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Biden Admin. Warns of Spike in Student-Loan Defaults if Courts Reject Amnesty

'These student loan borrowers had the reasonable expectation and belief that they would not have to make additional payments on their federal student loans...'

(Jacob Bruns, Headline USA) The Biden administration warned in a legal filing Tuesday that if the courts reject a controversial student-loan bailout, there will be a massive spike in defaults, potentially causing an economic crisis.

Education Department Undersecretary James Kvaal issued the warning soon after the Justice Department asked a Texas court to stay its order striking down Biden’s unilateral executive action, CNBC reported.

“Unless the [Education] Department is allowed to provide debt relief, we anticipate there could be an historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic,” Kvaal wrote.

The default would fall squarely at the feet of President Joe Biden and Education Secrerary Miguel Cardona, who proceed as if the money was in hand despite the ploy’s dubious legal prospects, in an effort to win younger voters ahead of the midterm election.

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The plan would cost an estimated $800 billion and would further exacerbate the existing inflation crisis, while also punishing responsible loan payers and those who opted to forgo college altogether.

In a ruling shortly after the election, Judge Mark Pittman of the U.S. District Court for the Northern District of Texas struck down the policy, calling it unconstitutional.

But according to Kvaal, over 18 million borrowers are at risk.

“These student loan borrowers had the reasonable expectation and belief that they would not have to make additional payments on their federal student loans,” Kvaal said. “This belief may well stop them from making payments even if the Department is prevented from effectuating debt relief.”

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He noted that the only way out of a potential economic crisis for everyone is to bail out college-educated elites who took out more loans than they were interested in paying back.

“Unless the Department is allowed to provide one-time student loan debt relief,” he went on, “we expect this group of borrowers to have higher loan default rates due to the ongoing confusion about what they owe.”

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