‘Forgiving’ student loan debt would be illegal, raise inflation

By Carrie Sheffield

The Biden White House is reportedly considering “forgiving” $10,000 worth of student debt for some borrowers, a move that is likely illegal and definitely will increase inflation and force poor people to subsidize rich people.

President Joe Biden is possibly considering subsidizing Americans earning less than $150,000 or $300,000 for married couples filing jointly — households in the 96 percentile of income, e.g. the most wealthy among us. He has to make a decision by Aug. 31.

It’s clearly an election year scam, one perfectly timed to try to gin up votes for a president whose approval ratings make him toxic on the campaign trail. House Speaker Nancy Pelosi previously suggested Biden’s move would be illegal: “the president can’t do it. That’s not even a discussion,” she said last year.

It’s unlikely Pelosi will remember her warning and will probably endorse this violation of the Constitution stipulating power of the purse to Congress.

In January 2021, just before the Trump administration departed, the U.S. Department of Education issued a legal memo (which has since been ripped down by the Biden White House) stating the secretary of Education “does not have the statutory authority to cancel, compromise, discharge, or forgive, on a blanket or mass basis, principal balances of student loans, and/or to materially modify the repayment amounts or terms thereof.”

Wasteful COVID-related government spending helped create record, devastating inflation this year and “forgiving” student loans will make inflation worse. Biden also ignores that the U.S. government fueled the initial student-loan debt balloon.

For decades, college tuition vastly outpaced inflation, but universities kept raising tuition because they know government-backed student loans will follow. The Federal Reserve Bank of New York reported in 2017 that one dollar of government student-loan expansion correlates with a tuition raise of 60 cents per dollar. And what have we gotten for those pricey degrees?

Education scholar Preston Cooper at The Foundation for Research on Equal Opportunity reviewed degree earnings potential, or the “Return on Investment” (ROI), of more than 60,000 post-secondary degrees and certifications. Cooper estimates “28% of bachelor’s degrees have negative ROI, meaning the degree does not increase students’ earnings enough to justify the costs of college and the risk of dropping out.”

Who wins most under Biden’s fake magic wand? Committee for a Responsible Federal Budget reports, “Nearly two-thirds of the benefit of canceling $50,000 in student debt per person would go to the top 40 percent of households and over three-tenths would go to the top quintile, according to a recent paper by Sylvain Catherine and Constantine Yannelis. Less than 5 percent would go to the bottom quintile. They estimate an average net lifetime benefit of $5,775 for someone in the top quintile and only $731 for someone in the bottom.”

The only possible voice of reason Biden might be listening to is economist Larry Summers, who rightly says that student loan cancellation “raises demand and increases inflation.” Summers impotently warned his fellow Democrats that their rash spending was spiking inflation.

Sadly, they did listen when Summers claimed the so-called “Inflation Reduction Act ” would decrease inflation, even though multiple nonpartisan analyses show it won’t. Regardless, in this instance, we can only pray Biden will give credence to Summer’s diagnosis.

Image courtesy of Gage Skidmore/Flickr

8 thoughts on “‘Forgiving’ student loan debt would be illegal, raise inflation

  1. The Cloward & Piven Theory in action. Overload the system until it breaks down, they come in to save us with a draconian police state using an emergency to declare martial law.

  2. Choice……money follows child k-12 would create competition which these “government aka public” schools do not want any part of……..
    during this trying time in education parents deserve to be making the choice of education for their children. end of story…….CHOICE and TERM LIMITS will be a great start to solve some of the corruption going on……
    and term limits WITHOUT a lifetime paycheck; do as forefathers intended, go do the job, go back to your income stream
    problem is we now see these “career” politicians……….this is a BIG part of problem

  3. Do these demoprog politicians not realize that all this GIVING AWAY OF FREE MONEY is what is responsible for the inflation, the drop in stock values and the shortage of workers?
    I could understand if certain professions which are in high demand and of great societal importance were given some reprieve from the debt associated with their training. We need nurses, law enforcement officers and engineers. We dont need more poets, art history experts and gender studies professors. What about the person who worked a side job while in high school to make a down payment and borrowed the rest to purchase earth moving equipment to start a business as an excavator? A loan for equipment is as much an investment in their future as is a college degree for someone else. You need somewhere to live so why not forgive home mortgages? You need transportation, so why not pay off everyone’s car loans?
    Where does this end, Bernie? The US is awash in college graduates with worthless degrees…why would we subsidize something that we have too much of?

  4. Colleges are guilty too….they are in on the scam…here’s a quote from an Op-Ed today, WSJ. Spot on:

    “Colleges have no financial incentive to ensure that their programs impart skills demanded by employers or provide a decent living. What does it matter to them if an anthropology graduate winds up working as a barista? Colleges are paid on the front end, and government is now writing off the cost on the back end…..Mr. Biden’s loan write-offs show this system has failed to reduce student costs while enriching an academic elite, and soaking taxpayers….Ivory Tower progressives vote for Democrats and don’t want to be responsible for student outcomes.”

  5. This is just one more unconstitutional action taken by this administration. The question then remains: “What is being done about it?”…NOTHING! By November, it may be too late to stop the madness. Wake up!

  6. Consider this: A college markets itself to students as follows. Based on the college’s studies, its college degree holders earn more money than those without a degree. Student signs a contract with the college to receive an education in exchange for doing the required work AND paying the tuition and room and board. Student graduates with a degree. Student can’t get a job sufficient to pay the cost of the education.

    Is this a case of false advertising? Is it a breach of contract? Why are unrelated taxpayers being asked to cover the costs? … especially by those who chose an education other than college? Why aren’t the colleges being held to account?

    And why in the world would anyone continue to purchase goods and services from these fraudulent enterprises? … unless, of course, the government’s taxpayers guaranteed the loans that pay their fees.

    The caveat: Consider that Vermont’s PK thru 12 education costs are nearly as expensive as the cost to go to college – including room and board. And fewer than half of Vermont’s high school graduates meet grade level standards.

    Isn’t it becoming clear to Vermonters that our entire education system is a fraudulent organization? No. Because taxpayers are the product of this scam and aren’t capable of recognizing a fraudulent deal.

  7. Classic Liberal scam. Biden just bought millions of young, mush mind, Dem voters with free forgiveness money. But colleges should pay $ a penalty. Colleges Profs are 85% Liberal agenda indoctrination. Colleges expanded worthless degree programs simply because the GOV’T created easy loans for any amount. Colleges grew & grew, off free Gov’t loans. But few kids took tough S.T.E.M. degrees, but worthless ones…like enviro studies & climate…or Gay/Gender studies…or Race studies…you name it, Colleges gave it. So when kids graduate? NO JOBS, but huge debt. Kids that took STEM are fine & employed. Kids that took “indoctination degree’s” are in trouble, can’t live or pay back loan. To solve this? No more loans for bogus degrees. My idea is to do, on any Gov’t college loan, the COLLEGE must be a “signator-guarantor” for 40% of the total loan, that their four year degree will produce a job after. If not, Colleges are liable for 40% of the loan default! It is basically a “Lemon Law” that Colleges scammed young kids with ‘LEMON” degrees! Do that and Colleges will admit all they offered was trash (but NO $$$ risk to them, just every dope kids they conned)..then they will no longer act as a signator/guarantor of THEIR bogus degree loans…because they woud GO BANKRUPT soon enough 🙂

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