Biden's student loan amnesty a disaster, and not just for his debt forgiveness for the rich
Joe Biden is doing all he can to detach the cost of an education from the value of an education.
According to the Bloomberg editorial board, his student loan amnesty plan is actually going to make all the problems it purports to solve ... even worse. And they aren't talking about the $10,000 in debt forgiveness to students below a certain income threshold -- the other half of the Biden proposal is where the real problems are going to be:
Amid the stir caused by President Joe Biden’s plan to cancel student loan debts, far too little attention has been paid to another far-reaching reform: the administration’s change to a lending program known as income-driven repayment (or IDR). If widely applied, Biden’s proposal would provide additional relief to millions of borrowers — and make the U.S. student loan system even costlier and more dysfunctional than it already is.
Unlike in standard 10-year loans, in which payments are fixed, borrowers in income-driven plans pay a percentage of their earnings each month, plus interest on the principal. The terms of such plans have become more generous since they were introduced in the 1990s. Current students who enroll in IDR pay 10% of their earnings above 150% of the poverty line and have their outstanding balances forgiven after 20 years. Low earners typically pay nothing at all.
The federal government, which serves as the lender through the bank proxies, stands to lose half, repeat, half, of its trillion-dollar portfolio as a result of this Biden debt-amnesty-for-votes scheme. Five hundred billion dollars flushed down the toilet, with the taxpayer to pick up the tab.
This is way worse than just the $10,000 debt forgiveness scheme for the rich that has drawn the most attention. This income-based repayment plan will primarily benefit the people who take out graduate studies degrees in useless majors where there's little prospect for earning the income needed to pay for the progam. Those degrees would be incentivized as essentially to be done on the taxpayer dime, and the colleges which run these useless programs would be similarly incentivized to keep introducing ever more useless programs as well as raise the rates higher since the taxpayers will pay whether they like it or not.
By making such generous terms available to all borrowers, the plan incentivizes students to take out bigger loans, increases overall student loan debt, drives up costs for taxpayers, and subsidizes upper-income professionals at the expense of the nearly 40% of Americans without any college education. Worse, it will only encourage colleges to continue raising tuition and weaken accountability for those that fail to prepare students for good-paying jobs.
Which, frankly, is a nightmare, and one of those nightmares that the press won't report on, at least not until the U.S. goes bust under the weight of all that useless debt to manufacture more women's studies majors and community organizers.
Bloomberg, not unreasonably, suggests that the problem be attacked at its root, with caps placed on how much the indigent can borrow, terms made easier for the truly low income graduates, more aid for students so they don't have to borrow so much in the first place, and certainly less of a free ride for those whose earnings are high.
Most of those ideas would be an improvement, but how about some real improvement -- by ending the intervention all together. Colleges can offer whatever degrees in whatever majors they like, but they have to bear the weight of the market, and if students cannot pay for such degrees, then they have to be free to declare bankruptcy and let the colleges eat it. That would knock some sense into these crazed leftist institutions, which have grossly detached the cost of their offerings from the value of their offerings and take no consquences for being wrong.
If this Biden trash isn't stopped by the next Congress, the U.S. will go bankrupt. Make Biden pay the bill, he has no right to put Americans on the hook for this kind of money just to get votes to perpetrate his power. His ignorant and expensive scheme has got to go.
Image: Pixabay / Pixabay License