The Tweed ring is nothing compared to Biden’s illegal student loan bribe.
The Penn Wharton Budget Model estimates that canceling $10,000 for borrowers earning up to $125,000 will cost about $300 billion. The Pell grant addition could increase this by as much as $270 billion. The four-month freeze on payments will cost $20 billion on top of the roughly $115 billion it already has.
The payment plan revisions could eventually add hundreds of billions of dollars more. An analysis commissioned by the Trump Education Department estimated that taxpayers would lose $435 billion on federal student loans, largely because borrowers in these payment plans on average were expected to repay only half of their balances. Now they will repay even less.
It’s important to appreciate that there has never been an executive action of this costly magnitude in peacetime. Not Mr. Obama’s immigration amnesties, not his Clean Power Plan, not Mr. Trump’s border-wall fund diversion. Nothing comes close to this half-trillion-dollar or more executive coup.
Congress authorized none of Mr. Biden’s loan relief and appropriated no funds for it. Progressives say the Higher Education Act of 1965 lets the Education Secretary “compromise” (i.e., modify) student debt. But the Federal Claims Collection Act of 1966 sets very limited terms and strict procedures for such “compromise.”
Even Mr. Biden said in December 2020 it was “pretty questionable” whether he had authority to cancel debt this way.
No two ways about it. It’s illegal.
Joe Biden justified his authority to forgive up to $20,000 in student loans per borrower by citing a nearly 20-year-old law for veterans, active-duty service members fighting in Afghanistan and Iraq, and victims of terrorism.
“All of this means people can start finally to climb out from under that mountain of debt,” Biden said in remarks from the White House announcing the loan forgiveness. “To finally think about buying a home or starting a family or starting a business. And by the way, when this happens the whole economy is better off.”
What Biden didn’t mention in his public remarks is the law he’s using to do so: the largely unknown Higher Education Relief Opportunities for Students (HEROES) Act of 2003. That bill was never meant to be a bailout for typical college grads, but a technical fix to benefits for active-duty troops.
The HEROES Act was signed into law by then-president George W. Bush as part of the federal government’s effort to provide financial security to soldiers fighting overseas. The bill grants the secretary of education the ability to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs … in connection with a war or other military operation or national emergency to provide the waivers or modifications authorized.”
The bill‘s stated purpose was to “provide assistance with [military personnel’s] transition into and out of active duty and active service.” The HEROES Act received little attention in the media. When the bill did make it into newspapers, reporters described it as support for soldiers called into active duty.
Now it’s being used to bail out the heroes of Harvard Law earning $250K.
On Wednesday, the Biden administration announced that it would forgive up to $10,000 in student loan debt (up to $20,000 for Pell Grant recipients), using a little-known provision in the post-9/11 Heroes Act, which allows the Education Department to waive or modify student loan payments in times of national emergency. Any debtor making less than $125,000 a year, or $250,000 for a family, will be eligible. The income-based repayment program will also become far more generous; required monthly payments will be capped at 5 percent of debtors’ discretionary income, and smaller loans can be forgiven after 10 years instead of 20.
How many ways can a single policy be bad? This one could cost the federal government somewhere between $400 billion and $600 billion, completely unpaid for. Its legality is at best an abuse of the law to address the “national emergency” of upcoming midterm elections. It will pour “roughly half [a] trillion dollars of gasoline on the inflationary fire that is already burning,” says Jason Furman, formerly the top economic adviser to President Barack Obama. And with the income caps set so high, it remains an extremely regressive policy, heaping benefits on the most affluent demographics, while leaving everyone else to pay the cost through some combination of higher taxes, lower benefits, or higher inflation and interest rates.
And it’s not enough.
The same lefty groups demanding this are complaining that it’s not enough. Not enough money was stolen from working people to pay for Yale Law. Will there be more coming? Almost certainly. Especially as those students who missed out on this are going to want to climb on this train.
Students who start college next year will get the benefit of the more generous income-based repayment program. But they will look longingly at recent graduates who got better repayment terms and $10,000 knocked off their debt. They will correctly point out that this is unfair — after all, tuition is still rising, so they’re even worse off than their predecessors! They will badger Democratic politicians to help them out, too.
Once you pay danegeld, there’s no getting rid of the Dane.