Biden’s loan forgiveness helps those who need it least

Just before Christmas a few years back, I was waiting in line at a busy South Philly bakery. When I reached the counter and placed an order for a dozen cannolis, the clerk informed me that, regrettably, the price of the cannoli had been increased that day by 25 cents.

“Money goes to money,” she said with a shrug.

That world-weary sentiment rings in my ears these days as I read about the Biden administration’s efforts to give free money to people who already have an advantage in life.

Yes, I’m talking about student loan forgiveness.

» READ MORE: How Biden’s student-debt relief is helping Philly-area borrowers: ‘I can pay rent and utilities’

Forgiving student debt won’t fix our higher education system, won’t make college more affordable, and won’t help the neediest members of society. But it will let President Joe Biden give a handout to some of his most loyal supporters — the college-educated middle class — while thumbing his nose at the working people who never went to college and those graduates who already paid their loans as promised.

From the isolation of the Oval Office, handing out $10,000 or $20,000 of someone else’s money might look like a bright idea. Surrounded as he is by bright young people with elite diplomas, Biden might be forgiven for thinking that student debt is a widespread and pressing problem. Indeed, many of those clever young politicos stand to benefit personally from this policy.

Perhaps we have become so used to the welfare state that we don’t think about these things very deeply anymore, but the point of government intervention — of handing out the taxpayers’ money — was supposed to be to help those poor and disadvantaged people who could not help themselves. We can debate the best means of doing that, but there is a nobility in the sentiment behind the New Deal and the Great Society, one of a wealthy nation trying to lift up those who might get left behind.

In what world does that description apply to college graduates who voluntarily made a deal to borrow money, received the educational benefit of that bargain, and now don’t want to hold up their end of the deal? Who in their right mind could call college-educated people disadvantaged when it has been proven time and again that people with college degrees make far more over their lifetimes than people without? These excess earnings far exceed the cost of the education and credentials that makes them possible. Even people who did not finish college earn more than those who never went, though not by nearly as much as if they had finished their degrees.

Biden’s decree looks even more bizarre when we see that the relief is available to people making up to $125,000 a year — or $250,000 for a married couple. This seems like something that we didn’t use to have to argue about, but people making a quarter-million dollars a year do not need government handouts. Even more debt relief is available for people who received Pell Grants when they went to school, a program designed to help kids from low-income households get their degrees. If you got a Pell Grant 15 years ago and you now make $100,000 a year: Congratulations! The system worked for you! You shouldn’t need any more government help.

I will pay my own student loans this month, as I have for the last 17 years. I would rather keep the money — who wouldn’t? But even though I meet Biden’s requirements for relief, I can’t see how making the taxpayer pick up the tab is fair. The federal government ran a $2.77 trillion deficit last year. Now, with the stroke of a pen, Biden wants to reduce future federal revenue by a further $395 billion. Biden will be out of office by the time that debt comes due, but we and our children and grandchildren will have to pay for all of it, eventually.

Perhaps the biggest flaw of this jubilee is that it does not fix anything about our college system, and may make things worse. No one will be less likely to borrow because of this — if anything, students will probably borrow more, hoping that the next round of middle-class amnesty will help them pay it off. Colleges won’t lower tuition — why would they when Uncle Sam keeps throwing money at them?

“[Loan forgiveness] does not fix anything about our college system, and may make things worse.”

Real reform would take effort. Congress would have to think about the problem and even change the laws. But the only change they have made recently has been to make it harder for people to discharge student loan debt in bankruptcy — a policy Biden voted for while a member of the Senate.

For real change, Congress should do the opposite: have the bankruptcy code treat student loans like any other debt. Bankruptcy is not a pain-free fix: it has real consequences for a person’s finances. But it would offer a way out for those who are in genuine need while adding financial rigor to the system by making lenders think twice about giving an 18-year-old $100,000 of unsecured credit. That will, in turn, give colleges a real reason to reduce costs.

Biden helped to close off that possibility but now wants to shower money indiscriminately on college-educated people, including many who are doing just fine in life. That rewards his voter base but fixes nothing about the system and shifts a financial burden onto taxpayers, which include people who never went to college and likely have fewer opportunities to earn as much as those who did.

Alas, money goes to money.

Kyle Sammin is editor-at-large at Broad + Liberty.