After the Supreme Court ruled on President Biden’s illegal student loan bailout scheme, the scheduled return to loan repayment should have been straightforward: Interest began accruing on September 1st, and student loan bills should be due in October. This is the timeline set out by Congress and agreed to by President Biden as part of the debt ceiling deal signed in early June. Sadly, the president is yet again trying to circumvent the law so that borrowers can skip their payments with minimal penalties.
Instead of following the schedule, the Biden Education Department will allow for a one-year grace period in which borrowers who do not make loan payments will not be “considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.” Interest still accrues, but it will not capitalize after the grace period. The Department of Education calls this a “safety net.” To Congress and to taxpayers, it’s a slap in the face.
The Biden administration seems to have forgotten that the payment pause and interest freeze is itself a safety net, and a generous one at that. By the time October 1t rolls around, the “emergency” policy will have lasted for 40 months, far longer than the emergency itself.
Everyone has known since June 3, when the president signed the debt ceiling bill, that borrowers would need to restart paying their loans in October. Based on the administration’s own communications, borrowers should have been prepared much earlier: In August of last year, Sec. Cardona told the public that the final extension would expire at the end of 2022.
Now, loan servicers will send bills (or whatever one might call a bill that comes with an “out” for those who don’t want to pay). This is President Biden’s Plan C to force taxpayers to pay off student debt: Plan A was his ill-conceived bailout, quashed by the Supreme Court. Plan B is his new Income-Driven Repayment plan, which is estimated to cost taxpayers up to $558.8 billion over ten years.
While this Plan C rolls out, he’s hard at work on Plan D, which is using the federal rulemaking process to ensure the burden of student debt is permanently shifted from borrowers and to their fellow Americans. The “on-ramp” is a one-year ploy to buy time until the administration can enact a rule to accomplish what his previous plans have not: Mass loan forgiveness without the consent of Congress.
All of this raises deeper questions. The Biden administration treats the $1.6 trillion federal student loan portfolio like a bag of treats for its supporters with the taxpayers left holding the bag. The die is cast, and Democrat presidents will always look for ways to cancel student loans until Congress either gets the federal government out of the student loan business or mandates the Department of Education to manage student loans as a fiduciary for the taxpayer.
If the Department handled student loans like a business, and if more college programs delivered a return on investment for borrowers, student loans would be a net benefit to the federal balance sheet. President Biden’s mismanagement of the program has made that scenario a distant dream.
The Biden administration has not given up on robbing taxpayers of money we are owed. All that’s changed is how they plan to pull off the heist.