For an example of how politicians cling to emergency decrees long after the crisis point, consider student loans.
The White House again raised the possibility of canceling student loans. During the campaign, Joe Biden said he supported canceling $10,000 in student loan debt. So far, however, he has yet to act – and it is unclear whether he has the power to take such a step unilaterally.
“The president is going to look at what we should do on student debt before the pause expires, or he will extend the pause,” White House Chief of Staff Ron Klain said this month.
This “pause” refers to the fact that, throughout the pandemic, student loan holders have not had to make their monthly payments. Interest does not accrue on their accounts either. Currently, payments are due to resume on May 1, more than two years after their initial suspension. But it looks like that date will be pushed back further. The Department for Education recently told loan service companies not to contact borrowers about resuming payments. This is relevant, as borrowers need to receive multiple notices before payments resume.
But neither renewing the suspension of payments nor forcing taxpayers to eat $1.75 trillion in outstanding loans makes sense.
The loan suspension is costing taxpayers $4.3 billion a month, according to the Congressional Budget Office. The tally now exceeds $100 billion.
Yet the economic shutdown is over, which triggered the initial concession. The country now has the opposite problem. Employers are struggling to find workers. There were 11.3 million job openings at the end of January, according to the Bureau of Labor Statistics.
Continuing to suspend loan repayments or cancel outright would be a major subsidy for the wealthy. A 2021 paper from the University of Chicago’s Becker Friedman Institute for Economics found that “loan forgiveness would benefit the top decile as much as the bottom three deciles combined.”
Such policies would also be unfair. Millions of borrowers have repaid their loans. Many others have chosen different education options to avoid or limit debt. These people and taxpayers in general should not be responsible for the educational decisions of others.
The moral hazard involved only encourages more irresponsible behavior. Wiping the slate clean without a complete overhaul of the federal student loans program would result in a repeat of the problem for years to come. This makes no sense, even by congressional standards.
Mr. Biden may believe that canceling the loans or extending the pause could energize Democrats for the November election. But it’s just as likely to anger a sizable portion of the electorate that isn’t interested in subsidizing the education choices of others.
The virus emergency is over. It is high time for loan recipients to fulfill their obligations again.