Opinion editor's note: Editorials represent the opinions of the Star Tribune Editorial Board, which operates independently from the newsroom.
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There are four main issues with President Joe Biden's executive order forgiving a portion of the nation's student loan debt: its constitutionality, its moral hazard, its cost, and the limited breadth of its benefits by comparison.
Nothing of the sort that would make a person question whether it's a good plan, right?
It's not a good plan. It's a plan that means well. It puts a bandage on fundamental problems that it doesn't address.
Biden's promise is to cancel up to $10,000 in federal student loans for those who still owe money (and up to $20,000 for those who qualified for a Pell Grant as undergraduates, meaning they had a higher degree of financial need at the time). This also promotes racial justice, since Black Americans hold more student debt on average — and for longer — than do white Americans.
Presumably there's an electoral calculation. A recent essay on how Democrats can be more competitive, published in the New York Times, explains the appeal. "[G]iving even a minority of Americans something that absolutely knocks their socks off, changes their lives forever and gets them talking about nothing else to every undecided person in earshot may be worth five Inflation Reduction Acts," writes Anand Giridharadas, author of "The Persuaders: At the Front Lines of the Fight for Hearts, Minds, and Democracy."
The administration has been pushing ahead, having begun a soft launch of the application process for relief last week even as lawsuits threatened to tangle the effort. Inasmuch as the relief would change beneficiaries' lives — which we don't deny it could do for those individuals and their families — how could we oppose it?
Let's review the problems mentioned at the outset.
The process
In the simplest terms, the president cannot spend money that isn't authorized by Congress. The Biden administration is relying on an interpretation of the Higher Education Relief Opportunities for Students Act of 2003. Various groups have asked the court to block implementation, and on Friday, the Eighth Circuit Court of Appeals temporarily halted the plan.
Regardless of how the court cases play out, Biden's unilateral exercise of power over the purse is concerning. The 2003 law was intended to allow the government to respond to emergencies. Are we in one? The closest case that can be made is the pandemic-related pause on student loan repayment, and that's ending Dec. 31.
Increasingly, the urgency underlying executive actions — not just Biden's — has been to counter the inertia of Congress in a divided nation. Stagnant policymaking is a problem for sure, but one that should remain subject to the scrutiny of first principles.
The moral hazard
According to U.S. News & World Report, the growth in tuition and fees at what it categorizes as "national universities" ranges from 134% over the last 20 years at private schools to 175% for in-state students at public schools. That far outpaces general inflation. And according to research published by McKinsey and Co., each graduating class has more debt than the class before.
Biden's plan will not alleviate those pressures. Instead, schools will have little incentive to control costs and students will have little incentive to maximize value if they know future loan forgiveness is conceivable.
Moreover, lifting future financial obligations and the resulting boost in personal confidence makes Biden's move at least somewhat inflationary at a time when that's particularly unhelpful. Since inflation tends to be fought with higher interest rates, new loans will be costlier.
The solidifying cost estimates
The Congressional Budget Office estimates that the plan will cost about $400 billion over 30 years, adding to the deficit. The National Taxpayers Union — which, it should be noted, opposes "the heavy hand of government" in general — says the average burden per taxpayer over time will be about $2,500, weighted toward upper-income levels.
The White House has yet to release a formal estimate, but officials there think the forgiveness will cost less than others are projecting because not everyone eligible will take Biden up on his offer.
It's not a good sign when the porousness of a financial aid plan is presented as a measure of its acceptability.
The breadth of its benefits
About a third of borrowers will see complete forgiveness of their student loan debt under Biden's plan. The forgiveness applies only to federal loans, but 92% of student loans are.
That stated, just 1 in 7 Americans carries student debt, according to census data. Moreover, the people with the highest debt loads are those with graduate and professional degrees who ought to be able to support repayment.
The Star Tribune Editorial Board has in the past considered proposals for targeted student debt relief intriguing. But Biden's action is broad. A burden on many for the benefit of some can sometimes have ripple effects that make it worthwhile. We're not persuaded that such a balance is present here.
It's not fair that the costs of higher education have become so onerous in just a generation's time. It's also not fair that people who've been unable or disinclined to repay their loans will get a reward that those who followed through on their commitment won't.
For that matter, it's unfair that today's students will begin building debt anew — armed now with the hint, but not the certainty, that there'll one day be a rescue party for them.
Editorial Board members are David Banks, Jill Burcum, Scott Gillespie, Denise Johnson, Patricia Lopez, John Rash and D.J. Tice. Star Tribune Opinion staff members Maggie Kelly and Elena Neuzil also contribute, and Star Tribune Publisher and CEO Michael J. Klingensmith serves as an adviser to the board.