The Free Market Memo

Biden’s Student Loan Forgiveness Leaves Montanans Paying More 

It’s important to remember that “canceling” student debt doesn’t make the debt magically disappear

By Jesse Ramos

The Biden Administration, already chastised by the Supreme Court for illegally trying to shift the cost of repaying student loans from borrowers to taxpayers, is at it again.   

Having been turned away by the Constitution from proceeding through the front door, President Joe Biden’s Department of Education has concocted a scheme to “forgive” loans through the backdoor.  

The so-called Saving on a Valuable Education (SAVE) proposal is theoretically an income-driven repayment plan designed to lighten the load on those least able to afford monthly payments. In reality, it’s a way for borrowers to skip payments on their loans until the balance is wiped away.  

It’s important to remember that “canceling” student debt doesn’t make the debt magically disappear. It simply shifts the cost of repayment from the borrower to the government – that is, to the taxpayer.  

This administration is trying to sell the idea as a way to help struggling graduates who are overburdened with debt. Unfortunately, most of the benefits go to those who may take out loans with the expectation they won’t have to pay them back.  

Less than 12% of Montanans have student loans. That means more than 88% would be paying off the debt of that small minority. 

The SAVE plan turns federal student loans into a de facto federal grant program. But society already makes a sizable investment — about $30 billion a year in federal Pell Grants — to help students with the greatest financial need attain higher education Rather than spend half a trillion dollars to bail out borrowers by shifting responsibility onto the 87% of Americans who don’t have student debt ─ those who didn’t go to college, or their fellow graduates who worked hard and paid their own way. We should look at ways to reduce the cost of education and examine alternative education models.  

The cost of this boondoggle to taxpayers is an estimated $475 billion to $558 billion over the next 10 years.  

And in the end, the Biden plan would do nothing to reduce the soaring cost of college tuition, which has risen about 240% – faster even than the cost of health care – since 1980, even adjusted for inflation, according to a Mercatus Center study.  

Two things should happen now.  

First, Congress should pass a Congressional Review Act resolution to block the income-driven repayment revisions from taking effect. We applaud Senator Steve Daines for his leadership in cosponsoring a CRA resolution to overturn the Biden administration’s latest IDR rule.  

President Biden needs to develop a workable solution to the high cost of tuition that does not include shifting the costs from those who to choose to attend college to those who choose not to.  

Those solutions might include matched savings plans, income share agreements, ensuring that Pell grants and other forms of aid go directly to students rather than institutions.   

Administrations and congresses of both parties over many years have created this problem. The current administration’s proposal would make it worse.   

Now’s the time to move away from the status quo and find innovative solutions that empower students to make decisions about what’s best for their lifetime of education.  

Jesse Ramos is a former Missoula City Councilman and the State Director of Americans for Prosperity-Montana 

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