Student loans

Biden’s proposals would help overhaul the student loan system. Some say it’s not enough.

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As the prospect of President Biden canceling student debt continues to dominate public discourse, new proposals shed light on the administration’s broader plans to overhaul a federal loan system widely seen as flawed.

But higher education experts and lawmakers are torn over whether the changes will bring meaningful reforms for borrowers.

“The Biden administration has made tremendous progress,” said Sen. Elizabeth Warren (D-Mass.). “The Department of Education was not on the side of working families and struggling borrowers, and that has changed.”

Warren, other congressional Democrats and liberal advocates say Biden is making big strides in cleaning up programs, like public service loan forgiveness and borrower defense until repayment, that have unfairly left too many borrowers behind. stuck in repayment. They are calling on the Ministry of Education to use its authority to make other bold changes.

Conservatives, meanwhile, are critical of what they say is a power grab by the administration.

“This is not about fixing the loan program, this is an attempt to massively write off loans and keep taxpayers in the dark about it,” said Rep. Virginia Foxx (NC ), the House Education Committee’s top Republican.

A new report from the Government Accountability Office, commissioned by Foxx, shows the federal government is on track to lose $197 billion in revenue from the loan program, and that’s before taking into account Biden’s proposed changes.

So far, the Biden administration has focused on targeted debt relief — temporary reprieves to give government officials, defrauded students, or disabled borrowers a better chance of having their loans forgiven. These efforts have been accompanied by promises of long-term reforms that are beginning to take shape.

This month, the Ministry of Education released two sets of proposals, including one that limit how interest can inflate student loan costs and others that make it easier to forgive debt in cases of fraud, school closures, or permanent disabilities. The agency will gather public feedback on the proposed rules before finalizing and implementing them next July.

In a call with reporters earlier this month, Education Undersecretary James Kvaal said: “These improvements will continue to address long-standing issues with loan repayment and cancellation programs and will serve borrowers for decades to come.”

The federal student loan system is a dizzying array of repayment plans and remission programs with rules that can be difficult to navigate. Efforts over the years to give borrowers more options have added more complexity and confusion.

The Biden administration’s proposals represent some of the most significant updates to the federal student loan repayment system in years. Still, Jared Bass, senior director of higher education at the Center for American Progress, described the effort as “asking [the administration] to repair a dam during a hurricane” because of the magnitude of the changes required.

“This administration has a dual track and responsibility to not only undo the harmful practices of the former administration, but also to make government work,” Bass said. “He takes action where he can…but he shouldn’t be alone in this.”

Bass and other higher education experts say Congress must play a role in achieving a radical overhaul of the system, in part because the Department of Education has limited authority. Although the department can do some administrative changes through rule-making, many laws governing federal student aid are largely within the purview of legislators.

Take income-based repayment plans, which cap monthly payments at a percentage of income and eventually write off the balance. While the administration may come up with a new version of the program — as it is expected to do in the coming weeks — it does not have the authority to consolidate the existing suite of income-focused options into one streamlined plan. It requires Congress.

“Legislation should prioritize replacing the overly complex loan repayment system with a single repayment plan for all borrowers that bases monthly payments and total amount to be repaid on borrowers’ income,” said Beth Akers, senior researcher at the conservative American Enterprise. Institute. “I would encourage the president to provide the necessary leadership in Congress to achieve legislative reform.”

Over the years, attempts to reauthorize the main law governing higher education have failed on Capitol Hill. Members of Congress have introduced a series of bills to fix the federal loan system in recent months, but none have gained traction.

Some experts say the focus on large-scale debt cancellation has further politicized federal student loans in a way that undermines any chance of bipartisan reforms in Congress. This observation is echoed by Marc Goldwein, senior vice-chairman of the Committee for a Responsible Federal Budget, a group that advocates deficit reduction.

“It poisoned the conversation,” Goldwein said of the debt forgiveness movement. “We have silly conversations about what amounts to band-aid solutions. If we can move beyond that, there will be opportunities for bipartisan reform of the system.

But Persis Yu, policy director and legal adviser for the advocacy group Student Borrower Protection Center, said it was unfair to blame the debt forgiveness movement for congressional inaction.

“Congress has a lot of trouble getting bipartisan consensus on many reforms,” ​​Yu said. The department has plenty of room to make improvements.

Warren argues that there is no path to meaningful reform without providing immediate debt relief to people who have been wronged by the system. “We need to address the over-indebtedness that already exists and come up with an effective plan to help people navigate post-secondary education without being crushed by another load of debt,” she said. said.

Foxx and other Republicans say Biden failed to engage Congress on federal student aid proposals and instead pursued its own agenda. They argue that much more attention should be paid to reducing borrowing and containing the costs of education.

“We allow borrowers to take on as much debt as schools charge them for degrees that simply have no return on investment, leaving students with 20 years of inflated balances until the debt is forgiven,” he said. Foxx said. “Schools are well aware of these flaws, which is why the cost of college has skyrocketed because they know it will be the taxpayers who will ultimately foot the bill.

Many congressional Democrats, including Warren, agree that colleges should be held accountable for the exorbitant cost of higher education that has resulted in more than $1 trillion in student debt. Warren has long been a supporter of requiring all colleges with high student loan default rates to pay the government a portion of the debt, an idea that resonates with some Republicans.

“There’s a lot Congress can do if they come to the table and work on bipartisan legislation,” said Michelle Dimino, senior education policy adviser at the Third Way think tank. “But the department has the power to regulate and the approach so far has involved a range of stakeholders and sought to build consensus with those groups through rulemaking.”

Dimino said the federal loan system must be simple and streamlined for borrowers, with a focus on helping them through each phase of the repayment process and ensuring they aren’t weighed down by unaffordable balances. . According to her, the Biden administration has shown that the ideal is achievable, but will require a lot of coordination between the department, Congress, colleges and states.