It’s reassuring to see an honest debate unfold about a federal initiative as sweeping as President Joe Biden’s decision to cancel billions of dollars in student loans. There’s plenty of room for disagreement about whether the initiative helps those who deserve it the most, needlessly stokes inflation, favors the wealthy or exceeds executive authority.
On one point, though, there should be no question. By announcing the plan Aug. 24, weeks before the Department of Education would be ready to start the application process, Biden did a big favor to an unsavory bunch.
The student loan forgiveness plan has become a juicy hunk of bait for scammers seeking to take advantage of borrowers, not least because federal bureaucrats have provided no guidance about how to proceed, apart from “hurry-up-and-wait.”
Con artists don’t sit around like the government. Once Biden announced the plan to cancel student loans for low- and middle-income debtors, they immediately cranked up their efforts to steal from those same marks. For a modest upfront fee, they promise to get their targets into the program early. Eligibility? Guaranteed!
The ubiquity of social media has aided these scams, but the pitch is old-school fraud, as in the voicemail going around from “Liz” of “Student Advisor.” Her urgent message informs potential suckers they’re “prequalified” for loan forgiveness but need to go over details now, because their “status” will expire soon.
Received it? Delete it!
A consumer alert issued by the Federal Trade Commission spells out the reality: “No one can get you in early, help you jump the line or guarantee eligibility. And anybody who says they can — or tries to charge you — is (1) a liar, and (2) a scammer.”
Fair enough, but what are borrowers who qualify for relief supposed to do instead? Nothing, yet, it seems.
Millions should qualify automatically because their relevant income data already is on file at the Education Department. Others, though, will need to apply for aid, and that application won’t be available until the vague date of “early October.” There’s an incentive to apply by mid-November, as the forgiveness approval process is expected to take about six weeks, and the pandemic-related pause on loan payments will expire on Dec. 31.
As of now, the final date to apply for loan forgiveness supposedly is Dec. 31, 2023. Our advice: Don’t bank on that timing and stay on high alert for fraud.
In some ways, the latest spate of flimflams is fitting, as taxpayers and students alike were long ago sucked into a collegiate daisy chain. Easy money provided by the government long has encouraged schools to jack up tuition and fees, which then necessitated more easy money.
The worst offenders have always been for-profit colleges that swindle naive students into taking out federal loans for worthless degrees, resulting in mass defaults. But even some prestigious bastions of higher education con students into, for instance, borrowing a fortune for master’s programs that never pay off in the workplace, resulting in more defaults.
We know: Buyer beware. But keep in mind that taxpayers ultimately are on the hook for these loan defaults. And for students who live within their means, choose more affordable public over private institutions, work a campus job, pay back their loans and otherwise set a good example, it is galling to see Biden’s giveaway going to those who don’t.
This “moral hazard” is the biggest potential problem with Biden’s free-money plan.
The program’s immediate impact on inflation is likely to be modest, as it doesn’t immediately put $10,000 or $20,000 in someone’s pocket to spend, but rather relieves them of making relatively small monthly payments on those loan amounts, stretching into the future.
Similarly, the administration has set parameters that will direct most of the relief to people who need it. Given the government’s record of corporate welfare and tax favors for the rich, it’s a plus to see households making $250,000 and up being excluded. There was a good case for reducing that household income threshold to $200,000 at most.
Republicans who say Biden lacks executive authority to carry out the measure are conveniently forgetting how they enabled a wannabe autocrat in the previous administration. They may have a legal argument, but it pales next to a very simple one: The key to the American Dream is not a high-priced degree, but rather hard work and personal responsibility.
In a Sept. 12 letter to Biden, almost two dozen GOP governors framed the issue perfectly: “For many borrowers, they worked hard, made sacrifices and paid off their debt. For many others, they chose hard work and a paycheck rather than more school and a loan. Americans who did not choose to take out student loans themselves should certainly not be forced to pay for the student loans of others.”
True! And forcing those taxpayers to foot the bill for others is no less a rip-off than the one being perpetrated by “Liz” at “Student Advisor.”
— The Chicago Tribune