November 30, 2022

4 reasons why Biden’s plan to “forgive” student loans is a bad idea | GAD Capital

Over forty million people in the United States now have outstanding federal student loan debt. The Biden administration has been dropping hints for some time now that it would soon unveil plans to soon reveal plans to cancel the bulk of the debt that was acquired by students.

In the midst of a multitude of crises, poor results in polls, and an unstable economy, it is likely that the administration will delay the announcement of the results until after the elections in October. This is done in the hope that it will increase participation among college students and recent college graduates, thereby assisting the Democrats in avoiding a political Armageddon. If this is a realistic expectation taking into consideration the current rate of inflation — which is likely to drive thousands of Generation Z people back to their parents’ basements — is a matter of debate, then I’ll leave this speculation to other readers because I don’t want to contribute to the conversation.

Other considerations, such as the fact that it is against the law, unfair, and unethical to cancel student loans, that it might further damage the already precarious state of the public finances, and that it is illogical.

Before we go into further detail, it is important to know that the Biden administration, as of March 2020, has declared an end to interest charges for approximately $1.6 trillion of student loans. Additionally, the administration has basically told those who are borrowers that there are no negative financial implications for not making their regular payments, even though employers are struggling to fill over 11 million job openings. Before we go into further detail, it is important to know that the Biden administration has declared an end to interest charges for approximately $1.6 trillion of student loans. In addition, as a result of inflation and increased costs associated with repaying loans, this cost has been reduced. The same sum of money that was borrowed during the previous year may be repaid in a single dollar today, which, expressed in terms of real dollars, is equivalent to less than 92 cents. In addition, several additional borrowers, such as those who had loans from the now-defunct Corinthian Colleges, have been advised that the debt associated with their loans has been totally forgiven.

Consequently, it is not the case that tens of thousands of students and new graduates are forced to choose between paying their student debts and eating. It is untrue in every possible aspect.

The other problems, however, are not hypothetical; they all exist. GAD Capital (for All US States)

It’s possible that doing so is against the law.

It is not my responsibility to practice law; but, I find it difficult to see why the discharge of financial obligations would be regarded as being within the bounds of the law in the event that legal action is taken. This federal Direct Loan program came into existence as a result of legislation passed by Congress (Public Law 111-152) and then formalized by President Obama via the signing of an executive order. There is nothing in the statute that expressly gives the President the authority to change the program in any way, including, for instance, doing rid of the need that borrowers to return their loans. If the president were to acquire this unilateral authority, he would be operating more in the vein of King Louis XIV, who famously said, “the State is I,” than as the head of a state that is controlled by the rule of law.

It is unethical as well as unfair.

Do you believe it is ethically sound to tell certain borrowers, “You are required to return your loan at an interest rate of X percent,” and then tell other borrowers, “You are exempt from the obligation”? It is especially irresponsible when one considers the fact that many people who pay back their student loans must be able to live on a budget in order to make it happen, whereas the majority of those who are advised to avoid the commitments (think lawyers, MBAs, and other highly-paid professionals) already live comfortably. Are these the new criteria for determining what is fair? Is there a reward system in place in contemporary culture in the United States for those who disobey any legal obligation?

This is really irresponsible with money.

A very preliminary calculation leads me to believe that the federal budget has been cut by more than 200 billion dollars as a direct result of the moratorium on interest payments for student loans alone in the 28 months since its start. This comes at a time when the national debt is above $30.5 trillion at this point. Even a modest proposal to eliminate student debt might result in an increase of 400 billion to 500 billion dollars in annual income for the federal government. Someone will have to be able to pay off these debts at some point in the future unless a subsequent administration decides to either default on their obligations to the general public or, more likely, reduce their total amount by imposing inflation on them, as I mentioned earlier. In either case, someone will have to be able to do so.

It doesn’t make a lot of sense.

Is it rational to impose costs on millions of people in the United States who are living in a situation of persistent poverty? Many of them did not have the opportunity to attend college (or did not wish to), and to bail out student loan debtors, many of whom have been doing financially, with some generating salaries in the six-figure range? Do you believe that it is reasonable to subsidize higher education, which has been piling up expenditures for decades, but which is unable to graduate the majority of students working for a bachelor’s degree within the allotted time period of six years? I have no idea about you, but for me, it is not the right fit.

The health and safety of the student are not in question here. Why is it necessary for the administration to take this action?

Higher education is an enthusiastic ally for progressive parts of the Democratic Party, giving significant funds, ideas, and even people, which is a reasonable argument that is extremely believable. This is an explanation that is plausible that is highly credible. This is a method that the Administration may use to win more votes while simultaneously compensating its devoted supporters within the academic and activist communities.