Student Loan Forgiveness - Just One Of Biden's Ploys To Win The Presidency Again

It was a few minutes before 11 on Friday morning June 30 when the Supreme Court released its decision striking down Biden's $430 billion student loan forgiveness program that would have completely erased the debts of 20 million borrowers and lowered the median amount owed by another 23 million from $29,400 to $13,600.  The Biden program forgave up to $10,000 in student loans per qualifying student ($20,000 if the student received a Pell grant) - to qualify for the forgiveness program individuals had to have an adjusted gross income less than $125,000 in either tax year 2020 or 2021, $250,000 if married.  The ink was not yet dry on the SCOTUS decision before Biden announced he was still going to pursue, by other means, removing the student loan asset from the government's books & transfer the ensuing liability to taxpayers - although he really didn't say it in those terms or that clearly. 

People have been paying back their student loans to the government under income-driven repayment plans (i.e., payments are based on income & have no relationship with the size of the loan like paying off a mortgage does) since October 1, 1993 & Biden's original scheme floated last August cut these payments in half from BO's program that was in place when payments were paused in March 2020 due to the Covid-19 pandemic caused by the Wuhan coronavirus.

There are several versions of income-driven repayment plans in effect & just 14 days after the Supreme Court's overruling of the $430 billion giveaway, in a separate previously planned action (i.e., not part of the Supreme Court's June 30 ruling) that otherwise would appear to be a blatant disregard for that Supreme Court ruling, Biden's Secretary of Education announced that 804,000 student borrowers who had made payments for 20 years (25 years for graduate students) would see their cumulative $39 billion balance forgiven on a one time automatic discharge adjustment because these borrowers have accumulated the equivalent of 20 or 25 years of qualifying monthly payments.  These borrowers were given credit for @ least three additional years of loan forgiveness under the various terms of the Higher Education Act (HEA) of 1965.  Although this move had been planned for about a year, the timing of this payment forgiveness (adjustment) for the 804,000 eligible borrowers takes the word chutzpah to another level.  This is a one-off event that is independent of Biden's future student loan forgiveness plans that I label Plans B & C hereinafter.

Biden's latest proposed income-driven repayment plan - dated June 30, 2023 - that starts this Fall caps monthly payments @ 5% of discretionary income (down from 10% under BO & 15% originally) defined as the difference between annual income & 225% of the federal poverty level ($14,580 for 2023) up from the current 150% of the FPL used by BO.  For 2023 no one making $32,800, or less, or about $15.75 an hour for a full time worker owes anything.  If you fall in this income exempt category or make your monthly payment, interest will not accrue (it will be covered by the Department of Education funded by taxpayers) so your loan balance will not increase & after twenty years will be forgiven.  

An actual test case I am aware of has the borrower owing $67,000 in student loan debt while earning $50,000 per year.  This means the borrower will be required to make twelve $72 monthly payments each year based on 5% of $17,200 ($50,000 - $32,800).  So if this borrower makes $72 in monthly payments for 20 years ($17,200 total payments) the entire $67,000 debt will be forgiven by the federal government who releases the borrower thereby saving the borrower $49,800 on the loan principal.  If the payments are made on time no interest will accrue saving the borrower over $36,000 in interest costs if interest was calculated as if the student loan was a typical loan received from a bank, @ 4.50% interest (Sallie Mae rate).  But such a 20 year $67,000 loan from a bank would require $430 monthly payments - not $72 - meaning that in the real world interest on these government loans would never be paid off making $72 monthly payments - it would just keep accruing forever without limit.

The White House Fact Sheet dated August 24, 2022 provides three more examples on the graphic below & follows up the graphic by saying "For each of these borrowers, their balances would not grow as long as they are making their monthly payments, & their remaining debt would be forgiven after they make the required number of qualifying payments."  Click on graphic to enlarge. 

So Biden already had a Plan B in mind - note the Fact Sheet link above, issued only hours after the Supreme Court decision on June 30, 2023 - when he made the pitch to forgive the $430 billion student loan debt showing he is determined to see student borrowers pay pennies on the dollar, if that.  He is working with a pool of 43 million people who owe an estimated $1.6 trillion.  

Biden estimates that his Plan B income-driven repayment scheme will save the average student $1,000 per year & $2,000 per year for a student going to a public college so that in 20 years such a student would see $40,000 in student loan debt forgiven which is more than twice the size of his original up to $10,000 per student ($20,000 if the student received a Pell grant) loan forgiveness program.

It will require another successful lawsuit to stop this income-driven repayment scheme that is costlier in many instances as indicated above than the one just rejected by the Supreme Court.  But many readers know it is dangerous to repeatedly go to the courts for relief.  The courts can hold off the abuse but it is much better to resolve matters like this through the political process of winning elections.

But Biden's long range Plan C involves another legal theory that he knows will end up before the Supreme Court again if he tries it.

The plan just rejected by the Supreme Court was based on Biden relying on the Higher Education Relief Opportunities for Students (HEROES) Act of 2003.  

SCOTUS found that the president does not have the authority under the HEROES Act to justify such a sweeping program without the express approval of Congress.  In short, Biden found some cherry picked wording from a twenty year old law that gave the secretary of education the authority to cancel or reduce loans in certain limited circumstances (e.g., student deaths, bankruptcies, becoming disabled, or being cheated by the school) - not to rewrite the entire Education Law. 

Chief Justice John Roberts wrote in the Court's majority opinion "The Secretary asserts that the HEROES Act grants him the authority to cancel $430 billion of student loan principal. It does not. We hold today that the Act allows the Secretary to “waive or modify” existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up."

Also from the Syllabus section that preceded the Opinion of the Court regarding Biden v. Nebraska "Under the HEROES Act, the Secretary “may waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the [Education Act] as the Secretary deems necessary in connection with a war or other military operation or national emergency.” §1098bb(a)(1).  As relevant here, the Secretary may issue such waivers or modifications only “as may be necessary to ensure” that “recipients of student financial assistance under title IV of the [Education Act affected by a national emergency] are not placed in a worse position financially in relation to that financial assistance because of [the national emergency].” §§1098bb(a)(2)(A), 1098ee(2)(C)–(D)."  An example of a recipient of student financial assistance not being placed in a worse position financially would be the three & a half year pause of payments & interest accrual because of the pandemic - not forgiving the entire debt.

In 2003 the entire student loan debt was $243 billion so Biden was relying on a twenty year old dusted off passage to claim that $430 billion, almost twice the nominal student loan debt when the HEROES Act was written, could be excused without Congress's explicit approval.  Adjusting for inflation over the twenty years since the HEROES Act was written means Biden pretended $400 billion ($243 billion 2003 dollars adjusted to 2023 dollars) of the $430 billion, or virtually the entire targeted portion of student loan debt being considered, could be waived or modified as if that was what Congress intended without ever saying so.  Not only didn't Biden originally believe he had such authority to forgive this debt but then-Speaker of the House Nancy Pelosi said in July 2021 that the president could not unilaterally forgive students loans: "That has to be an act of Congress."  Furthermore, the HEROES Act has never been used previously to cancel student loan balances.

But Biden knows a good vote baiting issue when he sees one & after making the income-driven repayment program as lenient as he can before resumption of student loan payments this Fall he plans to pursue student debt forgiveness again - this time under a legal theory following the HEA mentioned above - which takes us further away yet from the magnitude of money under consideration & making it harder to connect Congress clearly intending such significant executive action without specifically saying so.

When the HEA was written in 1965 the Department of Education had not yet been elevated to a Cabinet level agency - it began operations as such in May of 1980 - so there was no Secretary of Education to relieve student debt.  The HEA is a federal law that governs the administration of federal higher education programs & is the law referred to both by Chief Justice Roberts' Opinion paragraph quoted above & the Syllabus section that preceded the Opinion (i.e., the Education Act).  Title IV, entitled Student Assistance, of the HEA governs federal financial aid mechanisms including student loans. 

Numerous hearings were held by House & Senate subcommittees during 1965 & LBJ signed the HEA into law on November 8, 1965 as part of his Great Society program.  

Congress authorized the first federal student loans in 1958 under the National Defense Education Act —up to a total of $1,000 per student each year so the maximum student debt was $4,000 per student who graduated on time.  Today the average federal student loan debt is $37,338 per borrower.  Student loan debt exceeded credit card debt in 2010, auto loan debt in 2011 and reached the $1 trillion mark in 2012.  

Since 1965 the HEA has been reauthorized eight times with Congress making amendments adding & changing policies of existing programs so we don't know which clause Biden will rely on to cancel all student loan debt in Plan C.  But, with the financial growth of the program as described above & the complexities resulting from Congress fiddling with a law for 58 years, it seems a sure thing Biden will look for another cherry picked passage to try again.

And again, & again because Biden becomes the champion of buying the votes of student loan borrowers with every attempt to relieve their poorly conceived debt.  So even after the high Court struck down this most blatant & shameless political maneuver imaginable Democrats will remind students & their parents every election going forward that they brought it up or plan on bringing it up again under another pretense so people keep voting for them in the hope that it will somehow become legal one day.

GenZers will make up 37% of the electorate in 2024 & when coupled with Millennials the total is just under half @ 48.5%, & forgiving student loans registers with them.

Of course, if such a student loan forgiveness scheme ever became law it would be an open invitation for colleges to keep raising tuition meaning the federal government would repeatedly do this all over again with other groups of students in years to come. 

But student loan forgiveness is just one of three other major ploys Biden & the Democrats are relying on to win the presidency in 2024: 

1)  Stricter gun control laws - Biden is counting on the media unfavorably presenting this issue to the public every time there is a shooting that favors their narrative & not mentioning it when it doesn't so that emotions run high with independent voters to ban guns & eliminate the second amendment.

2)  Abortion -  Other than poor quality Trump endorsed candidates in the 2022 midterm elections (the vast majority of which lost), abortion was given as the biggest reason why the Republican red wave didn't materialize.  Abortion energises Democrats as well as suburban women who identify as Republican or Independents.  There were plenty of indications of the significance of abortion documented on this blog in the last year such as the statewide vote in traditionally conservative Kansas on August 2 overwhelmingly voting to keep abortion a constitutional right by a 60 to 40 landslide margin.  The abortion issue has been reduced to a discussion of debating the number of weeks before an abortion is illegal which pro-lifers like Bill McGurn, Mike Huckabee & Lila Rose should have a problem with - meaning Republicans are divided & still do not have a winning abortion message which can only hurt them again in 2024.  

3)  Trump - Since 2016 we have clearly seen that Trump brings out more anti Trump voters than pro Trump voters.  Trump talks powerfully but since 2016, under his leadership, Republicans lost the House in 2018 & the Senate & Presidency in 2020 & more pathetically the two Georgia Senate runoff election seats on January 5, 2021 when the stakes were precisely known - namely, retaining Republican control of the Senate if only one of the two Georgia Republican candidates had won meaning none of the Biden anti-American assault could have happened to America if Trump would have campaigned for Loeffler & Perdue instead of whining about his presidential loss during campaign stops in Georgia supposedly on their behalf.  The 2022 midterm red wave mentioned above saw Republicans losing another Senate seat as a result of John Fetterman defeating Trump endorsed candidate Mehmet Oz but the Republicans did squeak out control of the House by a five vote majority 222 to 213 (need 218 to control).  It is this losing electoral record that makes Democrats want to run against Trump - & he accommodates because he is his own worst enemy.