The Biden administration’s decision to continually forbear student loan interest is a boon to gender studies majors with gobs of federal loans. But it is a disastrous policy, if not patently unlawful.
Like so many 20- and 30-somethings, I fall into the middle when it comes to affording higher education. After attending the University of Kansas on a scholarship, I found myself neither rich enough to pay for law school in cash, nor disadvantaged enough to qualify for freebies. But, coming from a small town in western Kansas, the prospect of becoming a member of the legal elite was tempting, so I made the decision to attend Harvard Law School and borrowed a preposterous amount of federal money to do so. Before taking the plunge, I talked with family and friends: is Harvard Law School worth more money than a house? Is going to law school worth delaying marriage and having kids? Is it worth working grueling hours at a corporate job I might not love? The answers were overwhelming: yes.
Sadly, I then made a financial decision that, at the time, seemed smart. Federal loan holders are able to save thousands by privatizing their student loans, and like many of my friends, I chose that path. So, while federal loan holders dance in the light of loan deferment, pay their Uber surge charges, and go to sushi restaurants, I pay interest on my loans and stay home like a 33-year-old grandma. Sigh.
How did this disaster happen? At the beginning of the pandemic, the Trump administration—for which I worked—set federal loan interest to 0 percent and delayed payments for just 60 days. (Remember the great “15 Days to Slow the Spread”?) Congress stepped in and elongated the forbearance another six months. And then, because the Democrats would not pass COVID-relief measures, President Trump again extended the forbearance. That’s how a 60-day interim COVID policy becomes law-of-the-land for two full years.
The legal ground is dubious. The first loan deferment rested on a law passed following September 11th, the HEROES Act, designed to give students a break if they were serving in the military, lived in a disaster area, or were financially devastated by a national emergency. The HEROES Act allows the Secretary of Education to modify student loan terms to make sure that “affected individuals” are not worse off because of their student loans. Using the HEROES Act to defer loans nationwide might have made sense at the height of COVID. Today, the unemployment rate for bachelor’s degree holders is only 3.1 percent, and job openings are at a record high. So, it’s hard to make the case for “direct economic hardship” on a class-wide basis.
After the extension of the eviction moratorium, Americans are likely becoming comfortable with floppy legal reasoning. But, unlike housing, higher education is not a need; it’s a choice. A choice subsidized by you, the taxpayer, without any return on investment.
We all pay taxes for roads and bridges. But most of us also all drive on said roads and bridges. At the very least, we receive packages from people who drive on roads and bridges. We all pay for the court system. We all benefit from the court system. But why should you subsidize student loans for Bobby Upper-Middle-Class? Maybe if his degree were useful, that would make sense. Maybe if Bobby, despite making good choices, cannot make ends meet, we’d want to bail him out to prevent him from becoming a drag on society. Maybe if Bobby were doing something better with his time, like fighting terrorists, we’d subsidize that. That’s not the student loans deferment policy we now have. Current policy subsidizes every chosen major, however frivolous, and is blind to whether the borrower has made any effort to pay or done good for society in other ways.
The policy is unfair to the millions of Americans who dutifully paid their loans—or are paying their loans—having sacrificed leisure time, home-buying, or that exciting but low-paying career. It rewards laziness, when we should reward hustle. And it transfers responsibility for a student’s future employment from the student (and from the college, which has long avoided duty) to the taxpayer, making a deeply consequential decision—what to study, and where—disconnected from whether the study is useful.
Minimizing such a huge decision is no good for the student, for the workforce, or for our nation’s future. When the government subsidizes something, it gets more of it. We don’t need more unemployed art history majors, so let’s stop promoting policies that create more of them.