of President Bidenwriting off between $10,000 and $20,000 in student loan debt for borrowers earning less than $125,000 a year has drawn criticism from Republicans, some economists — and even some Democrats.
The plan, according to the White House, will benefit 43 million Americans, wiping out billions of dollars in student loan debt. But critics of debt forgiveness argue it will contribute to already high inflation, does nothing to help low-income people who have never attended college, is unfair to people who have already repaid their student debt, does not address the underlying cost of college and could even be invalidated by the courts.
crushes the budgets of many American families. Senior administration officials told reporters on a call on Wednesday that the resumption of loan repayments in January would offset any inflationary effects of the loan cancellations, but not all economists agree on that point. .
Jason Furman, former top Obama economics official tweeted Wednesday“Pouring about half a trillion dollars worth of gasoline on the inflationary fire that is already burning is unwise.”
The Center for a Responsible Federal Budget, a nonprofit, nonpartisan organization, estimated Wednesday’s student loan announcements will cost more than double the amount saved through the Climate and Tax Inflation Reduction Act, ” completely eliminating any disinflationary benefit from the bill”.
‘Unfair’ for Americans who never attended college or repaid their loans
Another criticism of the president’s plan is that it does not help Americans who have never attended college, who, on average, earn less over their lifetime than those who have graduated from college.
The Social Security Administration says men with bachelor’s degrees earn about $900,000 more in median lifetime earnings than their high school-educated counterparts. Women with a bachelor’s degree earn $630,000 more over their lifetime than their counterparts who only attended high school.
Republicans were quick to point out that the plan does not help those who have never attended college.
“I think that’s a bad idea,” Senate Minority Leader Mitch McConnell said in Kentucky on Wednesday. “A lot of Americans choose not to go to college.”
GOP Sen. Ted Cruz made a similar criticism during a Wednesday news conference about hurricane systems in Galveston, Texas.
“What President Biden has actually decided to do is take from working-class people,” Cruz said. “Taking away thousands of tax dollars from truckers and construction workers right now in order to redistribute them to college graduates who have student loans. “
Another criticism of the president’s plan is that it is “unfair” to those who have worked diligently to pay off their student loans. Senator Richard Burr, the top Republican on the Senate Health, Education, Labor and Pensions Committee, made this point.
“President Biden’s announcement that he intends to cancel student loan debt is irresponsible, unfair and deeply cynical,” Burr said in a statement Wednesday. “He’s asking taxpayers to subsidize the debt held by some of America’s highest earners in order to court votes. Every American who has paid off their student loans, put themselves through school saving and working extra jobs, or choosing not to go to college at all should be outraged right now.
The plan does not take into account the underlying cost of college
College tuition has rapidly outpaced inflation in recent decades, and the president’s plan fails to take into account the underlying costs of college for prospective students. The Center for a Responsible Budget estimates that student debt will again total $1.6 trillion, its current level, within five years.
“We estimate the cancellation will eliminate $550 billion in federal student loan debt,” the nonprofit said in an analysis of the announcement. “However, we expect the aggregate amount of federal student loan debt outstanding to return to $1.6 trillion (its current level) within five years.”
Democratic Congressman Chris Pappas of New Hampshire has expressed concerns about the ongoing cost of college.
“This announcement by President Biden is not a way to play politics and circumvent Congress and our oversight and fiscal responsibilities,” Pappas said in a statement. “Any plan to reduce student debt should go through the legislative process, and it should be more targeted and funded so as not to worsen the deficit. The president’s plan also fails to address the underlying issue of higher education affordability, and it’s clear that the high cost continues to limit opportunities for students.
The fact that the plan did not address the underlying cost of college was also one of Burr’s criticisms.
“This decision won’t solve sky-high tuition fees,” Burr said. “It will add fuel to the fire, increase the cost of university studies and accelerate inflation. It will encourage more schools to raise costs and encourage more students to take out loans they can’t repay in hopes they never have to.
Education Secretary Miguel Cardona, in an interview Wednesday with CBS News Radio White House correspondent Steven Portnoy, said lowering tuition was a priority for him.
“We’ve upgraded and improved our college scorecard, which gives credit to universities that are inclusive, that have better completion rates, that have better ROI,” Cardona said. “And we will continue to increase the accountability of our higher education institutions to ensure that students walk away with access to jobs, well-paying jobs. It’s a job we take very seriously at the department. You can’t have a student loan forgiveness and keep the system as it was.
The legal basis of the decision is likely to be challenged in court
The president and Cardona are using a post-9/11 law called the HEROES Act, which allows for debt forgiveness when it’s “in connection with war or other military operation or national emergency.” The national emergency, according to the Biden administration, is the pursuit, even as the administration touts the overall strength of the economic recovery. The Department of Education laid out its legal argument in a Tuesday memo.
“I have the power under the HEROES Act to ensure that people are not worse off after the pandemic than before,” Cardona told CBS News. “And we exercise this to provide targeted loan relief to those who are in difficulty. We know the pandemic has exacerbated disparities. And what we’re doing here is making sure that we’re taking care of some loan repayments and taking a system that’s broken down so that more students can get into college and get on with their lives.
But some lawyers aren’t so sure the legal justification will hold up in court. And even House Speaker Nancy Pelosi has previously said she doesn’t believe the president has the power to unilaterally cancel student debt.
“People think the President of the United States has the power to cancel the debt. He doesn’t,” Pelosi said in July 2021. “He can postpone. He can delay. But he doesn’t have that power. It must be an act of Congress.
Fordham Law School professor Jed Shugerman called a Justice Department memo on Tuesday justifying the president’s decision “weak.”
“The rationale is the COVID emergency, but it doesn’t even mention the Roberts Court rulings against the eviction moratorium and the vaccination mandate,” Shugerman tweeted, referring to times when the Supreme Court struck down uses of unilateral authority on COVID-19 grounds. “I don’t see this order surviving a legal challenge.”