Our policy debates tend to engage us on two fronts: through our reason and through our passion. And so it is with Joe Biden’s announced decision to unilaterally forgive $10,000 in student loans for borrowers who make less than $125,000 per year, or for married couples who make less than $250,000.
The decision generated both intellectual and emotional opposition. Opponents didn’t just think it was wrong; many of them felt it was wrong as well. And I think I know why.
But let’s deal with the head before we get to the heart. There are multiple policy reasons to oppose debt forgiveness. First, aside from the additional targeted relief for Pell Grant recipients (they get $20,000 of loan forgiveness), it’s regressive. College graduates make substantially more money over the course of their lifetimes than high-school graduates. Even Americans with “some college” make more money than those who stopped their education after high school. In the United States of America, college graduates as a class do well.
Most taxpayers, however, aren’t college graduates, and we’re asking a class of Americans who possess educational disadvantages to help pay for a program that benefits those who are comparably better prepared for real prosperity.
Second, it’s expensive. As the Committee for a Responsible Federal Budget notes, canceling $10,000 in student debt “would consume nearly ten years of deficit reduction from the Inflation Reduction Act.” Moreover, while the immediate effect on inflation is certainly debatable, Jason Furman, a former chairman of President Barack Obama’s Council of Economic Advisers, argues that the plan pours “gasoline on the inflationary fire.”
Third, in the absence of underlying reform, debt forgiveness does nothing to address the challenge of spiraling college costs. Furman is eloquent on this point also, noting that Biden’s plan encourages “higher tuition,” “more borrowing,” and “expectations of future debt forgiveness.”
Finally, the program is of dubious legality. Biden’s Office of Legal Counsel asserts that the so-called HEROES Act, which empowers the secretary of education to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the [Higher Education Act] … as the Secretary deems necessary in connection with a war or other military operation or national emergency,” grants Biden the authority to forgive student debt.
Yet the Supreme Court has made it abundantly clear that it’s skeptical of broad, sweeping delegations of authority to the executive. In Alabama Association of Realtors v. Department of Health and Human Services, the Court struck down the Biden administration’s eviction moratorium in part because Congress did not clearly authorize the specific use of presidential authority. A six-justice majority wrote, “We expect Congress to speak clearly when authorizing an agency to exercise powers of ‘vast economic and political significance.’”
Indeed, in a July 2021 press conference, House Speaker Nancy Pelosi said that President Biden did not possess the power to forgive student loans:
Here’s the thing. People think that the president of the United States—is this more on the subject than you ever want to know? Well, you’ll let me know. People think that the president of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress.
If a legal challenge does reach the Supreme Court (there are questions as to whether anyone has proper standing to challenge Biden’s order in court), Pelosi will likely be proved correct.
But I want to also deal with something more intangible: the raw emotion I’ve seen people express in opposition to Biden’s plan. Yes, some of it is purely partisan. In a polarized time, we often find ourselves angry at our opponents first, then searching for reasons why we’re mad. There’s something else going on here—something that my Atlantic colleague Tom Nichols touched on when he tweeted that Biden’s plan “pings” our “sense of unfairness.”
That sense of unfairness is rooted in the concept that most Americans, at a fundamental level, believe that it is wrong to use the power of the state to take from those who have less to give to those who have more. And by “have less,” we don’t simply refer to money. We’re also referring to opportunity, and in the information age, opportunity is disproportionately weighted toward those who possess college degrees.
Yes, I know that there are multiple examples of regressive taxes or special-interest carve-outs and bailouts in American tax and economic policy. Wealthy, favored interest groups enjoy the fruits of their campaign contributions and lobbying campaigns. Yet those carve-outs and bailouts also tend to ping our sense of unfairness. They motivate outraged engagement with the body politic—from the Tea Party movement to Occupy Wall Street.
That sense of unfairness is only heightened by the particulars. Yes, there are the tough cases—such as poor kids who are forced to drop out of college to help their families pay their bills, yet are still saddled with college debt for their uncompleted degrees. But there are also the students who passed up a cheaper state school for the far more expensive, dream private school.
Or there are the students who decided not to work to help pay for their degrees, even as many of their classmates worked themselves to exhaustion to pay tuition in real time.
Or there are the students who are laboring under very temporary financial hardship but who are on the cusp of extraordinary earning potential. Yesterday, Harvard Law School professor Laurence Tribe inadvertently triggered a wave of outrage when he tweeted, “Good news for thousands of my former students. I’m grateful on their behalf, Mr. President.”
Harvard Law graduates are among the most prosperous and influential classes of individuals in the entire world. They are among the last people in America who need substantial financial assistance. And yet many of them are reaping the rewards of a policy funded by millions of people who have less—less money and less opportunity.
It’s interesting to me that the debt-forgiveness portion of Biden’s plan is drawing much more fire than the provisions that merely decrease payments. The plan also (and with little controversy) caps loan payments at 5 percent of a borrower’s discretionary income. Making debt affordable is substantially different from eliminating debt entirely. And the 5 percent cap means that payment amounts will go up as income goes up.
Think of a counterfactual. Imagine Biden’s plan, except targeted only to Pell Grant recipients (who come mainly from low-income families) and only granting the 5 percent cap to everyone else. While legal problems may remain, it would no longer suffer from the same fundamental malady. It would no longer take from those who have less and give to those who have more.
The idea that powerful constituencies can game American politics to their advantage engenders an immense amount of righteous bitterness. And so it is with debt forgiveness. One of the most powerful and privileged communities in all the world—American college graduates—has gained for itself a great victory, but it’s a victory at the expense of people who face greater economic challenges and enjoy fewer career opportunities. No wonder so many think it’s unfair.