Select Page

The more you learn about school loan forgiveness… the worse it gets

The more you learn about school loan forgiveness… the worse it gets

I recently wrote a commentary critical of President Biden’s school loan forgiveness plan.  New reports reveal it is worse than I even explained.  

Biden includes loans from parents through some “parents-plus” deal.  As I see it, the parents can have their loans reduced by $20,000.  But here is the catch.  The determination of eligibility is based on THE STUDENT’S INCOME.

In case you have not connected the dots, that would mean parents with huge incomes can get the loan reduced based on the income of their kid – who could be a couch potato living off mommy and daddy (as was John Fetterman, the Democrat gubernatorial candidate in Pennsylvania until he was elected Lt. Governor.  Reports say he got an allowance for more than $50,000 per year from his folks. But I digress).

I previously covered the more than three hundred million Americans who will NOT be benefiting – but who will be footing the bill for the less than ten percent of the population who will supposedly be benefiting.

So, why did I say “supposedly” be benefiting?  Weeell … the benefit may not be all that Biden and the Democrats claim.

Biden – with his habit of hyper hyperbole (I did not want to say “bullshit”) – says that because of his canceling a portion of the student loan debt, folks will have money to do other things like buying a home.  (Yep!  That is what he said.)

Let us say you are making less that $125,000 per year – and you have a student loan obligation of $100,000 that you are paying off at the five percent interest rate.  You have 20 years to pay it off.  That gives you a payment of approximately $791 per month.

After Uncle Joe — I mean Uncle Sam – reduces your loan to $90,000, your monthly payment drops to $718 per month – or saving of a whopping $73 per month.  That would not cover a mortgage on a birdhouse.

Even if Biden were to give them the entire amount up front, a low-income renting individual would not be able to afford a house.  No doubt it will be a nice one-time piece of change to pay off a few credit card bills, but the economic benefit will be fleeting.   A year from now, the lives of the recipients will not have changed because of the money.

This is a one-time election-year goodie for a few folks but does nothing to address the ongoing problem of robber baron tuition increases.  As one commentator put it, Biden is using a small bucket to bail out a boat without addressing the gaping hole in the hull.

And then there is the cost of the program – and its impact on inflation – when asked about the cost, Secretary of Education Miguel Cardona said … he did not know.  They have not figured it out yet.

Cardona said the income from the rest of the student loan income would cover the costs.  That is just stupid and dishonest.  He might as well have said that Social Security income would cover the cost.  No.  The cost is the cost – and there is no counterbalancing income to offset it.  That is why economists call Biden’s action inflationary.                       

It is not just the Republicans complaining.  Tim Ryan, the Democrat Senate candidate in Ohio, has come out against the plan.  President Obama’s economic advisor Jason Furman called Biden’s action both “reckless” and “inflationary.” 

Furman tweeted, “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. And doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse.”

Biden and left-wing Democrats are selling a lot of sizzle but are not producing any bacon for anyone.

So, there ‘tis.

Author Note: In the commentary, it was noted that Secretary of Education Cardona did not know the cost of President Biden’s student loan write-off program.  We now have a figure.  It is estimated to cost $500 billion dollars – half a trillion.  That makes it a significant inflation driver.  In addition to the burden of increasing inflation, taxpayers will be picking up the tab for years to come – including those who paid off their student loans and those who never had any – and those who take out student loans in the future will be paying off theirs and those who got Biden’s election year gift.

About The Author

Larry Horist

So,there‘tis… The opinions, perspectives and analyses of Larry Horist Larry Horist is a businessman, conservative writer and political strategist with an extensive background in economics and public policy. Clients of his consulting firm have included such conservative icons as Steve Forbes and Milton Friedman. He has served as a consultant to the Nixon White House and travelled the country as a spokesman for President Reagan’s economic reforms. He has testified as an expert witness before numerous legislative bodies, including the U. S. Congress. Horist has lectured and taught courses at numerous colleges and universities, including Harvard, Northwestern, DePaul universities, Hope College and his alma mater, Knox College. He has been a guest on hundreds of public affairs talk shows, and hosted his own program, “Chicago In Sight,” on WIND radio. Horist was a one-time candidate for mayor of Chicago and served as Executive Director of the City Club of Chicago, where he led a successful two-year campaign to save the historic Chicago Theatre from the wrecking ball. An award-winning debater, his insightful and sometimes controversial commentaries appear frequently on the editorial pages of newspapers across the nation. He is praised by readers for his style, substance and sense of humor. According to one reader, Horist is the “new Charles Krauthammer.” He is actively semi-retired in Boca Raton, Florida where he devotes his time to writing. So, there ‘tis is Horist’s signature sign off.

3 Comments

  1. Tom

    Yeah you are right on this one Larry. Wow nobody, no media has talked about the “parent loan” provision. I never had a student loan or a parent willing to pay for my education. I was military then got an associates with VA benefits. After that I got on with a company with an education policy and got my BS paid by that. Then I paid for my masters. There are many paths for people who wish to get an education. None of those paths should lead through the tax payer wallet. GOP needs to message this hard so people understand before the midterms.

    • larry Horist

      Tom … I do not know much about the parent loan deal, but I assume it must require signing up for some federal “program” — not just money borrowed by parents. It is weird. What about parents need to borrow for a new roof and instead use the money for college and pay for the new roof with the money they would have used for college.

  2. Frank stetson

    Geez, Larry, your firing these out machine gun style, I think there’s a bee your bonnet.

    According to barons, parental loan forgiveness is based on the borrower not the recipient. In other words, I think it’s based on the parents.

    The good news in this is at least its income-based.

    The bad news is that it’s based on fsfsa which is usually garbage in garbage out. I’m not sure anyone really checks it beyond spot checking. It also means that many of these parents who have this information already on file will receive a check without doing anything.

    To have done this thing correctly, and been less of a political stunt, Biden would’ve made all loan forgiveness income-based. Or better yet, wealth based including income. And anyone who is listed as a dependent would have that analysis at the parents level. I know Biden is attempting to do this in the future, but he should’ve done it now Election years make for strange bedfellows and legislation, or in this case an EO.

    Haven’t seen a local stunt freehand out like this since the trump stimulus the fourth quarter 2020. Pretty sure that one cost more than 500 billion…

    But I agree, and I’ve said it a number of times now, this is a political stunt, buying votes.