The US Supreme court is currently deciding on a cased called Biden v. Nebraska. This case is challenging the Biden administration’s ability to bail out student loan borrowers.
In August 2022, the Biden administration declared that it would bail out all current federal student loan borrowers by $10,000 and some borrowers by $20,000. The administration called this move a student loan “cancellation”, but this is a misnomer. It is a bailout. The debt is not being cancelled; it is being transferred to all taxpayers. The federal government will take on the bailed-out student loans and start paying the cost itself. If it refused to pay, banks that are owed the debt would go bankrupt and financial meltdown would ensue.
Someone has to pay the debt and the Biden administration wants all of us to pay it instead of the people that actually took out the debt. Effectively, the bailout is a wealth transfer. People that already paid their student loans and people that never took out student loans will have to pay for the loans of people who have not yet paid theirs. And it will not be cheap. Estimates indicate that the bailout would cost taxpayers somewhere between $500 billion and $1 trillion.
Even many on the left recognize the glaring injustice of the Biden bailout. First of all, the people that currently owe student loans signed on the dotted line themselves. No one forced them to take out the loans, so forcing someone else to pay them back is unethical. Second, the bailout explicitly benefits those who currently owe debt, but not those who already paid off their debts, nor those who worked hard to avoid debt in the first place. The latter two groups are understandably upset that the rules of the game have changed, and that they are now expected to foot the bill for others. Lastly, most people with student loans have college degrees, and people with college degrees are among the highest income earners in the country. This means that a large portion of the bailout recipients are fully capable of paying off their loans, which makes the Biden bailout a regressive wealth transfer.
The Biden administration seems hell-bent on imposing the cost on all taxpayers instead of the actual student loan borrowers. Even with our current divided congress, the House and Senate came together and passed a bipartisan bill to overturn Biden’s bailout. Biden, unsurprisingly, vetoed the bill.
This raises another major problem with the bailout: it is wildly unconstitutional. The president and the executive branch cannot unilaterally bail out debts to the tune of hundreds of billions of dollars. Fundamentally, spending decisions must originate in congress and be passed by both the House and the Senate. Exactly the opposite has happened: both houses voted against the bailout. By acting unilaterally, against the wishes of congress, the Biden administration is acting as if it has despotic authority.
Thankfully, a group of states came together and filed charges against the Biden administration to stop the bailout. The Supreme Court granted the states a court appearance, and so we have Biden v. Nebraska. With any luck, the court should strike down the unconstitutional and unjust Biden bailout within the next few weeks.