Biden’s revised proposal to subsidise student loans may end up costing billions for the government.

The latest proposed regulation on student loans by the Biden administration exemplifies the government’s inverse Midas Touch.

President Joe Biden is attempting another back-door strategy to have you pay off someone else’s debt as the administration’s campaign for student loan debt amnesty is bogged down in the courts. How? The federal government’s already generous “income-driven repayment” scheme for college grads is undergoing substantial revisions.

However, the policy would actually encourage Americans to choose low-return degrees by offering more public subsidies to students who pick gender studies while demanding full repayment from engineers’ student loans.

Under the proposed regulation, borrowers whose income is between 150 and 225 percent of the federal poverty line would not have to use that amount when determining their ability to make monthly loan payments. About $30,600, putting them in the 65th percentile for earnings among those aged 22–31; scarcely enough to qualify for $0 monthly payments, as the regulation would have it. In addition, the law would shorten the period of time before any outstanding debt is “forgiven” by taxpayers for many debtors from twenty years down to ten.

A sociology graduate with $30,000 in debt and a typical wage in her profession would be able to pay off her student debts under the present system. However, under Biden’s revised income-driven repayment plan, her monthly payments would be so low that she will not pay off her loan’s interest for the first thirteen years. After 20 years, she will have 90% of her loan, or approximately $27,000, waived.

Let’s compare this to an engineering major who, although having the same $30,000 in debt, gets the average pay for her profession. In 16 years, the engineer will have paid off all of her student debt without any forgiveness.

An research by the liberal Urban Institute found that 22% of four-year college graduates who choose the new repayment plan would never make a single payment on their debts. Debts will be fully assumed by taxpayers. Students who take out loans to cover their education costs will effectively get a free education if they major in a sector with a poor projected return on investment.

The Department of Education estimates that the programme will cost $138 billion over the next decade. However, this is likely to be low-balled since it is assumed in the Department’s estimates that no borrowers would migrate to income-driven plans from non-income-driven plans, despite the latter’s cheaper payments and lack of debt forgiveness. The new, excessively generous repayment plan is likely to be adopted by the vast majority of borrowers who are now capable of and are making payments on their loans. Analysts agree that this will more than treble the price of the plan.

Borrowing in the future is not included into the estimated cost. However, most students would do well to borrow as much as they can under the new repayment plan because of the substantial subsidy it provides. Universities will undoubtedly emphasise this idea to their pupils. There will be less resistance to price increases from educational institutions if students are ready to take on larger debt loads.

The administration has made a habit of exploiting student loan giveaways to win political points with a particular constituency, and the proposed modifications are the most recent example of Biden’s administrative overreach. The initial effort to provide a blanket amnesty for student loan debt up to $20,000 received the most attention, but the ongoing “pause” on repayments is astronomically expensive, costing an estimated $5 billion per month, and is highly regressive, providing significant subsidies to professionals such as doctors and lawyers.

The Congress must prevent the current administration from further pursuing student debt forgiveness. These taxpayer-funded handouts are not only costly and unjust, but they also drive up the cost of higher education, which hurts the millions of Americans who have already paid off their student loans or who never took them out.

Congress must fundamentally restrict federal loans so that universities are not allowed to increase tuition at will. Perhaps government funding shouldn’t be available for programmes that don’t generate a profit.

Costs associated with the proposed rule to amend the existing generous income-driven repayment plan will be comparable to those of student loan forgiveness. But the most alarming aspect is that it would effectively make low-return majors eligible for “free” education. Congress should not let Vice President Biden reshape higher education on his own.

All sorts of student debt forgiveness rest on the same dumb and greedy foundation as King Midas. There’s foolishness in asking taxpayers to finance handouts to bolster President Biden’s reelection aspirations, and there’s greed in allowing for perverse incentives and unforeseen consequences to arise as a result. Nothing the Biden administration touches, however, turns to gold as Midas’s touch did.