The Department of Education (DOE) has announced the discharge of an additional $9 billion in student debt amid strong Republican opposition to the Biden administration’s “reckless” relief plans.
The move will wipe out the loans of about 125,000 more Americans, according to an Oct. 4 statement by the DOE. This would take the total discharged by the Biden administration to $127 billion for nearly 3.6 million Americans.
“For years, millions of eligible borrowers were unable to access the student debt relief they qualified for, but that’s all changed thanks to President Biden and this Administration’s relentless efforts to fix the broken student loan system,” U.S. Secretary of Education Miguel Cardona said.
To date, the Biden administration has forgiven $51 billion in student debt under the PSLF program and $42 billion in loans under the IDR plans, according to the DOE.
President Joe Biden has come under criticism for pushing programs that essentially bail out student loan holders, with Republicans making efforts to counter such plans.
Last month, a group of Republican lawmakers led by Sen. Bill Cassidy (R-La.) introduced the Congressional Review Act (CRA) resolution aimed at overturning the Biden administration’s “reckless” IDR plan.
The plan will “result in a majority of bachelor’s degree student loan borrowers not having to pay back even the principal on their loans, costing taxpayers as much as $559 billion,” according to a Sept. 5 statement from the lawmakers.
The plan will forgive loan balances after 10 years of payments, instead of 20 years, for borrowers who have loan balances of $12,000 or lower. There are also no “guardrails” to prevent households making more than $250,000 a year from collecting such assistance if family members file taxes separately, it said.
An individual would need an income of more than $32,805, and a family of four would need to have a total income of more than $67,500 in 2023 (roughly equal to the median income of all U.S. households) before they’re expected to pay anything under the IDR plan.
“President Biden continues to propose budget-busting student loan bailouts that would force 87 percent of Americans who do not have student loan debt to bear the costs of the 13 percent of Americans who do,” Sen. John Thune (R-S.D.) said.
“It’s incredibly unfair to those who never incurred student debt because they didn’t attend college in the first place or because they either worked their way through school or their family pinched pennies and planned for higher education.”
Negative Economic Effects
In late September, the DOE announced its “initial set of policy considerations” for a new plan to provide debt relief. However, unlike when the Biden administration previously had proposed universal debt relief, the new policy focuses on offering debt relief for student loan borrowers who are “in need.”The policy has identified groups of people as potential beneficiaries of the new debt relief plan: borrowers with balances greater than what they originally borrowed; those whose loans first entered repayment decades ago; borrowers who attended programs that didn’t provide sufficient financial value; and those who are eligible for relief under programs such as IDR but haven’t applied.
The relief will also be applicable to borrowers who have experienced financial hardship and need support but don’t receive such support from the current student loan system.
These policy considerations will be discussed in the first Student Loan Relief Committee meeting that’s scheduled to take place on Oct. 10 and 11.
The Biden administration’s move away from universal student debt relief has irked groups that were expecting the president to deliver on his campaign promise. In 2020, Biden said that he would seek to discharge $10,000 per student loan borrower.
Some experts are concerned about negative consequences for the economy arising from President Biden’s student debt programs.
This won’t only harm taxpayers at a time of high inflation but will also worsen tuition inflation by sending a message that colleges can continue to raise their fees, he said.
“Because every college knows that if there’s more funding, more free money, the best way to take advantage of that is to raise tuition for everybody.”
