Supreme Court Rejects Biden Student Loan Cancellation – But What About the College Industrial Complex?

On June 30, the United States Supreme Court threw out the Administration’s plan to cancel student loan debt  in the case of Biden v. Nebraska. The plan would have cancelled $10,000 of debt for borrowers now earning under $125,000 a year, and up to $20,000 for recipients of Pell Grants, given to low-income students. Six states had sued, claiming financial and other harms suffered, and the Eighth Circuit granted their request for an injunction, preventing the plan from taking effect.

The Court found that the Administration had improperly invoked as authority the 2003 federal statute called the HEROES Act (the “Higher Education Relief Opportunities for Students Act”). That law allows modification of student loan obligations “in connection with a war or other military operation or national emergency.” Biden was trying to extend the law to civilian students with COVID as the emergency justification.

In rejecting Biden’s plan, the Court stressed that the HEROES Act had never before authorized executive action of this scope and financial impact – the proposal would have wiped out over $430 billion of loan principal and would have affected 43 million borrowers. According to the Court, that’s not a “modification” but “a whole new regime” and therefore amounted to a “major question” of policy for Congress, not the Education Department.

So the Administrative State was dealt a blow and critics of administrative overreach have been vindicated. After all, members of Congress themselves introduced bills to forgive student loans. So the power belongs to them – not to the executive branch.

But everyone knows that more cancellation attempts are coming. In fact, the Administration has also proposed revising the income repayment plans (“IRP”) such that its effect could also amount to loan cancellation.

Yet amidst all this talk of debt forgiveness, not a word on real reform of America’s college industrial complex – a system that enriches already wealthy, arguably predatory, schools, and impoverishes graduates and their families.

Just this month a new documentary, “Exclusion U,” has detailed the staggering affluence of many colleges and universities, stating: “The real scandal in higher education: How Ivy League Universities hoard billions while refusing to expand enrollments. These tax-exempt institutions are failing their mission to act in the public good.” Indeed. Others have asked: Aren’t universities actually self-serving businesses masquerading as public goods?

As many know, the endowment of Harvard alone is $55 billion. And while Harvard obviously doesn’t represent all, or even most, colleges and universities, the financial disparity between institutions and individuals does point to the bigger, problematic picture: The schools get the student loan money; but the kids get the debt. This means the schools get richer and the kids get poorer.

Talk of higher income with a college degree is, at this point, a red herring. Wages have stagnated or declined for everyone, college or no college, to say nothing of the college debt trap for our young people that closes as many doors as college supposedly opens. And this doesn’t even address the forgone income of students while they pursue a degree.

College begins to look like a scam that favors – you guessed it – colleges.

So is the fight over student loan forgiveness – in Congress or in Court – actually a distraction from this larger problem?

Isn’t the real fight against this college industrial complex?

Yes. And in that fight, three real reforms should be priorities: First, American employers must follow the lead of states like Florida, Georgia and Maryland in removing a Bachelors requirement for jobs and require, instead, skills or commensurate experience.  By some reports, this is already underway because of the current tight labor market. None too soon.

Second, Congress should revise the federal student loan program to ensure that schools as well as graduates are on the hook for student loan defaults, an approach also known as “skin in the game.” Why do institutions get most of the benefits from the program – that is, the money – but none of the burdens – that is, the risks?  With skin in the game, schools will be much more careful about applicants they admit since those likely to default on loans will actually cost them.

Last, but certainly not least, is the point recently made by Congresswoman Virginia Foxx (R-NC), Chair of the House Education and Workforce Committee:  We need a change in mindset.

At present, the American higher education establishment and their allies in the mainstream media have promoted the idea of “college for all.” They suggest that simply attending a post-secondary institution is not only in itself a form of “success,” but also the only means of “success.” That mentality must change. As Foxx argues, “there is no one way to earning an education.” And employers can collaborate with schools – both colleges and high schools – to forge different pathways to jobs and careers. Let’s hope employers hear the call.

Because the alternative is the continued “over credentialization craze” and the college industrial complex that benefits post-secondary institutions more than anyone else.

Teresa R. Manning is Policy Director at the National Association of Scholars, Vice-President of the Virginia Association of Scholars, and a former law professor at Scalia Law School, George Mason University.

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About Teresa R. Manning

Teresa R. Manning is the policy director at the National Association of Scholars and a former law professor at Scalia Law School, George Mason University.

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