What Should Republicans Do If Biden Forgives Student Loans?

President Biden privately signaled to Democratic lawmakers that he is open to canceling “some” federal student loans by executive order, according to the Washington Post and CBS News. This is a terrible idea on the merits, as student loan forgiveness would mostly benefit wealthier households and create perverse incentives for colleges to push more loans on students on the credible assumption they will be canceled. Biden’s authority to cancel loans by executive fiat is also legally dubious, but that may not stop him.

However, the most egregious aspect of the whole idea is that while President Biden may grant loan forgiveness to millions of current borrowers, the federal government is slated to make over $1 trillion in new student loans over the coming decade. The White House has presented no plan to reduce new student loan volume, even as it actively considers canceling some of the existing loan portfolio.

The Committee for a Responsible Federal Budget calculates that, if Biden forgives $50,000 per borrower and does nothing to rein in new lending, overall student debt will climb back up to current levels by 2030. Forgiveness advocates will doubtlessly call for a second debt jubilee long before then. The student loan program will lurch on, annually disbursing a hundred billion dollars of taxpayer money, punctuated by new bouts of forgiveness every time a Democratic president takes office.

Universities will view this state of affairs as carte blanche to raise tuition. A loan program with regular jubilees is not a loan program, but an open-ended grant. Little will constrain colleges’ ability to raise tuition when they can credibly tell students not to worry about taking on enormous loans; the federal government will forgive them anyways. We’ve seen this movie before: some law schools have marketed six-figure federal loans to their students on the explicit promise that they would be forgiven under the Public Service Loan Forgiveness program.

Congress cannot conscionably allow this to become the status quo. Therefore, if President Biden chooses to cancel student debt by executive order, congressional Republicans should immediately act to rein in—or abolish—the federal student loan program.

The policy response from congressional Republicans should be commensurate with the amount Biden decides to forgive. If the president goes no further than his campaign promise to forgive $10,000 per borrower ($380 billion total), Congress should end federal loans to graduate students and parents of undergraduates; loans to both groups of borrowers are currently unlimited. Strict new controls should be imposed on undergraduate loans; only programs where graduates’ typical incomes are high enough to repay their debts should be eligible for continued loan funding.

These policies would be good ideas even if Biden does not forgive student loans, but a cancellation event would be an excellent reason for Republicans to move them to the front burner.

However, if Biden caves to progressive demands and cancels $50,000 per borrower (over $1 trillion total), Republicans should move to completely end the federal student loan program, without replacement. If student loans have become such a thorough disaster that canceling the majority of outstanding debts is warranted, then the federal government cannot in good conscience continue to make loans. The only reasonable option is a complete cessation of new lending.

The move would be disruptive, but not catastrophic, for higher education. Some students, especially those enrolled in programs with good financial returns, would get private loans or income-share agreements to pay their tuition. Many schools will reduce their prices. Pell Grants, along with state-based financial aid, will still be there to help lower-income students cover the costs of college.

But undoubtedly, an end to federal student lending would result in fewer postsecondary degrees and certificates granted. Some colleges would close entirely. Other institutions would shut down low-return majors like sociology and theater, for which private financing would be hard to secure. Thousands of questionable master’s degree programs, whose expansion was fueled by federal loans, would meet an abrupt demise.

By loan forgiveness advocates’ own logic, this might not be a bad thing. The argument for debt cancellation is based on the premise that students are worse off with debt, even if they used that debt to earn a degree. It follows that many of the degrees and certificates financed by debt are not financially worth it and should be discontinued. If higher education provides financial value, loan forgiveness is not necessary.

In a policy vacuum, a complete end to federal student lending might not be the optimal choice. With strict guardrails, student loans can be a useful tool to help individuals access quality higher education. But if President Biden creates the expectation that student loan jubilees will be a regular event, that calculus changes. Republicans may have no choice but to pull the plug on the federal student loan program.