If it sounds like an election year handout, that’s because it is. President Biden’s student loan bailout, which essentially robs the poor to pay the rich, will cost taxpayers roughly $500 billion, according to the Committee for a Responsible Federal Budget.
Between loan cancellations, extending payment deferrals for another four months, and a revised income-based repayment plan, the bailout could affect more than 40 million people. This is called “election year politics.” Just as bad, Mr. Biden doesn’t even have the authority to do what he’s doing.
Speaker Pelosi had it right a year ago: “People think that the President of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. The President can't do it. So that’s not even a discussion.”
A Wall Street Journal editorial today put it like this: “Even Mr. Biden said in December 2020 it was ‘pretty questionable’ whether he had the authority to cancel debt this way.” The Supreme Court underscored this in the West Virginia v. EPA decision, it added, but Mr. Biden’s vote buying knows no bounds.
As a number of studies have shown, middle- and lower-income earners are going to finance high-end earners. Beside the obvious regressiveness of this monster, it’s just plain unfair. People who didn’t go to college, or those who went but paid back their loans, will be furious.
We’re already seeing evidence of this. A bunch of Democratic senators and House members running for re-election have already jumped ship against Mr. Biden’s student bailout.
As a Ohio University economist, Richard Vedder, writes, “the student loan handout is illegal, inflationary, immoral and inequitable.”
Mr. Biden’s action will increase the moral hazard of student loans. If you know the government’s going to bail you out, and you don’t have to repay the interest and principal, what do you do? Well, you take out more government loans.
Then all these colleges, especially the high-end fancy universities and private liberal arts schools, will just keep jacking up tuition, which in turn will spur more student loans.
Regardless of this loan cancellation, in five years student loan debt will be back to $1.6 trillion. With crazy policies like this, it’ll keep going even higher in the future.
The education department, which is in charge of all this, has no clue about lending, banking, credit, or future income prospects. It’s just there to say, “Yes, we will give you more loans.”
Then, with a boss like Mr. Biden, we will bail out more loans. Let me repeat: Boss Biden’s bailout. Those wonderful educrats are deep in the weeds developing critical race theories and various gender and sex programs for their constituent public schools around the country.
A piece of good news here: Parents are starting to take back their school boards and schools, with a bunch of election victories in Florida, Texas, Colorado, Kansas, Pennsylvania, and Virginia.
I digress. The justice department has labeled these parents “domestic terrorists,” and you can bet the educrats are totally on board with that, but our great democracy is starting to successfully fight back. The education department should get out of the student lending business altogether. Private sector financing by banks and other lenders should be restored.
President Obama ended private lending, and the student loan program has become an unmitigated disaster since then. Somebody, somewhere should do something to reduce government-backed student lending. That’s right, reduce.
Just like someone somewhere should reduce overall government spending. That in turn would reduce inflation, deficits, and debt. Am I asking too much here? I don’t think so. How about repealing socialism? The cavalry’s coming.
Larry Kudlow was the Director of the National Economic Council under President Trump 2018-2021. His Fox Business show "Kudlow" airs at 4 p.m &. radio show airs on 770 ABC from 10:00 a.m. to 1:00 p.m.