Top Five Reasons Federal Student Debt Cancellation Is a Bad Idea

[Muda69]

This happened today:  https://apnews.com/article/student-loan-forgiveness-biden-plan-d9c8e18774a744187c9af634bf4eb728

 

A logical rebuttal:  https://www.cato.org/blog/top-five-reasons-federal-student-debt-cancellation-bad-idea

 

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The Biden administration is nearing its deadline to announce what it will do about federal student debt. In part this is because the latest freeze on student debt repayment ends on August 31. Also, at least in part, this is because progressives are demanding cancellation. But pushy progressives and a freeze that should have ended long‐ago do not make a policy wise. Indeed, there are at least five major reasons mass cancellation is a terrible idea.

1. Helping the Winners

People who have attended, and especially graduated from, college are typically set for a huge increase in their lifetime earnings. As seen below, the average person with a bachelor’s degree will earn an estimated $1.2 million more over their lifetime than someone topping out at a high school diploma. For someone with a graduate degree – and student debt is disproportionately taken on for graduate study – that earnings premium rises to between $1.6 and $3.1 million.

 

 

In addition to huge earnings increases, people who attended college have much greater job security than those who did not, and this benefit was especially stark during COVID-19 lockdowns. In April 2020, the unemployment rate only hit 8.4 percent for college graduates, versus 17.6 percent for Americans topping out at a high school diploma and 21.1 percent for workers with less than that.

 

 

There is no reason that people in such a good financial position should not repay taxpayers, roughly two‐thirds of whom do not have bachelor’s degrees.

2. Regressive

We have seen various cancellation proposals floated by different people, but one of the most recent was reported from the Biden White House: $10,000 cancellation with an income cap of $150,000 individually and $300,000 for joint filers. The table below is an estimate for the cancellation amounts and distribution of that plan by income quintile (and decile for top earners).

 

 

As highlighted in the graph below, much more of that aid would go to the highest quintile of earners than the lowest — $54.3 billion versus $33.8 billion. That’s because higher‐income people are more likely to borrow, and borrow more, for college than lower‐income.

 

 

3. Huge Cost to Taxpayers

The $10,000 plan discussed in reason number two would cost taxpayers – the people who funded all these student loans whether they liked it or not – an estimated $260 billion. $50,000 per borrower with no cap would cost taxpayers around $1 trillion. And forgiving the whole amount would cost taxpayers more than $1.6 trillion.

4. Even Worse Price Inflation

The biggest problem in higher education is its incredibly expanding price. As seen below, inflation‐adjusted tuition, fees, room and board at four‐year, nonprofit private colleges ballooned from $27,720 in the 1990–91 school year to $$51,690 in the 2021–22 school year, an 86 percent increase. At public four‐year institutions it rose from $10,430 to $22,690, a 118 percent ballooning. It was accompanied by a huge increase in aid per student.

 

 

Much research has shown that aid fuels college price inflation, including a Federal Reserve Bank of New York finding that for every 1 dollar increase in “subsidized” student loans, colleges raise their prices 60 cents. Mass cancellation would incentivize much greater inflation as neither colleges nor prospective students would believe future loans would have to be repaid, blowing the lid off of prices.

5. Unconstitutional

The Constitution gives Congress, not the president, the power of the purse. A president unilaterally cancelling up to $1.6 trillion would be a rank violation of that power. Of course, the federal student loan programs are themselves unconstitutional. The federal government only has the specific, enumerated powers given to it by the Constitution, and the authority to fund education, either directly or through loans, is nowhere among them. Cancellation would thus be a double violation of the Constitution.

Some cancellation advocates argue that Congress gave the president the power to cancel all loans in the Higher Education Act. But not only is the constitutional ability for Congress to give away its power highly dubious, the Higher Education Act does not authorize blanket cancellation, only forgiveness under specific loan repayment programs.

Conclusion

Mass cancellation would be a blatantly unconstitutional giveaway of taxpayer money to the people who arguably need it the least, and it would exacerbate the biggest problem in higher education.

There’s nothing to like about that.

 

[Muda69]

Joe Biden’s Legal Argument for Student-Loan Transference Is Cynical and Ludicrous

https://www.nationalreview.com/corner/joe-bidens-legal-argument-for-student-loan-transference-is-cynical-and-ludicrous/

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The contempt — the sheer, unbridled contempt — that this administration has for the rule of law can be summed up neatly by this news:

The full memo is here.

 

There is no point in our mincing words. This is a lie. A contrivance. A game. Nobody believes this. It’s an excuse. If it makes it to the Supreme Court, it will lose, and it will deserve to lose. It is facially farcical. Of course “The HEROES Act, first enacted in the wake of the September 11 attacks” does not convey this authority, as the memo claims. At no point, until today, had a single person in America ever believed such a thing. They shouldn’t now.

When criticizing Donald Trump for making an end run around the legislature in 2019, I wrote that:

To permit presidents to circumvent quotidian policy disputes by appealing to a phantom Too Important Clause is to tear up James Madison’s Constitution and to sanction an alternative settlement within which any sufficiently frustrated executive is able to delve deep into the statutory well and find a watery justification to get his way. “Emergency,” “crisis,” “prosecutorial discretion” — these words all mean something concrete. If, when things get tough for the president he can always find an Enabling Act somewhere in the forest, then we do not have a system of government at all. We have a dictatorship.

This rules applies just as much to Joe Biden. Indeed, given the scale of what Biden is doing, which is more than 100 times as expensive, and far less legally debatable, it applies more so. Joe Biden does not actually believe that he has this authority. Rather, Joe Biden has decided to violate his oath of office, and, in an attempt to cover it up, he has asked his lawyers to scour the statute books and to find any pattern of words that might plausibly serve to convince the partisans in the press that he is acting within the law.

That approach is a disgrace. As I wrote of Trump, when Congress doesn’t act:

the correct response from the White House must be, “Okay.” It must not be, “Let me consult with my lawyers and see if we can combine a few esoteric interpretations into executive carte blanche.”

Besides, Biden’s fake legal argument doesn’t even make sense on its own terms. In May, Biden ended the use of Title 42 at the border on the grounds that Covid-19 no longer represented a national emergency for that purpose. And yet we are supposed to believe that, three months on, Covid-19 remains so much of an emergency that the White House has no choice but to shovel hundreds of billions of dollars of taxpayers’ money to families who are earning up to a quarter of a million dollars per year?

Give me a break.

Biden the bald-faced liar.

 

Edited August 24, 2022 by Muda69

[Muda69]

Biden To Forgive $10k In Student Loans -- In Unrelated News, Nation’s Colleges Raise Tuition By $10k: https://babylonbee.com/news/biden-to-forgive-10k-in-student-loans-in-unrelated-news-nations-colleges-raise-tuition-by-10k

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CAMBRIDGE, MA — President Biden announced plans today to forgive $10,000 in student loan debt for anyone making less than $125k per year. In completely unrelated news, the nation's colleges and universities announced plans to immediately raise tuition by $10,000.

"Look, Jack! Here's the deal! No malarkey at all! Not a joke!" said Biden before an aide had to step in and explain he was signing an order to forgive student loan debt.

Dr. Charles Moneybags, director of the National Association for the Advancement Of College Professors (NAACP), said he applauds the president's decision to cancel student debt for so many borrowers. "We're very excited that a college education will be more affordable for the next generation of art history majors," he said.

Moneybags then went on to explain why immediate tuition increases were necessary. "Due to an unfortunate concurrence of high inflation, global warming, and, uh, the upcoming solar eclipse in 2024, we've all had to raise our tuition by $10k," he noted. "Plus, we've had to spend a ton of money building safe spaces and bathrooms for all the new genders."

...

Satire, I know.  But also probably very close to the truth.  Colleges and universities have been feeding from this spigot of "free" government money for decades now. It's why educational inflation outpaces regular inflation by order of magnitude.

 

[Impartial_Observer]

Nothing more than a bribe for the base. Surprised he didn’t pull this stunt a little closer to election time. 

[Muda69]

19 minutes ago, Impartial_Observer said:

Nothing more than a bribe for the base. Surprised he didn’t pull this stunt a little closer to election time. 

He had to do something before this latest round of monthly student loan payment forgiveness expired on 9/1.

 

[Muda69]

Indiana to tax student debt forgiveness

https://www.wdrb.com/news/education/indiana-to-tax-student-debt-forgiveness/article_632f0ff2-2e08-11ed-981b-9bc3d9c4e2fb.html

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Indiana residents taking advantage of President Joe Biden's plan to erase up to $20,000 in student debt will face a state tax bill next year that could eclipse $1,000.

The Indiana Department of Revenue on Tuesday confirmed that student debts erased are treated as income under the Hoosier tax code, meaning borrowers who reside in Indiana will owe the state income tax of 3.23% on the balances forgiven, plus an additional rate levied by the resident's home county.

For example, a resident of Clark County, which has a 2% county income tax, would face a total tax bill of $523 for every $10,000 in debt forgiven.

If the debt forgiveness happens in 2022, then borrowers would owe the Indiana tax on their annual tax returns filed in early 2023.

Student debt forgiveness will not be taxed by the federal government, nor by Kentucky. Congress exempted forgiven student debt from federal income tax for the years 2022 through the end 2025 as part of the Democrat-led American Rescue Plan Act of 2021.

The Kentucky legislature earlier this year adopted language matching the state's tax policy to the federal government, which means student debts forgiven are also exempt from Kentucky income tax, according Jill Midkiff, spokeswoman for the Kentucky Finance & Administration Cabinet.

However, the Indiana legislature passed a provision decoupling Indiana from the ARPA tax changes, according to Natalie Rodriguez of the Indiana Department of Revenue.

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Indiana: Land Of Taxes.