President Biden’s efforts to cancel federal student loan debt will do nothing to address the long-term college tuition swindle that is plaguing students. That includes both the White House’s initial plan to wipe out roughly half a trillion dollars in federal student loan debt and its recently proposed lawless workarounds that fly in the face of Congress and the Supreme Court.
The plan—which is set to unfold in October when the three-year student loan payment pause lapses—amounts to a de facto bailout paid for by taxpayers.
The plan includes shrinking monthly payments for many borrowers by both adjusting the equation used to calculate discretionary income and cutting the percentage borrowers pay in half. And it shortens the timeline in which loans are completely forgiven by 10-years for borrowers with balances of $12,000 or less, among other provisions.
Although not as straightforward as President Biden’s original debt cancellation plan, the scheme is more costly and no less misguided. According to the Penn Wharton Budget Model, it will cost taxpayers $475 billion over the next ten years—all while doing nothing to address the root college tuition crisis.
In fact, plots to cancel student loan debt in mass exacerbate the problem. Bailouts are little more than a financing plan for colleges to continue spending like drunken sailors.
A recent investigation by The Wall Street Journal found that spending at median flagship universities jumped by more than one-third between 2002 and 2022, with average per pupil expenditures rising by 15 percent. Meanwhile, the cost of tuition and fees for the average student increased by 64 percent during the same period.
Why has spending ballooned?
Universities are undergoing campus makeovers that include the construction of resort-style amenities and sports program facilities that resemble those for professional athletes. Curriculums are being expanded to offer students degree specializations that have limited financial benefit in the real world. And billions are invested in armies of highly paid administrators, which creates a bureaucracy that rivals the federal government while providing little additional value.
Biden’s proposal opens the floodgates to more of this financially irresponsible behavior. Rather than perpetuating the feedback loop with a temporary Band-Aid, policymakers have the opportunity to take concrete action that will address surging college costs for the long haul.
Holding colleges accountable is a good first step. Legislative hearings and investigations that compel university leaders to justify unsustainable tuition rate increases will spotlight the dubious behavior of colleges. Better yet, the elevated public profile will help pressure a change in college governing behavior.
Congress also has the opportunity for a legislative play. Senate Republicans have already proposed a series of bills that would help relieve college cost pressures. Among provisions, the package would provide students with transparent, realistic expectations of what career or financial outcomes degree holders can expect following graduation. It would also streamline payback options and eliminate inflationary Graduate PLUS loans.
Florida Governor Ron DeSantis has also offered his two cents. The now presidential candidate is proposing that universities—not taxpayers—should be on the hook for the loans their students receive. The door to discharge debt through bankruptcy should also be opened. Combining both policies will create an environment in which loans are provided more responsibly to young people.
Universities continue to push young Americans into a financial hole that is difficult to climb out of. And while persistent, the only thing President Biden’s current strategy accomplishes is ensuring the hole will be deeper for the next generation of students.
Holding colleges accountable with market forces that keep nearly every other industry in check—rather than bailing them out at taxpayer expense—is the way forward. The silence of the White House and its allies in Congress on supporting such a path is deafening.
Elaine Parker is the President of the Job Creators Network Foundation. She is also the co-host of the Main Street Matters podcast.