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A Deal to Trump Student Loans

Washington Examiner

June 13, 2024

Last month, President Joe Biden bragged about how he forgave another $7 billion in student loans.

“The Supreme Court blocked me,” he said, “but they didn’t stop me.”

These billions were added to the administration’s tab that already exceeds $400 billion. And that doesn’t count the $500 billion the Supreme Court blocked him from forgiving, or the over $1 trillion he’s effectively trying to cancel through an illegal scheme that the court may or may not block. 

Biden has destroyed the student loan program as we know it. The Democratic Party’s platform is now essentially to transform the loan portfolio into an infinite entitlement program for pro-Hamas glampers and diversity, equity, and inclusion staff.

So, what should the Republican response be? 

Business as usual is no longer an option. For a long time, the Republican stance on student loans was to “increase them just like the Democrats want, except a little bit less than the Democrats want.” We can’t think that way anymore.

That’s why, if elected, former President Donald Trump should offer an artful deal to trump the Democrats on student loans.

Call it “The 25 Plan.” The Department of Education could give $25,000 to every high school graduate who chooses to opt in, to be paid back at 2.5% of annual income over the course of 25 years. This is essentially the size of the average student loan debt but at a vastly improved interest rate.

White House press secretary Karine Jean-Pierre has complained that student loans are “literally crushing” borrowers. No one could be “literally crushed” by 2.5% of their income. Indeed, it could be collected automatically so that no one even notices.

Note, though, that I didn’t say that this deal would be extended to “every college student.”

Jean-Pierre was pressed on why college graduates, the economically most secure citizens, were getting a wealth transfer of tens of thousands of dollars in forgiven loans while those in the skill trades got nothing. She had no good answer, aside from abusing the word “literally” to describe the “crushing” effect of loans.

And there is no good answer. Trump could extend “The 25 Plan” to every high school graduate. They could use it for college. Or this loan program could open new frontiers in career, technical, and workforce education programs. Or maybe it could simply be a Universal Basic Adulting loan program.

But what about students who want to attend schools that they’d have to take out more than $25,000 in loans to attend? Well, one option for them is to just not do that. They could get an excellent education at public and flagship state universities. Pell Grant-eligible students, if Republicans choose to keep Pell under this program, could blend together a couple of years of community college with a flagship state university and essentially get a free bachelor’s from places such as the University of Virginia or Ohio State University.

Another option is to get the rest of the cost underwritten by the private market. The whole rationale for student loans is that they solve a market failure based on an information problem and an underlying inequity. How exactly can anyone know whether a low-income student, even one who got decent grades in high school and did well on his boards, will do well in college?

At 18 years old, you really don’t know. But after a year or two in college, you do. Students who do very well in their first few semesters will be able, with statutory tweaks to neutralize the insane implementation of civil rights law, to secure a private loan at a reasonable rate. Students who don’t will be sent a very strong market signal that they’re likely to get a higher return on their time by going directly into the labor market.

The $25,000 will see many through, or well enough through, undergrad. But what do the grad students get? Absolutely nothing. Want to attend law, business, or medical school? Get good enough grades and boards to suggest that you’ll do well after graduating and you’ll get a private loan without a problem. Want to get a master’s of fine arts in Queer Dramaturgy? You do you — the taxpayer should have nothing to do with that.

“The 25 Plan” would offer a vastly better deal to more young people while also sending a fiscal shockwave to colleges. They could no longer plan their financial outlays on the assumption of infinitely increasing and increasingly sure-to-be-forgiven federal student loans. They would have to impose cost discipline — or be disciplined by the market as students shift away from private colleges, for which they’d have to take additional loans, to public colleges they could attend for essentially no felt cost.

What would this cost? Someone can run the numbers. But all the numbers ever run on the federal student loan program have been fake anyway because they were all predicated on the assumption that the federal government would want to collect money due to it. That’s no longer true.

And however the Congressional Budget Office might score it, “The 25 Plan” would be vastly less costly to America than the system the Democrats will deliver by hook or crook: an endless entitlement for the most economically secure third of children to attend an increasingly costly and ideologically deranged gatekeeping mechanism.