I have to admit, I’ve never been a fan of canceling student loan debt.
I’ve heard the arguments in favor of it, and they’re valid points. But I’ve heard the arguments against it also, and there’s some validity there, too.
President Joe Biden issued an executive order this week that will cancel hundreds of billions of dollars in federal student loans to help ease the cumulative $1.6 trillion student loan burden in this country.
The Washington Post reported that Biden’s executive order will do the following:
*Cancel up to $10,000 in federal student loan debt for borrowers who earn less than $125,000 per year, or under $250,000 for married couples who file jointly.
*Cancel up to $20,000 a year – using the same income criteria -- for those who received Pell grants, which are federal aid for lower-income students from families typically earning less than $60,000 a year. Seven in 10 college graduates with federal loans also received a Pell Grant.
*Extend a pandemic-era pause on federal student loan payments through Dec. 31. It was set to expire Aug. 31.
*Propose creating a new income-based repayment plan to lower monthly bills for undergraduate borrowers. (Remember this one. We’ll come back to it.)
Previous estimates have found that canceling $10,000 in student debt per borrower would cost the federal government about $230 billion, but that number is going to go up once the larger payments for Pell Grant recipients are factored in, the Post reported.
We should note that Biden’s actions will probably be challenged in court. Last year, House Speaker Nancy Pelosi said the president didn’t have the authority to cancel loans on his own without congressional approval.
This isn’t the Biden administration’s first go at reducing student debt. Previously it approved nearly $32 billion in loan forgiveness to 1.6 million people through targeted actions for disabled borrowers and those defrauded by their colleges.
You can read the Post’s story here.
Democrats believe Biden’s executive order will help millions of people get out from under crushing debt, allowing them to pay their bills, save for a home, or start a family. The administration estimates that about 20 million borrowers could have their debt completely cancelled.
Centrist Democratic economists have said this will increase inflation and add to the federal deficit.
Of course, Republicans hate the idea, claiming it’s fiscally irresponsible and unfair to millions of Americans who never attended college, or those who did but never borrowed money or have paid off their loans.
We all know the GOP’s default move is to be against anything that spends money to help people have a better life, as opposed to their cheering on of anything that helps their rich individual and corporate donors.
Still – and I hate to admit this – some of their arguments are worth thinking about.
Is this the right time to be piling up more federal debt? Will it affect the inflation we’re currently dealing with? Is this the thing we should be spending this much money on when there are so many other ways to lend a hand to those in need?
And the fairness issue is real. Should our tax dollars go to paying off other people’s debts – in this case incurred in order to get an education that can lead to a better-paying job? Should we be subsidizing them like this?
One good aspect of Biden’s plan – which applies to loans originated on or before June 30 -- is that it’s designed to deliver the greatest benefits to the neediest borrowers. The White House estimates that nearly 90 percent of relief will go to people earning less than $75,000 a year.
I’m from the school of thought that people ought to pay their debts. I understand that sometimes a person’s financial situation makes that very difficult or downright impossible, but I think an individual should pay what he or she can.
That’s why Biden’s proposal to create a new repayment plan tied to borrowers’ earnings caught my eye. The Department of Education has the authority to create income-driven repayment plans, which cap what borrowers pay each month based on a percentage of their discretionary income.
The president wants to cap monthly payments for undergraduate loans at 5 percent of a person’s discretionary income instead of the current 10 percent. He wants to increase the amount of income that’s considered non-discretionary and forgive balances after 10 years of payment, instead of the current 20 years.
So, the fairest way to help people struggling to pay off their student loans is already in place. It sets up a monthly amount that they pay based on their discretionary income. This way they’re not being absolved of paying what they owe, but the cost will be more manageable. And Biden even wants to make it more pro-borrower.
If there still isn’t a light at the end of the tunnel, maybe we could look at knocking off the interest for those most in need and ask for repayment of only the principal.
Some on the Left think Biden should do more. Sen. Majority Leader Chuck Schumer and Sen. Elizabeth Warren had urged Biden to cancel at least $50,000 per borrower. They claim reducing the burden of student loans would help stimulate the economy and close the racial wealth gap, as Black borrowers shoulder a disproportionate amount of debt. Some people want all federal student debt cancelled.
My reply would be to stop talking and don’t look a gift horse in the mouth. This action by Biden is controversial enough. Democrats have a tendency to want to throw money at everything. I agree we need to help people who need help, but the Left has to stop acting like they have a blank check to do everything they want with no concern about how the government is going to pay for it.
Besides, this cycle will just continue until we get a handle on the sky-high cost of attending college nowadays. Until that’s addressed, we’ll just keep having the same problem.
I’m a reasonable Democrat. I support the party’s overarching philosophy and a lot of what it wants to do. There are some in the party who think it’s heresy to not march in lockstep. They’re delusional about the way the world works.
Call me whatever you want, but I don’t want to pay the student loan debts of people who will use the education we subsidize to make more money than a lot of us could ever dream of making.
We complain all the time about our politicians and other people of power not being held accountable for their actions. Why do we want to let some people be unaccountable for the decisions they’ve made and the debts they’ve accrued? Why do Democrats want to play into the Right’s narrative that they’re wild spenders when there are more important issues to address – like improving the lives and educational opportunities for kids in poorer public-school districts?
Our social safety net, at its core, should be a hand up, not a hand out. We can give that hand up to people struggling with student debt without rubbing it in the faces of those who have done whatever they could to pay what they owe. Who’ll have to watch people with better houses, better cars, a better standard of living, who can do more for their kids, all derived from a college-degree-driven better income that they’re now forced to help pay for.
I know that’s not the Democratic Party’s company line.
Maybe it ought to be.
***
Thank you for reading my post. You can see more of my writings on my blog: Musings of a Nobody.