What message is sent by student loan forgiveness?
Those confused by the arguments surrounding the Biden vs. Nebraska Supreme Court case challenging the authority of the U.S. Department of Education plan to forgive all or part of student loan debts, are not alone. In fact, there are many peculiarities, if not outright ironies, about the student loan forgiveness that were apparent in the arguments presented by the Biden administration’s lawyers to the Supreme Court.
Historically, those advocating for loan forgiveness often cite their concerns about the maldistribution of income in the U.S. They worry that income and wealth in the country are weighed heavily in favor of higher income citizens. Their concern about income distribution is warranted; however, a key factor in explaining why some people earn more than others is a college education. The average college graduate can expect to earn about $1.2 million more over their lifespan than non-graduates. Why is it then, that the advocates for loan forgiveness want college graduates to have their loans cancelled, especially when the $430 billion forgiveness plan will be paid for by increased taxes on all Americans, poor and rich alike?
The fact of the matter is that student loan forgiveness cannot be argued rationally as a policy to adjust income distribution. Nor can it be argued from the standpoint of overall fairness or equity. Why should anyone who did not go to college, and instead worked hard to establish his or her own business, pay the debt of those who did? Should we forgive the loans of those who chose to borrow money to start a business instead of attending college? Should the mortgage payments made by a young non-college graduate family who purchased a home be dismissed? What kind of message are we sending to a generation of college and non-college graduates alike? You need not be responsible for debts you have incurred. Just wait long enough and the government will take care of all or portions of it.
Some of the implicit arguments made by justices questioning lawyers arguing for loan forgiveness seem to reflect the feelings of many Americans. They rightly asked if the Department of Education has the right to single out the debt of college students for special treatment? Unfortunately, the case before the court is not that simple. Instead the question of “standing” needs to be addressed first.
By standing the courts mean who or what specific entity will be harmed if student debts are forgiven? Therefore, what must be proven is not that a $430 billion budget deficit that loan forgiveness will generate is harmful. It certainly will be to taxpayers. Rather the case initially rests upon proving that a single individual or entity will be harmed by debt forgiveness. This is why the Missouri Higher Education Loan Authority, (MOHELA), which, like its counterparts in many other states acts as a clearinghouse for federal loans, is the plaintiff in the case. The legal argument is that MOHELA will be harmed because it stands to lose fees that it earns by handling student loans if these loans are forgiven.
A `more basic question also needs to be addressed. What is the legal basis that allows the secretary of Education to forgive massive amounts of student loan debt? The current administration claims that the 9/11-era bill known as the Higher Education Relief Opportunities Act (Heroes Act), signed in 2003 by President George Bush, provides this authority. The act was passed to ensure that active duty military personnel could pause their student-loan payments while serving their country during the Iraq War. The administration argues that the Heroes Act gives the secretary authority to cancel student debt. To suggest that this legislation, passed to temporarily give assistance to those who were serving in the military, should be the basis for loan forgiveness for 26 million Americans today seems ludicrous.
Perhaps most importantly, the entire argument for debt cancellation strikes at the very heart of the separation of powers established in our Constitution. It is Congress which processes the power to spend and tax, not one of the administrative departments within the Executive Branch.
Let us hope that the Supreme Court takes all of this into consideration when it rules upon the legal and moral efficacy of student loan forgiveness.
Michael A. MacDowell is president emeritus of Misericordia University and a director of the Calvin K. Kazanjian Economics Foundation. He lives in Estero.
This article originally appeared on Fort Myers News-Press: What message is sent by student loan forgiveness?
