The Stealth Student Loan Bailout

 The Supreme Court is likely to strike down the Biden Administration's borrower bailout in the coming weeks.

The administration's plan to transfer up to $20,000 in student loan debt per borrower-from individuals who voluntarily took out loans to finance their college education to unsuspecting taxpayers-is one of the most audacious examples of executive overreach in American history.

Undergraduate borrowers will be required to pay only 5% of their disposable income toward their student loan debt, with disposable income defined as income above 225% of the federal poverty line.

Borrowers in the second lifetime-income quintile will receive a 65% discount on the cost of college, and borrowers in the third and fourth income quintiles will receive 37% and 13% discounts, respectively.

Concretely, a household of four earning $80,000 per year with $30,000 in student loan debt would be expected to pay approximately $291 per month under the current version of REPAYE. Under the new rule, that payment would drop to just $52 per month.

Because the new program would artificially cap repayment below the cost of college for most borrowers, students will also have an incentive to overspend on college, comfortable in the knowledge that REPAYE's cancellation provision effectively sets a repayment ceiling.

All of which is to say that when the Supreme Court issues its judgment in Biden v. Nebraska later this month, the debate about student loan forgiveness will not be over.

https://www.realcleareducation.com/articles/2023/06/22/the_stealth_student_loan_bailout_110878.html