in costs likely coming if the Supreme Court invalidates the White House’s student loan forgiveness scheme. That means the final tab could be more than twice the $138 billion price tag attached to the proposal by the Department of Education, which is overseeing the program’s rollout.
Under current law, federal student loan payments are capped at 10 percent of an individual’s “discretionary income,” which the Department of Education defines as income that exceeds 150 percent of the federal poverty guidelines. In practice, that means a single borrower with no children starts making payments on income that exceeds $20,400.
Biden wants to lower that threshold to 5 percent for undergraduate loans and impose a new limit of 10 percent for loans put toward a graduate degree. Biden’s plan would also wipe away outstanding student debt after 10 years of payments for those who borrowed $12,000 or less—and a maximum payment period of 20 years no matter how much was borrowed.
But if you cap monthly payments at a lower level and also shorten the allowable repayment time, there will be a lot of loans that never get paid back in full. That cost ultimately falls on the taxpayers, and that’s what the dueling estimates from the CBO and the Department of Education are all about.”
Lawsuit: It’s Time To Start Paying Off Those Student Loans Again
“Student loan payments have been paused since the onset of the COVID-19 pandemic in March 2020. However, in the three years since the pause began, the economic and legal justification for the continued moratorium has grown increasingly weak.
Not only has the economy recovered in full force—leading to the lowest unemployment rate in over 50 years—but President Joe Biden himself has declared that “the pandemic is over.” Yet, student loan payments are still paused—with the same, flimsy justification that the pandemic emergency rages on and student loan borrowers simply can’t be expected to shoulder the unsurmountable burden of paying back their loans, especially with a Supreme Court ruling on sweeping student loan forgiveness eminent.
However, a new legal challenge has emerged to try to end the absurdity.”
…
“The HEROES Act was passed in 2003 and allows the federal government to provide student loan relief to college students who withdraw from school in order to enter active military duty during a time of “war or other military operation or national emergency.”
While the Department of Education has long claimed that the COVID pandemic presents such a national emergency, the lawsuit contends that a yearslong student loan repayment pause is simply out of the HEROES Act’s scope.
The Act was explicitly designed to help a very specific group of Americans—those that leave school to serve in a war. “Recasting the HEROES Act from a statute permitting limited modifications for targeted groups (primarily those serving in the military during wartime) to one that can suspend payments and cancel interest for all 45 million borrowers is a change so significant” that it fundamentally revises the statue, the lawsuit states.”
…
“The student loan repayment moratorium is one of the strangest holdovers of the COVID-era government spending spree. Whatever economic—and legal—justification to suspend loan repayment has long since expired, making each new extension seem more bizarre than the last.
In the meantime, the cost of the payment pause keeps ticking up. As the lawsuit notes, “The Moratorium has been wiping out $5 billion of assets owned by the United States every month for the past 32 months without any statutory authorization or appropriation, at a cumulative cost to taxpayers of $160 billion and counting.””
The Biden Administration Is Taking From the Poor and Giving to the Rich
“Biden announced that he will—unilaterally, mind you, and for no apparent reason that I can see—extend the pause on student loan payments until the end of the year and forgive up to $10,000 for those persons making less than $125,000 a year. This generosity with other people’s money extends up to $20,000 for Pell Grant recipients.
As David Stockman, a former director of the Congressional Office of Management and Budget, reported recently, “Only 37% of Americans have a 4-year college degree, only 13% have graduate degrees and just 3% have a PhD or similar professional degree. Yet a full 56% of student loan debt is held by people who went to grad school and 20% is owed by the tiny 3% sliver with PhDs.”
Picture two young married lawyers who together earn just under $250,000 and are on their way to making even more mon ey in the future. They will be able to collect from Uncle Joe a nice bonus of $40,000, taken from the pockets of the many people who didn’t go to college—perhaps because they did not want to take on debt—and from those who have responsibly already paid back their debt.”
Biden’s Student Debt Relief Plan Will Worsen Inflation
“even though student debt relief might not look like spending the way we traditionally think of it—the government isn’t cutting checks or awarding grants here, the way it did in the American Rescue Plan, for instance—economically, it will function the same way.
Because money is fungible, student loan borrowers will effectively now have extra discretionary income equal to whatever they would have had to pay towards that $10,000 in loans. That might sound great, but remember that the standard definition for inflation is what happens when a larger supply of money is chasing the same amount of goods and services. Money that would have been spent paying back loans will, upon the conclusion of the repayment moratorium, remain circulating in the regular economy. Ending the repayment moratorium without passing forgiveness would’ve been deflationary by returning U.S. dollars to Treasury.”
Forgiving Student Debt Without Abolishing the Federal Loan Program Is Morally Wrong
“colleges and universities will have even less incentive to lower costs. Economic researchers have often found that the government’s subsidized student loans cause educational institutions to jack up their prices for obvious reasons: If the feds cover the cost on the front end, no matter what it is, universities have every incentive to raise the sticker price. Forgiving student loan debt exacerbates this problem since it encourages more reckless borrowing. Indeed, the Committee for a Responsible Federal Budget estimates the cumulative student debt level will return to current levels in just a few years.
There are structural incentives that push students to borrow money that they can never hope to pay back, and the fact that so many people have fallen into crippling debt is a compelling reason to change these incentives. No rule says the federal government must lure people down a path that leads to financial ruin with some frequency. Congress can sharply limit, or even end, this practice.
A one-off cancelation of some level of debt held by borrowers who happen to be in dire straits at this specific moment does nothing to fix the underlying problems; on the contrary, it exacerbates them. It is a slap in the face to everyone who either paid down their college debt or made different educational choices to avoid accruing it.
If Biden wanted to make the strongest conceivable case for forgiving some college debt, this course of action needed to be paired with serious changes to the entire higher education system. Otherwise, he is simply engaged in a vast transfer of wealth, taking hard-earned money from those who did not fall prey to the federal government’s scam and awarding it to those who did.”
The Student Loan Forgiveness Fiasco
“Loan forgiveness may encourage reckless borrowing, if today’s college students think they won’t actually have to pay back their loans. And this, in turn, could lead to even higher college tuition rates. It could also be inflationary more generally, by freeing up income for tons of people who may then drive up demand for goods and, along with it, prices.”
…
“The program amounts to a massive subsidy for middle-class Americans, as opposed to benefiting the most economically downtrodden or financially strapped. It provides a handout to many people for whom loan payments aren’t a problem now (someone making $125,000 per year can surely afford a few hundred dollars per month) or won’t be in the very near future (for instance, a doctor or lawyer on the verge of making big bucks who hasn’t quite gotten there yet). In short, the program “consumes resources that could be better used helping those who did not, for whatever reason, have a chance to attend college,” as economist Larry Summers put it on Twitter”
…
“Certainly not everyone who had to take out student loans was lazy, irresponsible, or anything of the sort. And not everyone without student loan debt is responsible or hard-working; many just lucked into having parents who could afford to pay for college. But there are many people for whom avoiding student loan debt or paying it off promptly meant making all sorts of sacrifices. Biden’s loan forgiveness program says to them that this thrift, practicality, etc. may have been for nought.”
…
“to simply write off existing student loan debt without addressing the source of the fast rise in college prices —which has a lot to do with the federal student loan program existing—is only ensuring ongoing problems.”
No, PPP Doesn’t Justify Biden’s Student Loan Bailout
“The federal government’s Paycheck Protection Program, which effectively paid businesses to keep workers on their payroll even if they temporarily closed during the COVID-19 pandemic, was a mess.
After quickly burning through its initial allocation of $349 billion, the Paycheck Protection Program was reauthorized a few times and ended up costing more than $820 billion, making it one of the largest components of the federal government’s humongous COVID relief effort. Despite being lauded by both Democrats and Republicans, independent analysis found that the program was a hugely expensive failure. Only about one-third of the program’s money actually went to workers who would have otherwise lost their jobs, according to a National Bureau of Economic Research study. Another study by the Federal Reserve Bank of St. Louis found that taxpayers paid roughly $4 for every $1 of wages and benefits to workers.”