The Corner

Politics & Policy

Forgiving Student Debt Is (Still) a Dumb Idea

Some on the left, perhaps most prominently senators Chuck Schumer and Elizabeth Warren, have encouraged Joe Biden to forgive loads of student debt via executive order. I’ve written numerous times about how bad of an idea this is, most extensively in a print piece last year, but here’s a brief overview.

Basically, the student-debt “crisis” is nowhere near as bad as some like to pretend: Most borrowers pay a small share of their income toward their loans, and borrowers who get into trouble can already have their loans delayed or forgiven through various programs. The folks this system neglects are not people with huge debt burdens — who tend to make high incomes and are exceedingly well-covered by existing forgiveness programs anyway — but those with smaller debts, particularly those who didn’t finish college.

Forgiving debt for everyone is a poorly targeted policy no matter how you look at it. It helps the wealthy more than the poor, it’s not fair to people who paid off their debts early, and it’s not a good way to stimulate the economy during COVID. (As the center-left economist Jason Furman points out, the forgiven debt would be taxed, which would cut into any immediate economic effect.)

There’s also the legal question of whether the executive branch can get away with this. The law does give the executive an astonishingly broad power to “compromise, waive, or release” student loans, and both a letter from the Harvard Legal Services Center and an article in the Buffalo Law Review defend such a move as legal. However, it would be a blatant abuse of the power the executive has been granted, and, as the law-review article explains, there are legitimate reasons why the courts might not be amused. For instance, federal law also commands agencies to “try to collect” the debts they’re owed, and courts generally assume that policymakers don’t “hide elephants in mouseholes” — i.e., they don’t write tiny, low-profiles provisions into statutes that override vast swathes of policy.

Lastly, a word on the politics. The economy is in poor shape right now, with lesser-educated Americans having a particularly rough time. Shoveling tons of taxpayer money toward the college-educated would produce a major backlash, possibly — hopefully! — rivaling the Tea Party fervor a few years back.

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