At Townhall: Why Biden’s Planned Student Loan Bailout is disastrous and will create very bad incentives
Dr. John Lott has a new piece at Townhall.
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We put five children through college (one is still attending). We saved up. We never took out any loans, as we didn’t want our kids burdened with debt. Our kids went to William & Mary, Mary Washington, Dartmouth, Johns Hopkins, and the University of Pennsylvania. So far, the total costs for these colleges have been well over $600,000.
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On Wednesday, Biden announced his massive $300 billion student loan forgiveness program. He canceled $10,000 of federal student loan debt and will forgive up to $20,000 for Pell Grant recipients, while extending the pause on federal student loan payments through the end of the year.
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Pell Grants are for those who were relatively poor when they went to college, but that hardly means that those getting this $20,000 benefit are still poor after college. The moratorium on paying loan payments also affects all borrowers regardless of their income. The $10,000 forgiveness applies to people making up to $125,000 per year. Even for those in this last category, is that what Democrats view as the working poor?
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All this is on top of Biden forgiving federal student loans in June for 560,000 student loan borrowers.
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All this makes a mockery of the Joe Manchin-Chuck Schumer “Inflation Reduction Act” that was supposed to reduce inflation by cutting the deficit. Despite the rhetoric, the Democrats’ bill wasn’t going to reduce the deficit for years, but other spending bills have continued Democrats’ spendthrift ways. In July, Democrats passed the $280 billion CHIPS Act without paying for it. Now the $300 billion loan bailout without paying for it.
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As our federal debt approaches $31 trillion and our national income shrinks, our federal debt is almost 25% greater than our income.
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Biden delayed the announcement until the end of August to be closer to the election. Democrats will likely try to keep borrowers locked in politically by continuing to freeze repayments and warning that Republicans will end that.
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But little thought seems to go into how Biden’s policies will affect people.
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In my family’s case, should we have just borrowed all of this money and sent our kids only to public universities? If so, we could have had $600,000 to spend on all sorts of other things — nicer cars, nicer houses, or fun trips. Or it is money we could have given our children and grandchildren when we die. We always purchased used cars that were a year old. My Ford Taurus lasted for 16 years and had more than 225,000 miles. My wife’s Pontiac Transport lasted almost as long before rust meant it could no longer pass the state’s yearly safety check.
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But we didn’t complain. We promised our children that if they worked hard and got into a good college, we would figure out a way to pay for them to go there. We were proud of our children’s hard work, and we thought that going to a top university was important for their success in life.
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So, because we saved up and behaved responsibly, President Joe Biden will punish us. Those who didn’t save or work 80- to -90-hour weeks, who spent their money on nice things, now get us and other taxpayers to pick up the tab for their kids’ education.
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How exactly is that fair?
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Nor is it fair to those who don’t go to college. The people who attend college generally tend to be the future wealthy in the country. Why should those who didn’t go to college and are relatively poorer end up giving large amounts of money to those who did go and are going to be wealthy?
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These policies will impact people’s behavior in other ways. It tells people they don’t need to save up to send their kids to college. That they don’t need to save up to buy their first homes, if Biden wins and enacts his programs, Americans will surely reduce their already low savings rates. That will make our country poorer.
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Biden’s rhetoric keeps on discussing preferential treatment for public universities, and could be the death knell for many private schools, which already have a hard time competing against heavily taxpayer-subsidized public universities. The Obama administration put private, for-profit colleges out of business, and a Biden administration will finish the job with many nonprofit private colleges.
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Student debt has ballooned over the last decade, but the cause is ironic. At the beginning of the Obama administration, the government took over student loans from banks. But the government was much less concerned than banks were about getting their money back. It just kept giving out loans, even if it looked like the student would never be able to pay them back. So now we have a situation in which the government lends out too much money to some people who went into fields that don’t pay enough.
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With loan forgiveness, students are apt to borrow even more than they would have otherwise. Making people with larger even more dependent on Democrat promises of future loan forgiveness.
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Biden and the Democrats are outright buying votes. Promising this money and holding out the possibility of even more in the future for young people is nothing short of bribery. And to do so, they are using my family’s money and the money of other families that made sacrifices for their children.
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