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When the Founding Fathers gave Congress the power of the wallet, they didn’t expect the president to be able to manage the $1.6 trillion loan portfolio drawn directly from the U.S. Treasury. Nevertheless, the federal student loan portfolio has put President Joe Biden in just the right position, and if he gets his way, he will spend more than $1 trillion to forgive student loan debt and congress. will do so without the approval of
High-priced forgiveness proposals are gaining attention, but masking the hundreds of billions the president has already spent toward that goal.
The most ambitious of Biden’s proposals is a block forgiveness of up to $20,000 in student loan debt for borrowers earning $125,00 or less, which will be filed with the Supreme Court at the end of February. The administration argues that the president’s authority to adamantly forgive student debt stems from the Higher Education Relief and Opportunities for Students Act of 2003 to address the “economic damage of the COVID-19 pandemic.” Penn Wharton’s budget model estimates the cost of Biden’s plan this year at $469 billion.
Courts may rule against the president because his plans violate basic principles of separation of powers, but we know what the president would do if he could, and that would be the iceberg. is just a corner of
Elaine Parker: Biden knows his student loan distribution is such a loser, he didn’t even talk about it
Less flashy, but equally important, are changes to the administration’s proposed income-driven repayment (IDR) program. IDR ties the borrower’s monthly payment to income and forgives the remaining balance after a period of successful payments. Biden’s changes to the program adjust multiple factors, including the amount of income that is exempt, the minimum percentage of disposable income, and the repayment period required for forgiveness, all in ways that increase forgiveness.
The Urban Institute projects that these changes will cause 49% of the average IDR-enrolled bachelor’s degree borrower to repay less than half of their federal loans. Such generous terms not only increase the cost of forgiveness, but also future borrowing. Penn Wharton estimates that the IDR change will cost him $333 billion over 10 years, which doesn’t take into account the potential increase in borrowing. To make matters worse, the administration’s revision of his IDR comes through regulatory changes that do not require congressional approval and are difficult to challenge in court.
It’s still unclear how much the Biden administration has already allowed into this account. His AEI Student Debt Forgiveness Tracker, which I created, documents federal student loan income already abandoned by the US Treasury during the Trump and Biden administrations. This month, the total amount from Biden’s actions reached his $201 billion. This includes a one-off hospital discharge, a civil servant loan forgiveness waiver, and a pandemic suspension of federal student loan payments. That total will increase by $6 billion each month, and Biden will maintain the moratorium.
Add in his immediate $469 billion plan to waive up to $20,000 per borrower, the $333 billion cost over the 10 years of the proposed IDR change, and the $201 billion he has already waived, and Biden could divert exemptions totaling $1 trillion from the U.S. Treasury. Much of this could go back to taxpayers, but even if it doesn’t, the $1 trillion will go towards building back better’s 10-year plan pel increase, universal pre-K, and 5 early-learning births. Other potential priorities, such as regulations, can be double funded by him.
To add insult to injury, these forgiveness measures are far from progressive and have benefited many relatively advantaged Americans, few of whom have never chosen to attend college. The unimaginable amount that is working on is worth more than $8,000 per American household, and if Biden gets his way, he will spend it without congressional approval. The measures will not stop the flow of student loan debt and will likely magnify the underlying problem in the future.
President Biden quotes his own father. Despite what he said in his State of the Union address, his budget is clear. Student debt relief, much of it aimed at relatively wealthy Americans, is one of his top priorities.
The Biden administration has been wasting the public’s money without Congressional action and trying to avoid interference from the Supreme Court. Both institutions need to stop this wasteful spending and executive overreach as soon as possible. The court should rule against the pardon proposal, and Congress should justify sizing her IDR. Long-term solutions require Congress to address the root causes of these challenges. This includes rising college costs, increased student loan spending and, ultimately, unrestricted presidential control over his portfolio of huge loans held in the U.S. Treasury.
