A more equitable student loan forgiveness plan

It is human nature’s call for fairness that brings us to the issue of President Joe Biden’s student loan forgiveness plan, seeking to benefit students who received loans, regardless of their current financial situation, by forgiving those loans up to an amount of $10,000 ($20,000 for Pell grant recipients).

One example of the plan’s outrageousness is that it covers loans obtained by parents as well with eligibility, again, based on the student’s income. In other words, parents making huge incomes can qualify even though their graduated child may now be back at home, living in the basement.

While clearly there are many students who have achieved financial stability and are fully capable of paying off their loans, there are also those who have not yet established such stability. But it is estimated only 15% of Americans will qualify for the plan of which most already are in the upper-middle class.

Thus, the issue of equity arises – fairness in not only ensuring student debtors truly in financial need benefit from loans being discharged but also fairness to taxpayers in ensuring their tax dollars benefit such students and not the upper-middle class. The bottom line is Biden’s plan makes the American taxpayer cover – to the estimated tune of $2,100 each – the private debts of individuals.

The plan places an annual income cap of $125,000 on those eligible for the program. Fortunately, this eliminates from consideration those like Alexandra Ocasio Cortez (AOC) who, despite her socialist ideology, is making a very capitalistic annual income of $174,000. Clearly, AOC, doing well financially, rightly should not so benefit. After all, she was able to buy a $59,000 Tesla, which she randomly parks illegally and for which she even now has the leisure of considering a trade-in due to her political sensitivity over Tesla founder Elon Musk’s recent conservative conversion.

But despite AOC and other congressional members not qualifying, it is estimated at least 30 members of Biden’s White House staff, collectively owing $4.7 million, will. As such, one critic calls the proposal “shameful” evidence of “the gap between the people and the ruling class in Washington, D.C.”

Sadly, while in the shorter term, non-student loan taxpayers will foot the bill for this forgiveness, even those benefited fail to understand they will suffer a longer-term negative impact in the form of increased cost of government, inflationary price rises and the burden of a $30 trillion national debt. Student loan forgiveness beneficiaries will recognize too late they were victims of Biden’s plan. Some day, perhaps, the reality will sink in that they only served as conduits for transporting over a trillion dollars in taxpayer money to a liberal academic community – many already with billion-dollar endowment funds – to promote the Democratic Party’s ideology. Yet, for playing this role, students have faced tuition increases and the need for larger loans. (Hint: Perhaps college endowments, which are untaxed, should pay off the bad loans.)

Little attention is paid to the fact that several years ago as Obamacare was making its way through Congress, a provision was included to eliminate private student loans by federalizing the system. Not widely understood then was the hope of raiding funds paid by students to help fund Obamacare. In 2013, the Congressional Budget Office reported that $8.7 billion of the funds collected in student loan interest payments went to Obamacare, $10.3 billion went to the federal debt and $36 billion went to pay Pell Scholarship grants, resulting in students paying higher interest rates.

While the plan’s total financial impact is officially put at $300 billion, other estimates suggest it could go as high as $500 billion. It may even be higher as, in 2019, it was estimated 44 million borrowers collectively owed $1.5 trillion in student loans – the second highest consumer debt category behind mortgages.

Whatever the student loan amount is, at a time the U.S. economy is struggling, inflation is rearing its ugly head, billions of dollars is being committed to help Ukraine defeat its Russian invader, and a misnamed $739 billion “Inflation Reduction Act” is passed that will not do what its title suggests, the last thing we need to do is implement a student loan forgiveness plan that includes those who have truly benefited from their loans to win good-paying jobs. Six days after announcing his plan, Biden still refuses to share how he intends to pay for the debt cancellation while claiming it is “fully paid for” through deficit reduction. When Vice President Kamala Harris was asked who specifically is footing the bill, she responded in her typical non-responsive manner, “The same people who are criticizing what we rightly did … are the same people who voted for a tax cut for the richest Americans.”

A more equitable way existed for Biden to structure a plan based on real financial need. Fairness to taxpayers at a time our national bank account is being depleted absolutely demanded this. However, by announcing his plan just two plus months before midterm elections and polls showing Democrats in real trouble, Biden needlessly chose to benefit more debtors than only those in most need.

To explore a more equitable solution, we need to review bankruptcy law.

Before 1976, student loans could be discharged in bankruptcy, at which point the law gradually changed. By 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act exempted federal and private student loans from discharge, reasoning students could obtain such loans, intending to earn a degree and then declare bankruptcy to avoid payment. However, exemptions existed for discharging loans by proving undue hardship – basically demonstrating an inability to make loan payments while maintaining a minimum standard of living. This remains the standard today.

A more equitable solution would use a “fast lane” process in bankruptcy courts, to which special student loan adjudicators were assigned to evaluate the financial needs of those attempting to discharge their indebtedness. Applicants would submit affidavits, listing all assets and liabilities to show the applicant’s finances exceeded a predetermined debt ratio level. Any affidavit involving fraud would result in reinstatement of the debt plus other penalties.

Those lacking financial need know who they are and, as such, would be unlikely to submit to this bankruptcy process, possibly running the risk of a false submission. This would help weed out many unqualified applicants. Additionally, since Biden has now extended a freeze on federal student loan payments for a full year, through Dec. 31, conveniently until after midterm elections, it would have given qualifying applicants ample time to submit paperwork.

Such a student loan forgiveness plan would give taxpayers a comfort level, knowing their tax dollars were going to those in real need.

Biden has had 20 months to think out his student loan forgiveness plan. Like so many other decisions his office has made, adequate timing seems unlikely to generate thoughtful planning. At a time when the gap between “haves” and “have nots” in our society is so wide, fairness dictates benefitting the latter, to include all taxpayers, to the exclusion of the former – something Biden ignores in an effort focused on buying votes for the midterm elections.

As one critic says about the plan, “It is profoundly immoral to transfer the privately incurred debts of some onto the backs of all taxpayers. …” But then, immorality seems to be a generational characteristic within the Biden family.

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This article was originally published by the WND News Center.

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