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The Student Loan Forgiveness Disaster

Posted on Wednesday, June 8, 2022
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by AMAC, Bob Carlstrom
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One of the first acts of President Joe Biden’s administration was ordering the Department of Education to pause federal student loan repayments and hold the interest rate at 0% for those in debt. Since then, President Biden has paused the student loan repayments four additional times. On the surface, it may appear like this is good policy and good politics, especially for Democrats who supposedly cater to those who simply can’t help themselves. However, a closer look at who holds this debt gives up the gambit. Democrats are indeed catering to a key constituency, but it’s mostly a constituency of woke keyboard warriors who have avoided the real world while earning 5 worthless college degrees and racking up massive debt. This student loan bailout will come at the expense of those who chose to pay back their loans responsibly or simply chose to enter a trade and start working without shackling themselves in debt.

Consider that households with graduate degrees owed 56% of the outstanding education debt, according to federal data analyzed by the left-leaning Brookings Institution. Again, in other words, President Biden’s actions primarily benefit lawyers and elite woke professor types who hold the vast majority of student loan debt. So much for the Democratic Party looking out for the working class.

There are conflicting views over whether or not the President has the authority to cancel or delay debt payments to private companies. Even Nancy Pelosi has questioned the President’s authority on loan forgiveness. “People think that the President of the United States has the power for debt forgiveness,” stated House Speaker Nancy Pelosi (D-CA). “He does not. He can postpone, delay, but he does not have that power,” she said. Pelosi argued that student loan forgiveness could be accomplished by “an act of Congress.” Speaker Pelosi may just be trying to save President Biden from the bad optics of debt forgiveness for the privileged classes. She has not historically shown a great reverence for institutional norms or the Constitution. But in this case, Biden’s out-of-touch advisers should listen to Pelosi and stand down on student loan forgiveness, claiming a lack of authority.

Most readers understand basic economics, which shows that debt is never actually “forgiven” but that, more accurately, the debt burden is simply transferred from one group to another group of people. The concept of “moral hazard” also comes into play here. Theoretically, if the debt is forgiven, institutions will rationally respond by hiking up prices, aware that the loan burden will no longer fall on the individual but the state. In addition, individuals responding to the “moral hazard” of loan forgiveness will rationally make paying back these loans their last priority, knowing a future Democratic administration is likely to bail them out. What we are left with is a snowball-like acceleration of the current spiraling student debt crisis, which is now well into the trillions.

Another simple tenet of economics is that services subsidized or controlled by the federal government tend to increase in cost. Public college tuition costs are no exception to this rule and have predictably ballooned over 80% from 2000 to 2014. Forgiving federal student loans would drive the cost of tuition even higher. To make matters worse, the left-leaning Committee for Responsible Federal Budget reported that Democrats’ proposals to forgive $50,000 in debt per individual or more would accelerate inflation, which is most voters’ top concern heading into November and is up 8% over the last year.

On April 6, 2022, the president’s statement alluded to it being the last time he intended to pause student loans. “I’m asking all student loan borrowers to work with the Department of Education to prepare for a return to repayment, look into Public Service Loan Forgiveness, and explore other options to lower their payments,” Biden said. But instead of following through, he used that exact same language again in his December 22, 2021, statement extending the program. As is the case on many issues, Biden finds himself being pushed to the left by tone-deaf members of his own party and his far-left advisors. In March, over 100 Congressional Democrats turned up the heat on Biden and urged him to “cancel a meaningful amount of student debt.” 

In short, the Democrats’ calls for student loan forgiveness are as hypocritical as they are potentially economically destructive. Biden’s plan for student loan forgiveness mostly benefits a class of democrat aligned elites; it adds to inflation and raises the cost of college tuition for future students. Bailing out student loans for the elite is unfair to borrowers who have responsibly repaid their loans and leaves the 85% of Americans who don’t have student loans holding the bill.

Bob Carlstrom is President of AMAC Action

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Kathleen Hays
Kathleen Hays
2 years ago

Communism in action. Good bye America!!

Kathleen Hays
Kathleen Hays
2 years ago

Communism in action. Good bye land of the free!!

PaulE
PaulE
2 years ago

Any attempt by the POTUS to abrogate student loan debt would be an impeachable offense, as the President does NOT have the power to cancel contracts of this nature. While he can delay repayment of the outstanding loans for a limited period of time, if he takes the step of outright canceling these student loans (making the taxpayer pick-up paying the debt off), he opens himself up to impeachment. This is straightforward constitutional law.

Republicans, if they were smart, should focus less on reminding Biden that if he procedes with his plan to cancel these student loans and place the debt on the shoulders of the American taxpayer, that should Republicans re-take Congress, Biden will be impeached. I know both McConnell and McCarthy have already stated that neither of them intend to pursue impeachment proceedings against either Biden or Harris if they retake Congress, but honestly Republican congressional leadership can’t simply continue to roll over and play dead as Biden commits one unconstitutional act after another. Otherwise, what is the value of the GOP having control of Congress?

Smike
Smike
2 years ago

Thank you for bringing up who the real players are in this controversy.

John
John
2 years ago

IRS regulations have forgiven debt treated as regular income. So instead of $50k spread out over a decade or two, these folks may find they have $15k due the IRS and more to their home states at tax time if their debt is forgiven.

christian jesus ccksucker
christian jesus ccksucker
2 years ago

what about people who never completed college and what about middle class teachers . what is the plan to help them besides not cancelling their debt. scum. God bless!

Stephen Russell
Stephen Russell
2 years ago

Have said colleges , Univs pay since students take out loans to Pay those colleges day 1

Philip Hammersley
Philip Hammersley
2 years ago

The “elite” colleges (who are really propagandists) have BILLIONS in their endowments. They could LOWER tuition and R&B if they really wanted to help students. They could also make “professors” actually teach a full load rather than write books full of lies and appear on CNN and MSNBC.

Patriot Will
Patriot Will
2 years ago

Making it very easy for graduates to improve their loan rates and terms would make much more sense than forgiving huge chunks of loans. People should be encouraged to be responsible with their debt, not allowed to act as if they are entitled to a bunch of freebies. Our economy is in serious jeopardy of imploding.

Granky
Granky
2 years ago

Biden is using this as a mid-term carrot. Keep the democrats in control, we will erase your student loan. The government making student loans was a huge mistake that colleges took advantage of. 80% increase in tuition in 14 years happened because of greed, all that easy money there with no risks to the colleges. Pump out useless degrees given to students that don’t have a clue that they are getting a useless degree.

Mac
Mac
2 years ago

Democrat elites only looking out for themselves !
Let’s destroy American by continuing to vote democrat !

Garye
Garye
2 years ago

Time for a simple life lesson – you borrow it, you pay it back!
Enough of this marxist democrat party garbage!
Let the democrat party pay their loans!

USN Retired
USN Retired
2 years ago

Pay off my (and everybody’s) credit cards as part if the deal, since I already paid for my college, and maybe I could go for it.

Stupid communist Democrats . . . When will the left wingers learn? This crap Biden is shoveling is NOT working.

Larry W.
Larry W.
2 years ago

This is one of the most outrageous acts that I have seen in my 70 years as an American citizen.
Just as Obamacare hurt as many people as it helped and it cost a fortune to do it, this loan forgiveness is of the same madness. Just giving everyone a free pass at the expense of others is nothing more than abuse of power and over reach of the government to buy votes for the democratic party.

Bebe
Bebe
2 years ago

Personally know someone now working on her doctorate who complains of her huge student debt, yet throughout her early education and since has not denied herself anything. She always has the latest in technology, phones, fashion. I went to school at nights while working full time, paid my way along, lived as frugally as possible, and earned BA and MA degrees WITHOUT debt! I don’t feel I am responsible for someone else’s irresponsibility with their money! I am tired of paying for other people when they pay nothing, whether for education or whatever!

Jordan
Jordan
2 years ago

Spoken like someone who paid one sixth of the current cost for a college education (1/12 without adjustment for inflation) and then used that education to help craft a society that denied your children and grandchildren any similar opportunity.

Countries that care about their future provide college for their citizens and spend less doing it. America chooses to place enormous debt on 18 year olds, simply because that’s what generates profits.

90% of defaults on student loans come from people who received Pell grants, specifically given to low income students. Generations of people have a fraction of the purchasing power of their parents, median wage hasn’t risen since the 80s, and the ratio of home prices to income has exploded, wealth inequality is worse than before the Depression, and you’re here blaming young poor people.

Real mature, Bob.

I’d suggest you sit down and think about what life would be like if you went to college now, paid SIX times more (adj for inflation) and then entered a job market with 3-4 times more candidates that all have the same degree as you.

Your American dream was a great one, but your generation took it back to the alley and shot it dead, and now you’re all blaming your grandchildren.

Don’t worry, young poor people will work incredibly hard to repair the damage your generation caused.

Sudden
Sudden
2 years ago

I came to America from Africa because I saw opportunity here. The early Americans were fiercely independent types who shucked their British overlords, but there are too many Americans today who expect their government to hold them up. Whatever happened to Kennedy’s exhortation to “Ask not what your country can do for you, but what can you do for your country “? Our Federal Government has supplanted King George lll by growing way too big and intrusive. We have a Republic if we can keep it. History teaches us that corruption overtakes everything good, that bad decisions outnumber good ones in the long run. Reagan saved us back in the 80s. Trump was on course to repeat, but was cheated at the ballot box. Interesting though, that both men started out as Democrats then became Republicans!

Sudden
Sudden
2 years ago

Just a general comment: Democrats view government as a means to an end, while Republicans view it as a necessary evil. My own view is that government performs best as a referee; it should stay out of the game itself. Everything government does costs way more than when done in the private sector. Why is the Federal Government involved in education, anyway?

Jordan
Jordan
2 years ago

https://amac.us/newsline/society/seniors-are-under-pressure-to-repay-student-loans-says-amac/

Interesting how the tone changes when AMAC talks about senior citizens with student loan debt.

Becky
Becky
2 years ago

This is evil, and malicious. Can the Commie Party think of any more ways to hurt citizens?
Anyone who signs a contract to borrow OWES THAT MONEY BACK. If they don’t, put them in prison on a chain gang to earn it back, until paid in full.
It’s called THEFT, and breech of contract.

johnh
johnh
2 years ago

If you take out a loan, then you are responsible to pay it back is a lesson from the generation of the 50-60s. Some people file bankruptcy or have the money to file frivolous lawsuits to get out of their debts. Problem is, the taxpayer & consumers are the ones that end up paying this.

Karen
Karen
2 years ago

I’ll pay my own loan, thank you. I don’t want any favors from the commie so-called President.
GET LOST….all of you garbage heads!

Dave
Dave
2 years ago

Cannot wait to get back what I paid! Also take over my mortgage, car payment, not to mention credit cards! No, wait, I AM a responsible man and take care on my OWN debts, plus my vote is NOT for sale!

Trump Supporter
Trump Supporter
2 years ago

Order 2000 mules they shredding the constitution of Pennsylvania turned it over the drug cartel to place Biden as the wax submarine of cocaine delivery service

Trump Supporter
Trump Supporter
2 years ago

U student dept paid by cocaine shipments into Pennsylvania ports of call

Sam
Sam
2 years ago

I’m not benefiting from a college education that I’m paying for. The people who made these loans owe them not all American taxpayers!

Chris
Chris
2 years ago

Dam right i paid mine back!

Kev
Kev
2 years ago

The democratic party has destroyed everything in our country from our economic inflation and useing there covid PANDEMIC and George floyd RIOTS TO DESTROY SMALL BUISNESSES IN THERE DEMOCRATIC GOVERNORS CONTROLLED STATES AND THEN DESTROYED OUR EDUCATION STATUS IN THERE DEMOCRATIC GOVERNORS CONTROLLED STATES. IF YOU THINK IM OFF BASE ON THIS ILL EXPLAIN MY VIEWS ON N IT IT USE TO BE THAT THE ONES WHO WENT TO COLLAGE WERE THE ONES WHO HAD PARENTS THAT HAD THE MONEY TO SEND THERE KIDS BUT ALSO TO GO TO COLLAGE THE STUDENT HAD TO PASS THE INTRANCE EXAM TO GO TO THE COLLAGE.THOSE WERE THE ONES QUALIFIED AND HAD THE MEANS TO PAY FOR COLLAGE. THEN SOME OF THE STUDENTS WHO DIDNT MAKE THE CUT FOR COLLAGE THEY WENT TO TECHNICAL SCHOOLS AND LEARNED TRADES THEN THE ONES WHO WEREN’T QUALIFIED FIR THEBTEC.SCHOOLS AND COULDNT AFFORD THAT SCHOOLING WERE THE ONES WHO WENT TO WORK IN FACTORIES AND MADE THERE LIVEING THERE NOW THE DEMOCRATS HAD THERE FEDERAL FUNDED COLLAGES DROP THE ENTRANCE EXAMS AND GIVE OUT STUDENT LOANS AS A WAY TO KEEP THERE SCHOOLS FULL SO THE PROFESSORS COULD CONTINUE TO MAKE THERE MONEYKNOWING THAT A HIGH PERCENTAGE OF THOSE STUDENT LOANS WOULD GO DEFAULTNOW SINCE THE BIDEN HARRIS ADMINISTRATION GOT IN OFFICE THINGS GOT EVEN WORSE FOR THE QUALITY OF EDUCATION THEY DROPPED THE STANDARDS OF OUR EDUCATION SYSTEM SO THAT THERE FUTURE VOTEING BASE IF ILLEAGAL/AND LEAGLE IMMAGRANTS COULD FIT IN THE SCHOOL SYSTEM NOW WHAT I MEAN BY THAT IS THAT THE OPEN BIARDER ALLOWS THEM THIRD WORLD COUNTRY PEOPLE TO COME INTO OUR COUNTRY WITH LITTLE TO NO EDUCATION LIKE US AMERICAN CITIZENS HASTHEY DROPPED THE QUALITY OF EDUCATION SO THE NEW PEOPLE IN OUR COUNTRY CAN GO TO SCHOOL AND FIT IN WITH THE SAME AGE GROUPE GRADE SCHOOL AND HIGH SCHOOL USE TO BE READING ,WRITING, MATH ENGLISH SPELLING THEN IN HIGHERVGRADES IT WAS HISTORY ,SCIENCE LITITURE ECONOMICS ,SOCIAL STUDIES AND SO ON NOW THE QUALITY OF EDUCATION IS GEARED FOR THE SIMPLE MINDED NO MORE BASICS NOW US REAL AMERICAN CITIZENS HAS TO CHANGE TO THE ILLEAGLE/LEAGLE/NON AMERICANS LANGUAGE AND THERE COUNTRIES WAYS OF LIFE SO THE DEMOCRATIC PARTY CAN USE THEM PEOPLE FOR THERE VOTES FOR THE DEMOCRATS PERSONAL POLITICAL GAINS IT WOULD BE TOTALLY IMPOSSIBLE TO BRING ALL THEM NEW PEOPLE UP TO OUR QUALITY OF EDUCATION SO THEY DROPPED THE QUALITY TO FIT THERE NEW VOTER BASE INTELECTUAL QUALIFICATIONS AGAIN SO THE DEMOCRATIC PARTY CAN BUILD THERE VOTEER BASE FOR THERE PERSONAL POLITICAL GAINS NO MORE APTITUDE TESTING…..ECT.NOW FOR OUR COUNTRY TO FINANACLLY WORK WE NEED THE PECKING ORDER OF NOT EVERYONE CAN GO TO COLLAGE NOT EVERYONE CAN GO TO TEC SCHOOLS WE NEED THE PECKING ORDER SO THE WORKING ECONOMICS OF OUR COUNTRY WILL HAVE ALL THE JOBS COVEREDTHE WAY TO UNDERSTAND WHAT IM SAYING I…..IF EVERYONE WENT TO COLLAGE AND SAT BEHIND A DEASK WHO IS GOING TY O DO THE WORK?????THE DEMOCRATIC PARTY IS ABUSING THERE POWER FOR THERE OWN POLITICAL GAINS BY USEING THE ILLEAGALS AND NEW IMMAGRINTS FROM THE OPEN BOARDERS JUST FOR THE VOTER BASE PERIOD …….

John
John
2 years ago

Forgiven debt is regarded as regular income by the IRS. Forgive $50k in student loans and suddenly owe the IRS $15k? Be careful what you ask for.

Richard Minetti
Richard Minetti
2 years ago

Those that have repaid their loans will make good Republican voters!!

John Riley
John Riley
1 year ago

What will this tell future students? Will it kill any future support for the student loan program?

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