Biden invests in moral hazard
The Biden administration has issued an executive order extending the forbearance of student loan payments through January 2022.
That means those who have student loans will not be required to make payments, nor will interest accrue on the outstanding balance. The loan payment stop first went into effect in March 2020, during the Trump administration. But, as the Wall Street Journal writes, why extend it even further when the economy is coming back, jobs are available, and vaccines are available to fight the coronavirus?
Because of politics. Progressives are still pushing for outright loan forgiveness – leaving taxpayers to pick up an already hefty tab:
Student loan forbearance has already cost taxpayers $80 billion, and the new extension will add $20 billion. A Brookings Institution study estimates that cancelling $10,000 in debt per borrower would cost $373 billion and $50,000 a cool $1 trillion. Republicans are looking like even bigger chumps for scrounging to “pay for” their infrastructure deal as Democrats demand Mr. Biden spend money Congress hasn’t appropriated.
Mr. Biden in the spring asked the Education Department to conduct a legal analysis of his authority to cancel debt. Then last month he appointed Toby Merrill as the deputy general counsel. Ms. Merrill wrote a memo to Ms. Warren this year arguing that the President has the authority under the Higher Education Act to cancel student debt without approval from Congress.
Cancelling or delaying debts may make the left feel good. But it’s an engraved invitation for moral hazard. Why just let students off the hook for their loans? Why not homeowners? Or maybe car loans. And while we’re at it, loans for boats, vacation homes, that man cave addition to the pool house? If we are going to allow one group to escape its contractual obligations to repay their loans, then others, with similar loan obligations, could make the case they, too, deserve all the forgiveness government can provide.