Biden Is At It Again With Some Costly Student Loan "Forgiveness"

"If you at first don't succeed, try, try again." That is the approach of President Biden and his attempts with student loan "relief." It does not matter that the U.S. Supreme Court struck down his student loan forgiveness program last year in Biden v. Nebraska, which the bipartisan Committee for a Responsible Federal Budget (CRFB) estimated would cost $400 billion. That does not stop Biden from giving up on the idea. Last week, the White House announced a new plan to "provide relief to borrowers disproportionately burdened by student debt." This plan entails multiple provisions, including:

• Waiving up to $20,000 of accrued and capitalized student loan interest
• Eliminating student loan debt for those who have had debt for more than 20 years
• Assisting borrowers who experience hardship in paying back loans
• Applying the most favorable repayment options, whether under this latest version or from the previous version (known as SAVE)
• Helping borrowers enrolled who enrolled in low-financial-value programs or institutions

The Penn State Wharton School of Business, which is the premier business school in the country, modeled the cost of Biden's student loan plan. When combining the overlap between the new plan and previous SAVE plan, Biden's student loan plan is going to cost $559 billion!

When Biden first tried student loan "cancellation" with the SAVE Plan, I was critical enough to provide a list of 13 reasons why such a policy does such a disservice. These reasons ranged from the unfairness, cost, and lack of economic stimulus to its regressive nature, the moral hazard, and doing nothing to prevent that the problem from resurfacing. As the CRFB brought up in its response to Biden's latest plan:

You can't solve a very real debt problem by issuing more debt. The President's previous student loan cancellation plan was expensive, inflationary, poorly targeted, and would have boosted rather than reduced tuitions. This plan similarly misses the mark.

Knowing that it is an election, I know this is more than wanting to help out the little guy. It is about fulfilling a 2020 campaign promise, as well placating a certain demographic amongst the Left that is more likely to be critical of Biden's stance on the conflict in the Middle East. Biden's student loan plan is not going to do anything to lower tuition costs. If anything, Biden's plan will create inflationary pressures, both in the higher education market specifically and the macroeconomy generally. If the Biden Administration were to do the responsible thing, it would abandon this plan and work on reforms that would actually reduce college tuition costs. Sadly, it looks likely that good politics will defeat good policy once again.

4-16-2024 Addendum: Apparently, the Wharton School is not the only one to come up with an estimate. The CFRB released its analysis today (4-16-24) and found that it could cost anywhere between $250 billion and $750 billion.