Biden’s Outrageous Attack on PPP Loan Recipients

The differences between the two programs are stark. PPP was created at the onset of government-ordered economic shutdowns during the pandemic to keep workers paid and relieve the burdens on state-based unemployment insurance systems. Without PPP, permanent small business-closings would have cascaded, throwing more than 10 million people out of jobs and onto the unemployment rolls and permanently severing relationships with employees, customers and suppliers, thus drastically slowing the post-shutdown recovery.

PPP rolled out shortly after the enactment of the Cares Act, to relieve pressure on American workers. PPP loans were forgivable as long as most of the money went to payrolls. Under the original rules of the program, at least 75% of the forgiven amount had to be used on eligible payroll expenses. Within two weeks of the program opening, more than $343 billion was approved for small businesses to keep paychecks flowing.

The result was that the unemployment rate peaked in April 2020 at 14.7%, not the 20% many had forecast. Instead of losing up to eight million jobs in May 2020, the consensus estimate at the time, the U.S. regained 2.6 million jobs. Congress and the Trump administration saved the economy from what could have been a depression. Contrast that with student loans. A person voluntarily borrows money—not under pandemic duress and government mandated closings—to attend school in exchange for forgoing some future income to repay that loan. Historically, education has been a good investment. According to the Bureau of Labor Statistics, median weekly earnings in 2017 for those with a bachelor’s degree were 65% higher than for those with only a high school diploma and nearly 100% higher for those who went on to obtain a master’s degree. While PPP loans taken by business owners principally benefited employees, student loans principally benefit borrowers.

Student loans also weren’t originally designed to be forgiven, the way PPP loans were. Borrowers chose to assume that obligation to improve their lives. Like other personal borrowing—whether for cars, homes, clothing or entertainment—student loans are used to relieve the amount of work the borrower must contemporaneously engage in to achieve the same spending.

The Biden student-loan forgiveness doesn’t reform higher education to reduce college costs. On the contrary, the plan creates incentives for colleges to raise prices, since students and schools will expect further bailouts. According to the Penn Wharton budget model, once one includes direct forgiveness and changes to income-driven repayment, this action could cost almost $1 trillion over the next 10 years. Of that money, 70% is forecast to go to the top three income quintiles.

At a cost of $800 billion, PPP loans supported the employment of more than 50 million Americans, facilitated compliance with public-health mandates, and enabled a swift economic recovery. The student-loan forgiveness will fuel inflation, do nothing to curb ballooning college costs, and primarily enrich those already most likely to succeed.

PPP loans and student loans are worlds apart. While PPP was designed to prevent a second Great Depression and keep workers employed during a once-in-a-century pandemic, Mr. Biden’s student loan bailout seems designed to keep his party’s members of Congress employed after the fall elections.

Mr. Faulkender served as assistant Treasury secretary for economic policy, 2019-21, and was responsible for implementing the Paycheck Protection Program.