“According to an analysis from the Penn Wharton Budget Model, the new plan is expected to cost around $360 billion over the next decade—a staggering price tag, though not quite as much as the over $500 billion predicted cost of one-time student loan forgiveness.”
“the SAVE plan radically reduces monthly payments—and the time required before forgiveness. Under the plan, borrowers only pay 5 percent of discretionary income, which is now defined as earnings above 225 percent of the poverty rate. Borrowers only have to make 10 years of payments before forgiveness, if the balance is less than $12,000. Further, interest will not accrue on borrowers’ loan balances when their monthly payments are not enough to cover interest.”
“With his original plan for writing off billions of dollars in student loans undone by the Supreme Court, President Biden has a more modest workaround in mind. But that scheme, based on adjustments to existing income-driven repayment plans, faces not only renewed legal challenges and a bureaucratic gauntlet on its way to implementation, but estimates that the ultimate price tag will be $475 billion—much higher than originally expected. In other words, be ready for an already spendthrift federal government to burden taxpayers with yet more debt.”
“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.”
“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.”
“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.”
“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.”
“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.”