[Editor’s note: On April 17, the Biden administration unveiled its latest plan to transfer outstanding student-loan debt to American taxpayers. The essay that follows is a slightly expanded version of the Martin Center’s “comment” on the plan, submitted to the Department of Education during its public-comment period.]
The Martin Center opposes the Biden administration’s new loan-forgiveness rules for two basic reasons: They are outside of the Department of Education’s authority, and they will have adverse consequences.
Legal Authority
Economists often refer to special-interest legislation—bills passed to favor some politically influential group with benefits extracted from society in general. The nation’s Founders were well aware of that prospect and sought to prevent it in their writing of the Constitution. In Federalist 10, James Madison wrote about the evils that arise when “factions” can use governmental power to enrich themselves at the expense of others. The Constitution’s limitations on and division of federal authority were adopted to head off that problem.
The proposed loan-forgiveness “rules” clearly amount to the making of new law by unelected bureaucrats.In the Department’s proposed student-loan regulations, we have something even worse than special interest legislation, namely special interest regulation. We say this is worse because, with legislation, it is at least possible to vote out of office those who passed the odious bill and replace them with representatives more committed to the general welfare. With regulations decreed by unelected bureaucrats, that possibility does not exist.
The Founders sought to minimize the chances for special-interest legislation by drawing a line between the legislative and executive branches. Only the former was authorized to make laws, and then only within strictly defined boundaries. The executive branch was given the authority to enforce duly enacted laws. The proposed rules, however, clearly amount to the making of new law. Even if it were within the purview of Congress to pass a law relieving certain individuals of their obligation to repay debts owed to the government, it is not permissible for an agency of the executive branch to do so. (We say “even if” because the Constitution confers no authority on any branch of the federal government to lend money. While Article II covers the power to spend in detail, the Constitution is silent as to any power to lend. Had the Founders wanted to include such power, they would have said so and set forth rules for it. They did not.)