Canceling student loan debt is a way to buy votes while paying off supporters
By Richard Vedder
The Biden administration has been suggesting for several months that it will soon announce plans to cancel a significant amount of student loan debt for the well-over 40 million Americans with federal college loans.
Beset with multiple crises and abysmal poll numbers, the administration likely will delay the announcement until closer to the fall elections, hoping it will boost turnout among students and recent college grads and help the Democrats avert political Armageddon. Whether this expectation is realistic, given the current level of inflation— which may soon drive many Generation Z members back into their parents’ basements—is debatable, so I’ll leave such speculation to others.
More important are several other considerations, such as the following: Loan forgiveness is likely illegal, immoral and inequitable, would weaken already-shaky government finances, and makes little sense.
Before elaborating further, it’s important to note that the Biden administration since March 2020 has put a moratorium on interest charges on about $1.6 trillion in student-loan debt and essentially has told borrowers that there are no financial consequences of not making regular repayments—even as employers struggle to fill more than 11 million available jobs. Not only that, as a result of inflation, the cost of repaying existing loans has gone down; a dollar borrowed a year ago can be repaid with a dollar today that in real terms is worth less than 92 cents. Moreover, large numbers of other borrowers, such as those with loans from the defunct Corinthian Colleges, have been told that their debt has been fully canceled.
o, it’s not as if tens of millions of college students and recent grads are having to choose between paying their student loans and eating. That’s not the case at all.
My other concerns, however, are real.
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Richard Vedder is a Senior Fellow at the Independent Institute, Oakland Calif., a Distinguished Professor of Economics Emeritus at Ohio University, and author, most recently, of Restoring the Promise: Higher Education in America.