SAVE Plan Is Another Student Loan Forgiveness Boondoggle

Under the Biden-Harris initiative, taxpayers would cover groceries and rent as well as school.

The Biden-Harris administration’s Saving on a Valuable Education Repayment Plan, or SAVE, sounds honorable until you scrutinize the details. The program, styled as loan repayment, is really loan forgiveness. Eighteen states are suing to stop this election-year giveaway, and a federal appeals court has issued a preliminary injunction blocking the Education Department from administering it. But if the states eventually lose in court and the plan goes into effect, taxpayers will foot the bill not only for tuition, books and student fees but also for rent, groceries, gasoline and other “living expenses.”

College students are already able to use federal loans to cover a variety of living expenses. Because students know they’ll have to pay that sum back, many borrow reasonably, or not at all, live modestly, and work while they attend school. The SAVE plan would turn that incentive on its head. Knowing that other people would foot their bills, students would have every reason to stay in school as long as they want, live lavishly and borrow to the max. If a student knows taxpayers will pay off his loans, he’ll have less incentive to try hard in school, earn a serious degree, or get a job after graduation.

The administration created the SAVE plan without clear authorization from Congress. Like some other federal loan-repayment schemes, the plan ties loan payments to a student’s future earnings. Yet the program dramatically reduces the required payments, so that even many middle-class borrowers would never pay anything. According to an analysis from the Urban Institute, only 11% of borrowers with certificates and associate degrees would have to pay back their loans in full, and 38% would never have to pay a cent. Only 22% of borrowers with bachelor’s degrees would repay in full, and 20% would pay nothing.

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