Why Democrats Might Come to Regret Student Debt Relief

Usually, giving stuff away is a winning political strategy. But that’s not an iron law.

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When a dog catches a car, things don’t always end well. In politics, some victories that are rapturous for the true believers can leave a lot of putative allies sighing, “That’s not what I had in mind.”

Such appears to have been the case, for instance, with the Supreme Court’s Dobbs ruling. That verdict, initially expected to be pretty much a wash politically, now appears to be giving a big boost to Democrats. While the politics may matter little to committed pro-lifers thankful to be rid of Roe, it’s a big headache for many Republicans trying to legislate or campaign in the post-Roe era.  

Democrats just might be in a similar situation when it comes to President Biden’s massive, illegal, and regressive student loan jubilee.

The idea that Democrats could regret Biden’s loan scheme may come across as far-fetched. After all, the abortion debate is intimate in a way loan forgiveness is not. And a new Quinnipiac poll finds that Biden’s scheme is more popular than not, winning the general public and independents by identical 53-43 margins. But there may be more to the story.

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  1. Avatar photo
    Rdpulfer

    I simply don't see the Democrats taking a victory lap on this. It might have helped Biden rehab his underwater approval ratings, but most Democrats aren't on-board with it (if only because they can't take credit for it). Given Manchin's opposition to this move, I can't see the Democrats doing more in the way of student loan forgiveness even if they wanted to (which again, they don't right now). I think the way forward in the future is coming up with a legislative package aimed at reducing college costs without outright debt forgiveness, perhaps through payment caps and tax credits. Perhaps Biden could try for a sequel when (or more likely if) his approval rating incline proves temporary, but doing so repeatedly would probably prompt a legal challenge eventually.

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  2. cb76

    Ah yes, "Republicans offering a policy response."

    Isn't it pretty to think so.

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    Julie from Texas

    I hope you're right about Democrats coming to regret this move, but I have little hope these days that either side overstepping their Constitutional authority will feel any regret whatsoever. Meanwhile, few decisions Biden has made have angered me like this one. I paid off my student loans years ago and then made personal sacrifices so that my kids would not graduate with any college debt. What do I get for that? My tax dollars paying for some family who never skipped a vacation and took out loans then got them "forgiven," which just means cancelled. Yes, there are other folks who scrimped and saved and still took out loans or who got hoodwinked by fraudulent institutions, but we can target help to them. Instead, Biden blew threw legal constraints and offered a blanket cash-dump to people already more likely to vote Democrat. Unbelievable! Or it should be unbelievable. Instead, it's all too common in our politics.

    (P.S. I voted for Biden, so I'm not anti-Biden. I'm against this policy.)

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    Rajeev

    The politics are simple. The giveaway to voters is felt by those voters and the rest don't feel it regardless of how many commercials the Republicans put up. The entire government is full of thousands if not more weird tax credits, contractor cronyism, subsidies, giveaways, incentives, etc. If a bunch of farmers got taxpayer dollars during the last administration I'm not feeling it directly because it just isn't obvious to me. It all gets absorbed into debt which is always exploding under Republican administrations.

    Trying to compare this to Dobbs is lazy. Abortion is a passionate social issue that makes most voters feel a certain way. The Republicans (Justice Alito specifically) spiked a football into the faces of honorable Americans who don't feel the same way about the issue. Had the primary interest of Republicans been the reduction of abortions and not trying to use the courts and law (rightly or wrongly) as a cudgel to stick it to a large portion of the primarily younger female population of the country, then this wouldn't have had to go this way for them. Instead they passed ludicrous state laws and stood behind an opinion that was partisan when it didn't need to be.

    The reason Republicans will suffer electorally particularly in 2024 due to Dobbs is not because they oppose abortion, but because of the way they do not make any decent effort to see the other side and make concessions on the issue. Student loan forgiveness is already in the rear view mirror like infrastructure and a million other 2 day news cycles. Abortion like it has been for decades will remain front and center and the Republican Party will bear the brunt of the blame for their level of callousness on the issue which has surpassed Democrats who haven't always carried themselves with dignity on the issue recently.

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  5. Rick K

    I like how you sleep through the part about the WaPo editorial board just to wake up in time to messenger shoot with an AEI reference.

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    Connie

    I benefited from the Home Affordable Refinance Program (HARP). Having purchased a home in 2007, my property value sunk like a stone when the housing market crashed. HARP allowed me to refinance a mortgage (required to be in good standing) that was underwater so I could take advantage of lower interest rates. I never defaulted on the mortgage and sold the house in 2020.

    Not every Democrat idea is a bad one.

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    Matt J

    I'm sure you guys do actually read the comments, but smarter folk than I have been poking holes in your arguments left and right. May be worth your while to make an article responding to those? Your stuff usually doesn't get ratio'd this hard, just saying.

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    Beth

    Dear Mr. Hess - I don't support the student loan forgiveness program, but you so clearly do not understand how endowments work, and so it was really hard for me to keep reading to even entertain the rest of your argument against a sector for which you clearly have great disdain (i.e. colleges & universities).

    1) Endowments are typically restricted in purpose by the original donor, that is, the individual (or foundation or corporation or whatever) that donates the money dictates how it is to be used. In most cases, if an institution wants to use the endowment for another purpose, the institution must either go back to the original donor, or if the donor cannot be reached due to death, seek release of the funds for another purpose from the AG. So they are not "hoarding their endowment for buildings and bureaucracy"

    2) Endowments (usually) are managed "in perpetuity," i.e. functionally forever - or at least as long as the institution that holds the endowment is around. Restricted endowments cannot be pledged to debt or other obligations of the institution, and the institution holding the endowment has an obligation to maintain the corpus of the original endowment and to spend from the income and appreciation of the endowment, with limited exceptions. 49 states have adopted the Uniform Prudent Management of Institutional Funds Act which governs not-for-profits (and therefore most colleges' & universities') management of and spending from endowments

    3) Endowments are invested with a long term horizon, and in such a manner as to aim to produce a return that will cover both annual distributions from the endowment (a simplified version of the "prudent" rule for illustrative purposes is no more than 5% of the accumulated market value of the endowment) plus inflation to preserve the purchasing power of the endowment over time. This is increasingly difficult for institutions to achieve when inflation is >3%. So your $50 million endowment is actually quite tiny and will only produce $2.5 million in annual support to an institution's operating budget under the "prudent" 5% spending rule.

    And finally 4) the institutions with the largest endowments are already doing the most to reduce student debt. The Ivies have no loan programs; for example at Harvard meets full need without loans for families earning below $75K; families between $75-150K are expected to pay 0-10% of family income toward college.

    I could go on and on about how you and everyone else calling this a bailout for higher education have NO IDEA how college finances really work. The drivers of increased costs at colleges is NOT the availability of loans as so many articles would have you believe; the annual and aggregate federal loan limits for individuals has not changed since 2009, and very infrequently before that. Rather what is driving up costs? Demand for services - Everyone wants small class sizes. Everyone wants their first year seminars (in small classes) to be taught by star faculty. Everyone wants a single room dorm with a private bathroom. Everyone wants on demand mental health counseling, health services, and tutoring support on campus. They want a full slate of student activities, sports teams, extracurriculars, etc. etc. etc. If the non-Ivy college doesn't offer these things, they lose the student. Are there some wasteful institutions out there? Of course, but it is far from a universal problem, with the numeric majority of colleges in this country actually struggling to balance their budgets, attract & retain students, and invest in aging infrastructure to remain relevant.

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  9. Michael York

    One cannot be a "line jumper" if there is no line, which is the case for nearly all undocumented immigrants. Many Americans think there is such a line, but that's just not true unless one has very particular credentials or immediate family who are US citizens. Words matter. Expectations of rigorous accuracy are much higher for The Dispatch than for most of what travels under the label "news media" these days.

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    Jack

    “As it turned out, though, Latino immigrants who came here legally weren’t all that thrilled about rewarding line-jumpers.”
    You can’t jump a line when there’s no line to jump.

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