This is not a great moment for the separation of powers. But at least the net effect is positive in policy terms. Mr. Biden’s student loan forgiveness plan was a mistake, and not only because of its high cost and shaky statutory foundation. The plan offered $10,000 for individuals making less than $125,000 a year, and $20,000 for borrowers who were previously recipients of Pell Grants for low-income students. Even so, some $140 billion of the benefit would accrue to relatively well-educated, mostly White students from affluent family backgrounds, according to an analysis by Adam Looney of the Brookings Institution. Every dollar of relief would come from the broader taxpaying public, mostly made up of workers who did not attend or complete college. There’s nothing in it at all for those who saved for college and didn’t borrow.
The plan might still have been worth it if it came accompanied by structural reforms to the nation’s system for financing higher education. But it did not. After this one-off benefit for current borrowers, new students would have signed up for loans, possibly borrowing even more than they would have otherwise, given that the Biden administration had created the expectation of another debt write-off someday. There would be no incentive for colleges and universities to control the costs that feed rising tuition rates.
Unquestionably, the $1.8 trillion in student debt that 43 million people currently owe represents a burden on household finances for many, and a potential drag on the overall economy. And yet neither effect should be overstated; student debt, at least in part, pays for itself in enhanced human capital, both for individual borrowers and for the economy as a whole.
Mr. Biden said Friday that he would seek a “new path” to debt cancellation based on different legal authority, the 1965 Higher Education Act, though he supplied few details — and begged the question why he did not invoke that statute in the first place. Better for Mr. Biden, and everyone else, to focus on proposals that could make a meaningful dent in the cost of higher education. Loans for graduate education, which are currently allowed without limit and make up an increasing share of the total student debt, should be capped. The federal government should use its bargaining power to leverage greater cost control by colleges and universities. More student aid should come from means-tested subsidies such as Pell Grants, as opposed to debt.
Structural reform should be accomplished urgently, and in the clearest statutory language Congress can write.
