When it comes to comparing President Biden’s student loan forgiveness to the Paycheck Protection Program, the evidence is less convincing.
As Mr. Biden rolls out plans to forgive student loans, including this week, his White House and its allies have repeatedly accused Republican critics of condoning and forgiving pandemic-era PPP loans. pointed out.
A chart circulated on social media this week listing more than a dozen Republicans who took out forgiven PPP loans and their amounts.
“The hypocrisy is astounding,” Biden said last year on the issue.
The hypocrisy would be even more surprising if this comparison were an apples-to-apples comparison.
Although both situations technically involve loan forgiveness, the key word is “technically.” There’s a big difference.
The key point is that although PPP money is billed as a “loan,” it is actually designed as a payment.
Congress and the Trump administration enacted the program in 2020 as lockdowns took hold across the United States. The idea was to keep small businesses afloat and help pay their employees rather than lay them off. The bill’s text states that loans “in an amount equal to the cost of maintaining payroll continuity” would be forgiven as long as the loans are used for eligible expenses.
Making forgivable loans allowed banks to lend money quickly with the knowledge that it would be repaid in full by the government, speeding up the process during a particularly difficult time for the economy.
“The idea is to exempt taxpayers from a large portion of the money that goes to workers,” Treasury Secretary Steven Mnuchin said in May 2020, adding: “But this was not designed as a loan. It was very much designed as a grant.”
So there was a jump recognition that these were effectively grants. Unlike student loans, this does not involve people taking on debt that they are expected to repay over time and then lighten the burden.
Another major difference is who is reducing the burden and why.
Biden’s attempt to forgive student loans is so controversial because Congress failed to follow through on his plan, and the president himself tried to do so through executive action. The Supreme Court last year rejected $400 billion in student loan relief, ruling that Biden lacked the authority. So Mr. Biden has sought, including this week, to avoid a last-minute situation with a more targeted approach that could pass legal musters.
In contrast, the PPP was approved by Congress in the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020, which passed by an overwhelming bipartisan margin. This was not an administration trying to circumvent the will of Congress to provide relief to the people.
Effective subsidies from the government also made sense, as the government was imposing lockdowns that businesses had no control over.
While you can take issue with high and escalating tuition costs and lender practices, student loans are debts entered into by the borrower with terms that are uniquely available to them. It is another thing for Congress to provide relief and recovery for those who have been adversely affected by emergency government policies and a once-in-a-lifetime pandemic. It’s another thing for the president to unilaterally terminate people who have worked on something of their own volition and benefited from it (in the form of education).
Biden may have the ability to do that. The question is whether it is good policy. Congress doesn’t agree that’s the case, and even some Democrats question the wisdom of this approach.
Now back to the main point.
To the extent that there is an argument that Republicans are somewhat selective about their fiscal conservatism, that’s another thing. At about $800 billion, the PPP is about twice the size of Biden’s $400 billion student debt relief plan, which was struck down by the Supreme Court last year. And Biden’s latest plan totals a relatively paltry $7.4 billion, compared to his administration’s more targeted debt relief total of about $150 billion.
The question from there is which types of remedies do you think are good policies and which do you think are not? As mentioned earlier, there are some important differences in the mechanisms. Republicans will argue that propping up the economy back then is a much better excuse than supporting student loan recipients today.
But the argument, or even unstated suggestion, that Republicans have reversed loan forgiveness as a policy and made it their own while exempting student loan recipients is taking away real freedom. It turns out.
