Statement on Recent Student Loan Court Decisions

Teresa R. Manning

In the past few days, two federal courts have ruled against the Biden student loan forgiveness plan though neither opinion is final.

On Thursday, November 10, the United States District Court for the Northern District of Texas found the plan violated the Administrative Procedures Act as a "major question" of policy that only Congress could enact, not the Biden Education Department. And on Monday, November 14, a three-judge panel of the Eighth Circuit Court of Appeals enjoined the plan from taking effect to preserve the status quo, while also finding that Missouri, one of the six States suing the Administration - had standing to bring the lawsuit because its state loan servicing agency would be affected by the administrative burdens, and also lost revenues, caused by the plan.

NAS has no objection to these court challenges, especially when both Democratic and Republican government officials have said that Executive Branch attempts at student loan forgiveness are unlawful, and also when members of Congress themselves, such as Massachusetts Senator Elizabeth Warren and Florida Congressman Al Lawson, have introduced bills to provide student debt relief, confirming that such policies are matters for Congress, not the federal bureaucracy.

NAS further supports States standing up to administrative overreach in education policy, which is becoming a hallmark of Biden’s Administration especially in the Title IX space. The pushback against Biden by State Attorneys General, including formal letters and litigation, is an encouraging sign. It reminds Americans of our system of federalism where Washington, DC cannot presume to make policy for different states and regions when local authority might be infringed.

That said, NAS continues to object to the framing of the student loan debate which invariably pits Americans against each other—specifically, college graduates against non-college graduates and young Americans vs. older Americans.

As we've said before, the real villains in the student loan debacle are the schools, who benefit most from federal lending schemes by receiving most of the money but none of the debt.

As long as policy makers ignore the predatory self- interest of higher education institutions, grossly enriched by the student loan program just as young Americans and middle class families are impoverished by it, moves like the Biden loan forgiveness program are not only a lot of sound and fury signifying nothing—that is, doing nothing to fix the underlying problem—but yet more coddling of colleges and universities, who are often awash in cash and doing much more harm than good with it. See, for example, the 2021 NAS Report, Priced Out, which documents the mushrooming bureaucracy at most schools.

For Democrats, the appearance of loan forgiveness seems benign, of course—we’re supposed to believe they’re looking out for 20-somethings. But the reality is the opposite: schools continue business as usual with tuition hikes fueled by the easy money of student loans; and high school graduates continue to be seduced to borrow, told "everyone should go to college" to succeed. Then, in a few short years, taxpayers are set up to again be tapped, supposedly to bail out college graduates but in reality, to further subsidize wealthy schools.

What would real reform look like?

NAS has recommended measures that the higher education lobby opposes, they may be summed up as “skin in the game.” Institutions must be on the hook for unpaid loans since they get most of the money—that is, if they're receiving a free benefit, they must also shoulder a burden. Schools might even co-sign as borrowers so they're on the hook for the entire sum borrowed, “joint liability,” as they say. That would change higher ed in a hurry: admissions, grades and graduation rates would quickly become real concerns for the schools, not just for the students.

NAS has also advocated for bankruptcy relief for those college graduates in real financial hardship, similar to the bankruptcy relief now available to consumers. Why do adult credit card holders get their debts discharged in bankruptcy but not young American college graduates?

Finally, if such government loans are to continue for educational purposes, NAS would like to see stricter requirements. For example, the government should consider a student's academic merit and a degree's economic returns. This would encourage students to enter fields that are profitable and in-demand and also discourage students from spending too much money on frivolous degrees that simply don’t pay. Stricter conditions would ultimately protect both students and taxpayers.

Until these obvious reforms get as much attention as loan forgiveness, we know we're in the grip of the higher education cartel and not in the realm of real progress or public interest.

Photo by Daniel Thomas on Unsplash

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