By David R. Henderson
“Congrats to everyone who didn't have college debt. Now you do.” So said a wise friend on Facebook last week – referring, of course, to President Biden’s unilateral declaration that he would "forgive" up to $10,000 in student loan debt for some students, and up to $20,000 for those students who got Pell grants to go to college.
Is there a more succinct way than this quote to show the injustice of Biden’s action? I don’t think so.
If you or your kids went to college and didn’t take out loans, that doesn’t matter. You’ll still be on the hook for the new federal debt that Biden has created. Or if you or your kids did take out loans but paid them off, that doesn’t matter either. You’ll be on the hook for other people’s college loans.Various commenters have pointed out that even very high-income people will get bailed out. If your income is less than $125,000 and you’re single, you’ll get a bailout. If your joint income with your spouse is less than $250,000, you’ll get a bailout.
That’s bad – but even if the cutoff were well below $125,000 or $250,000, the bailout would still be unjust.
And the quote I started with hints at why it’s unjust. It’s unjust because people who literally had no role in taking out the loans will be forced to pay for those who did take out the loans.
And the quote I started with hints at why it’s unjust. It’s unjust because people who literally had no role in taking out the loans will be forced to pay for those who did take out the loans.
I’ve heard the argument that 18-year-olds often got into heavy debt without understanding what that means. That is too bad, and I feel for them. But if they were uninformed, that was a choice they made. They could have gotten information before getting into debt. They just didn’t. Moreover, they might not have thought through interest rates much, but even an 18-year-old knows that when she gets into debt, she has to pay.
Compare their situation with that of people who will now be forced to pay – in future taxes – for this new federal debt.
Even becoming very informed would not have helped them avoid this situation – because they have no choice.
A basic principle of justice is... people who make decisions should bear the cost of their decisions, and a government shouldn’t be able to shift that cost onto others.
A basic principle of justice is... people who make decisions should bear the cost of their decisions, and a government shouldn’t be able to shift that cost onto others.
Some people have argued that because governments bailed out banks and some homeowners during the 2007-2008 financial crisis, the government should bail out those with student loans today. Their argument is that the principle is the same.
The principle is the same. Those earlier bailouts were wrong, too.
Two wrongs don’t make a right. It’s time to say no to bailouts.Today's TaxByte was written by David R. Henderson, a research fellow with the Hoover Institution at Stanford University.
