Republicans call the large-scale cancellation of student loans “reckless” and bad policy.
Here’s what you need to know.
Republicans on the U.S. House Committee on Education and Labor have a message on student loan forgiveness for President Joe Biden. Rather than pushing for systemic change in higher education, Republicans to accuse the president to appease the progressive wing of the Democratic Party. Specifically, Republicans claim:
The federal student loan system is broken.
Republicans say the federal student loan system is broken. (Here’s how federal student loans will change this year). Currently, any student borrower can qualify for a federal student loan issued by the federal government. There is no credit score requirement to qualify. Therefore, the federal government does not guarantee any federal student loans. This means that every borrower gets the same interest rate, regardless of their underlying credit risk. (This politician called increasing student loan relief a “terrible idea”). While access to higher education is an important goal, Republicans have argued that lending to all borrowers who cannot pay their student loans poses inherent default risk for the federal government. When access to federal student loans is easy, Republicans argue that colleges and universities have an incentive to keep raising tuition. This makes college more expensive and increases the risk of student loan default, which ultimately hurts student borrowers.
(Here are 6 major changes to student loan forgiveness)
Canceling student loans disproportionately benefits high-income borrowers
Currently, there are approximately 45 million student borrowers. This represents approximately 20% of American adults. This means that 80% of American adults no longer have student loans or have never attended college. There are approximately $1.7 trillion in outstanding student loans. According to research, student borrowers who have graduated from college can earn about $1 million more over their lifetime than people who only have a high school diploma. Moreover, about half of all student debt comes from higher education. While not all graduate degrees generate high earnings, many graduate degrees generate six-figure earnings for doctors, lawyers, and dentists. Republicans are concerned about any legislation that would support blanket student loan forgiveness for all student borrowers. For example, Sen. Bernie Sanders (I-VT) wants Biden to forgive all student loans, including private and federal student loans.
Canceling student loans does nothing for future generations
Republicans prefer fundamental reform of higher education rather than a one-time cancellation of student loans, which they consider to be bad policy. Current proposals for large-scale student loan forgiveness call for a “one-time” student loan forgiveness. This means that Congress would cancel federal student loans for current borrowers. However, the student borrower who borrows new student debt tomorrow would be out of luck. Therefore, one-time student loan forgiveness provides immediate student loan relief to current borrowers, but ignores the fate of future student borrowers. Republicans say this imbalance “ignores the systemic problems plaguing the student loan program that created the vicious debt spiral and tuition bubble we have today.”
(Student loan refinance rates have gotten ridiculously cheap)
What this means for your student loans
While Biden has canceled $15 billion in student loans, Biden has focused on targeted student loan cancellation. Biden has made it clear that he does not plan to enact large-scale student loan forgiveness because he does not believe he has the authority to do so. Instead, Biden urged Congress to forgive up to $10,000 in student loans for borrowers. Biden has extended temporary student loan relief three times and made historic reforms to student loan forgiveness that will make it easier for borrowers to qualify for student loan forgiveness. (Where Biden stands on student loan relief). However, Biden did not mention student loans or student loan forgiveness in his State of the Union address. Progressives argue that Biden has the executive power to cancel student loans for all borrowers. They believe the president must cancel student loans to reduce disparities, stimulate the economy and allow borrowers to buy homes, start families and save for retirement. (Cancellation of the student loan could be the reason the Democrats lose the midterm elections).
Student loan relief is expected to end in less than 60 days. Make sure you have a game plan for your student loans. Here are some popular ways to pay off your student loans faster:
Here are some popular ways to pay off student loans faster: