President Biden will announce student loan forgiveness of $10,000 or more for low-income debtors on Wednesday. This is unconstitutional, unfair, and hazardous for our economy and democracy.
Young, low-income, and black borrowers would gain from student loan reduction. This would help them avoid default and allow some to buy a home.
Some of these debtors are victims of a system that encourages young people to attend college when other paths might be better suited to their talents and interests, that raises federally-subsidized tuition costs, and that steers students toward ideological majors that provide few marketable skills but train them as future left-wing voters and activists.
However, most debtors took out student loans freely, and there are solid arguments against forgiveness.
1. Just. Rewarding loan defaulters is unjust to those who have worked hard to pay off their college debt. It's unjust to folks who choose not to attend college — often because of debt — and must now fund others' student loans, even if they have their own bills (such as mortgage and car payments). Despite income limitations, richer borrowers will profit.
2. Inflation Giving $10,000 in loan relief to millions of American borrowers and prolonging a break in student loan repayments will boost the amount of money accessible to consumers, raising inflationary pressures and reversing the "Inflation Reduction Act" The rest of society will pay higher prices, indirectly subsidizing student loan borrowers through inflation.
3. Moralhazard Bailouts create expectations of future bailouts, distorting future borrowers' incentives and reducing the risk awareness that leads rational marketplace decisions. When the student loan market — and other capital markets — lose credibility, individuals lose faith in economic institutions and abandon frugality and hard effort, which are vital for a free market economy to survive and grow.
4. No academic reform Nothing in Biden's next proposal will modify how colleges and universities charge for higher education. Currently, many colleges offer poor degrees and conceal all but the most left-wing viewpoints. In certain fields, professors are little more than political activists training foot soldiers for radical agendas. Universities don't pay for students' loan defaults, so they'll carry on as usual.
5. Executive usurpation. The president can't control federal spending or debt. The only way he can forgive $10,000 per borrower — for incomes up to $125,000 — is by forceful executive action like President Obama's immigration program. Instead of working with Congress to reform higher education, Biden mocks separation of powers.
6. Banana Republic In Third World banana republics, demagogues promise large wealth redistributions to win reelection. Biden's declaration so close to a midterm election Democrats may lose reeks of cheap left-wing populism. Once a president starts spending other people's money without limit, subsequent presidents — left and right — will do the same to placate supporters.
The preceding is a summary of an article that originally appeared on BREITBART
