EDITORIAL: Biden ignored economists on student loan handout

On the issue of student loan forgiveness, The New York Times reports that President Joe Biden ignored the advice of his treasury secretary and “top Democratic economists” in favor of counsel from progressive politicians such as Sen. Elizabeth Warren. Perhaps this helps explain Mr. Biden’s dismal first 20 months in office.

Some perspective is in order.

In 2010, Congress voted to force commercial banks out of the student loan marketplace. Democrats argued that private banks were profiting off the current arrangement and that the federal government could more efficiently manage the lending program. The Congressional Budget Office calculated at the time that the move would save $61 billion over 10 years.

The reform also included an income-based repayment plan for borrowers, capping payments at a percentage of income. This was supposed to prevent graduates from being unfairly burdened by debt as they moved into the workforce. Balances would be wiped clean after 20 years (10 if you worked in the public sector). Sen. Warren was an especially ardent supporter of the legislation, which was wrapped into an ObamaCare measure. No Republican endorsed the plan.

Of course, none of the proposed savings ever materialized and colleges continued to ramp up tuition every year. Borrowing became cheaper, luring many students to overextend themselves financially. The Wall Street Journal called the whole thing “a con.”

Fast-forward to 2019 and Sen. Warren finds herself seeking her party’s presidential nomination. Less than a decade after promising that Democrats would save taxpayer money by nationalizing student lending, defaults have increased. Sen. Warren now advocates putting the American taxpayer on the hook for much of the $1.5 trillion in outstanding student loans. She favors canceling $50,000 in obligations for each student, based on a sliding income scale. Sen. Warren offers that she’ll tax the rich to pay for the massive giveaway.

The Massachusetts progressive is eventually purged from the Democratic primaries due to a lack of support. But her idea lives on, as Mr. Biden, struggling to generate support from party leftists, signals support during the campaign for erasing $10,000 in individual student debt. Once elected in 2020, however, Mr. Biden had second thoughts and waffled for months.

Last week, the president “gave in,” according to the Times, overcoming “deep reservations” from his economic advisers and siding instead with progressives such as Sen. Warren, while outraging those who met their obligations, scrimped to pay for their own education or never went to college. Apparently, the president found a kindred spirit in Sen. Warren, who has been wrong at every turn when it comes to economic policy, particularly regarding student loans.