Last week, the Supreme Court ruled against the Biden administration’s student loan forgiveness proposal which would have forgiven $10,000-$20,000 of student loans per borrower. But the fight for student loan forgiveness isn’t going anywhere.
In a previous article for FEE, I highlighted how student loan forgiveness has already been happening and started under president Trump due to the freeze on interest accumulation. Although this may not be as visible as a $10,000 lower balance, frozen interest means the real cost of taking a loan out became smaller than the initial terms suggested.
This highlights a simple truth about student loan forgiveness—the Biden administration has already and can continue to forgive student loans in spite of this ruling. In fact, they already have plans to do so.
Almost immediately after the Supreme Court decision was announced, the Biden administration announced their response.
Perhaps the most important announcement by the Department of Education was the introduction of a new student loan repayment plan—the SAVE plan.
The SAVE plan is a modification of the current REPAYE plan. Both of these plans are considered income-driven-repayment (IDR) plans.
IDR plans are complicated, but essentially they limit the size of a borrowers monthly payment based on income. The payment calculations depend on the borrower’s income relative to the poverty line.
Under the new guidelines by the Department of Education, someone making 225% of he federal poverty rate will now have their income completely protected from payments according to Fox Business. That means borrowers earning $32,805 or a family of four with income of $67,500 will be required to make payments of $0.
Even borrowers who make more than those amounts who qualify for a SAVE plan will see lower payments.
But wait, won’t low or zero dollar payments mean the interest on these loans will grow out of control? Nope. The administration is capping interest rates to make sure loan balances don’t grow. So how much do we expect someone to pay on a student loan with a required payment of $0 and no interest accumulation? It’s not hard to see that this is just shadow forgiveness.
It doesn’t end here either. IDR plans already offered loan forgiveness to borrowers who made payments for 20-25 years. So borrowers who have a small payment under Biden’s new SAVE plan will see their balances disappear eventually based on already existing rules.
So, if a borrower qualifies for a $100 monthly payment, and they pay that over 20 years, that’s a total repayment of $24,000 (not even including the fact that the present value is lower). So if someone has a $50,000 student loan, that means they got forgiveness of $26,000. That dwarfs Biden’s $10,000 forgiveness promise struck down by courts.
Not only that, borrowers can get even more forgiveness if they take jobs in the government or non-profits. The Public Service Loan Forgiveness (PSLF) program grants forgiveness after just 10 years of payments to those who work for qualifying public and non-profit jobs. Using the previous example, that would increase forgiveness to $38,000 of the $50,000
The Cost of Our Student Loan System
It would be nice if the cost of this convoluted shadow forgiveness program was limited to the dollar value of the forgiveness (which ultimately is borne by taxpayers). But that isn’t the full cost.
Perhaps an even worse aspect of this system, is it distorts the incentives of future generations in making career decisions. The current system, exacerbated by the Biden Administration’s new plans encourages and rewards those who take out massive student loans to pursue jobs which consumers do not value highly.
Even more damaging, the new repayment program exacerbates the use of PSLF which encourages workers to avoid value creating private sector jobs, and, instead, pursue wealth-extracting public sector jobs.
What world-improving things would have been created had individuals been left to become educated at their own expense? Those forgone benefits will go largely unseen a la Bastiat.
On the other hand, many will experience direct benefits from these programs which are very visible, making the programs very hard to end.
So while some have celebrated the Supreme Court decision as defeating loan forgiveness once and for all, I’m not nearly so optimistic. So long as the Department of Education has administrative control over the country’s student loan system, loan forgiveness is just a few bureaucratic tweaks away.
At this point, the only way the Supreme Court would be able to do anything about it is if they declared the Department of Education itself unconstitutional. But I doubt this will ever happen. Unfortunately, the administrative state seems to always be forgiven.
About the Author
Peter Jacobsen teaches economics and holds the position of Gwartney Professor of Economics. He received his graduate education at George Mason University.
Article cross-posted from FEE. Image Credit: Gage Skidmore via Wikimedia|CC BY SA 2.0
Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.
