A Wizard’s Advice

“Give with a free hand, but give only of your own” J.R.R. Tolkien

As most people know from the books, if not the movies, the above quote is the wise counsel by the wizard named Gandalf to the Hobbits in the trilogy “Lord of the Rings”. While the books are fantastical fiction, this counsel should be well regarded by not only those in government, but perhaps even more importantly, the American people. It is amazing that many believe that the student debt that Biden forgave simply disappears, as if he is a wizard with magical debt disappearance powers.

The reality of the student debt forgiveness is that it’s actually a transfer of the debt from those that signed the loans to those that did not. It should be obvious that in order for someone to ethically give something away it needs to be their own. The U.S. Department of Education owns the guarantees on about 92% of the 43 million student loans; so by forgiving between $10-20K per loan means an obligation of $395-791B. The lenders are not liable for this obligation as they hold the guarantees, but should this debt forgiveness actually become law, the American taxpayers are.

Constitutionally the government does not have the money to do this without the legislative action of Congress to enact both the law and appropriation required. This in turn requires a source of funding through taxation or loans, which is actually the same thing. The Biden administration seeks to justify the executive action by citing things like The Public Service Loan Forgiveness Program, the HEROES Act of 2003, and various acts related to relief during the pandemic. However, there is nothing in these legislative acts that provides the president an authorization by Congress for this debt forgiveness. Recently Jonathan Turley, a respected constitutional scholar and law professor at George Washington University, stated that “President Biden is something of a constitutional recidivist when it comes to executive overreach. He has been repeatedly found to have violated the Constitution in his unilateral use of executive powers.”

Among Trump’s egregious failures as president was his ignorance of and disregard for the constitution, the rule of law, and basic ethical conduct in general. With Biden we have similar problems but cloaked in his never ending virtue signaling of caring for the welfare of the less fortunate.  However a simple look at the statistics regarding student loans debunks such noble sentiments. Approximately 60% of student loan debt is held by the economic top 40% of households, with the lower 60% having the remaining 40% of student loans. Some of those top households represent students with loans for graduate degrees, many in professional occupations like law and medicine.

One of the largest voting blocks for the Democratic Party are college students and graduates holding these loans. Biden’s behavior is not wizardry but a wanton disregard of ethics by burdening Americans with the cost of benefits for the wealthier of his party’s electoral base. This is the very thing that he and his fellow politicians accuse Republicans doing, who also justify such actions with equally dubious reasoning. It appears that hypocrisy is indeed an occupational requirement in politics.

There is another consequence of this travesty, one that is morally corrosive; loans are freely agreed contracts which should be honored. Both sides should understand the possible consequences of their free choices. Borrowers should repay, even if that requires making sacrifices, and creditors who make bad lending decisions should suffer losses; but the conundrum here is that the borrower is being forgiven the debt, or portion thereof, while the lender is incurring risks insured by a third party through guarantees that become the obligation of those that made no such agreement.

Further reflection requires an explanation as to why this situation is called a student debt crisis to begin with? These loans were voluntarily agreed to; there was no compulsion to do so, just a desire for an education to improve one’s economic wellbeing. The “crisis” occurs if it was not worth the debt because the degree obtained did not provide the employment with an income justifying the investment in the education received. There’s actually more costs that the loan because it means a considerable amount of time in college without working for an income. However that does not mean that others owe you for the choices you made. This is especially true for some of the dubious degrees some students obtained, like Memeology, Egyptology, Sexuality Studies, Popular Culture and a host of other degrees with dubious employment opportunities.

This action by Biden is just another in a history of such actions that erode all sense of individual responsibility. FA Hayek expressed this well in “The Road to Serfdom” when he said “Freedom to order our own conduct in the sphere where material circumstances force a choice upon us, and responsibility for the arrangement of our own life according to our own conscience, is the air in which alone moral sense grows and in which moral values are daily recreated in the free decision of the individual. Responsibility, not to a superior, but to one’s own conscience, the awareness of a duty not exacted by compulsion, the necessity to decide which of the things one values are to be sacrificed to others, and to bear the consequences of one’s own decision, are the very essence of any morals which deserve the name.”