Biden’s Embattled Student Debt Forgiveness Program Draws Mounting Criticism

President Joe Biden announces student loan relief with Education Secretary Miguel Cardona on Aug. 24, 2022 (Oliver Douliery/AFP via Getty Images)

President Joe Biden’s student debt forgiveness program is set to billions of dollars in loans, but whether it’s fair to saddle others with these debts, and whether the Supreme Court will let them, is far from settled.

The Biden administration on Nov. 18 asked the U.S. Supreme Court to reinstate the program after a lower court blocked it.

The U.S. Court of Appeals for the 8th Circuit on Nov. 14 sided with six Republican-led states and temporarily halted Biden’s plan. A federal judge in Texas also struck down the White House’s student loan program last week, siding with a lawsuit brought by the Job Creators Network Foundation.

Depending on how the lawsuits play out, under Biden’s executive order, borrowers may see up to $20,000 in student debt waived.

A few states say they’ll tax student loan forgiveness funds as taxable income.

In Indiana for example, 897,000 Hoosiers are carrying $30 billion in student loan debt, Andy Nielsen with Indiana Community Action Poverty Institute said during an October panel discussion hosted by Prosperity Indiana.

In Indiana, those receiving a reprieve will pay between $746 and $1,246 in state and local income taxes on that money, Nielsen calculated.

Indiana resident Frank Garrison is a public interest attorney with the Pacific Legal Foundation. They’re among the many entities suing the Biden administration. In a statement, Garrison said he made student loan payments for 10 years. While he would be among those who would receive debt forgiveness, the program would make the forgiven debt taxable income in Indiana and some other states.

The Pacific Legal Foundation is appealing an Oct. 21 refusal by the U.S. Court of Appeals for the 7th Circuit to block the program.

‘Abuse of Power’

“It’s clearly a violation and abuse of power to deliver debt amnesty to millions in an election year,” Garrett Bess, vice president of Heritage Action for America, a conservative advocacy group, told The Epoch Times. “It’s clear that Americans feel inflation’s impact brought on by Joe Biden’s policies, not just this one policy, and making the economic malaise worse.”

Like so many millions of others, Bess put himself through college the hard way, by working. Bess drilled wells—pump and pipe systems—to pay his $27,000 student loan.

“It never even crossed my mind that someone would wipe out any of my debt. I gave my word when I took those loans,” he said. “Many Americans, even some who will have their debts canceled do not agree with this policy,” Bess said. “It is antithetical to the American way to simply have the government eliminate debt.”

What are the expectations moving forward? What about students this year, or next year, or all the years after that? Bess asked.

“There are only downsides. If there are future debt amnesties, obviously the greater country loses. Taxpayers lose, Americans lose,” Bess said. “This is being done by executive order. It’s not even being done by the rule-making process. There is nothing like better ideas being presented.”

Save Along With Mitch

Purdue University President and former Indiana Gov. Mitch Daniels blistered Biden’s plan, as well as colleges’ skyrocketing prices.

“In the sad catalog of its failures, the federal government has set a new standard. President Biden’s debt-cancellation announcement represents the final confession of failure for a venture flawed in concept, botched in execution, and draped with duplicity,” Daniels wrote in an op-ed in the Wall Street Journal.

Purdue has not raised tuition in 10 years, while its student enrollment numbers and alumni giving have both increased, Daniels said. Purdue is one of the few colleges or universities to do anything like that.

The cost of college has tripled since 1980 and the average undergrad carries $25,000 in student loan debt through the commencement line, Ann Petros, vice president for regulatory affairs for the National Association of Federally Insured Credit Unions, said in the October panel discussion. She cited an American Bar Association survey of 1,300 lawyers, and 65 percent said they suffered from “overwhelming stress” because of debt.

That stress might now fall on American taxpayers. Estimates from the University of Pennsylvania Wharton School of Business show this move alone could cost around $1 trillion.

Building Better Ideas

“This is something Congress really needs to act on to get to sustainable solutions,” Bob Glaves, executive director of the Chicago Bar Foundation said in an email to The Epoch Times.

Glaves said Biden’s executive edict was “only a partial and in many ways temporary solution at best, and that Congress really needs to more comprehensively address the issue.”

Congressional action is almost certain to sail into stormy seas. In a letter to the Wall Street Journal, Florida Republican Sen. Rick Scott panned Biden’s order to “transfer the debts of Ivy League grads to the backs of construction workers” as “grossly unfair.” Scott in August introduced The College Act, which would put colleges on the hook if students default on their loans. It would also force colleges with huge endowments to match federal student aid, and require the education secretary to publish data on graduation rates and job placement.

Glaves had some suggestions if Congress actually moves forward, including:

• Include vocational schools, as long as there are stricter accountability standards for for-profit vocational schools, which he said is where most vocational school student loan defaults originate.
• Using the prevailing federal funds rate for loans, which is also used in other contexts such as legal judgments in federal court cases.
• A flat interest rate for all loans, which would protect borrowers who make timely payments from accruing additional interest that grows their loan balance.

Andrew VanSingel knows Glaves’ last point by heart. These days he’s an attorney with the Internal Revenue Service. He said during the panel discussion that he piled up $15,000 in student debt for his undergrad debt. Law school left him $220,000 in debt.

He said he faithfully made payments for 10 years, but the way his interest rate was wired his loan total ballooned to $335,000. Biden’s executive order and years working in a debt cancellation program with Legal Aid helped him finally shed his debt, he said.

“I don’t feel like I started living my life until three or four years ago. I didn’t buy a house, I didn’t have children. I didn’t feel like I could until this student loan debt was behind me,” VanSingel said.