President Joe Biden on Wednesday announced a plan for the federal government to pay off $10,000 in student debt for borrowers whose income is less than $125,000 (or $250,000 for married couples), and twice as much for Pell Grant recipients.
The plan, which delivered on a Biden campaign promise, drew a harsh response from Republicans, who argued that it is an unfair policy, particularly for all the individuals who have worked to save money to pay for education.
“President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt. This policy is astonishingly unfair,” Senate Minority Leader Mitch McConnell wrote in a statement.
Sen. Ted Cruz called it “insane” and “illegal” in a tweet criticizing the plan.
Insane – and illegal!
We have the highest inflation in 40 years/highest gas prices ever, but Biden wants to spend even more at the expense of hard-working Americans.
The middle class will be stuck with the bill – it’s debt transfer.
This is just a Hail Mary before midterms. https://t.co/tJi6yoiztU
— Senator Ted Cruz (@SenTedCruz) August 24, 2022
However, Biden’s plan has also divided the Democratic Party.
Politico has even called it “[t]he centrist revolt against Biden’s student debt plan.”
“I don’t agree with today’s executive action because it doesn’t address the root problems that make college unaffordable. We should be focusing on passing my legislation to expand Pell Grants for lower income students, target loan forgiveness to those in need, and actually make college more affordable for working families,” Democratic Sen. Catherine Cortez Masto of Nevada said, according to the Nevada Independent.
Are you in favor of Biden’s student debt relief plan?
Chris Pappas, a New Hampshire representative, also said that he didn’t agree with the administration going around the legislature with this issue.
“[T]his announcement by President Biden is no way to make policy and sidesteps Congress and our oversight and fiscal responsibilities. Any plan to address student debt should go through the legislative process, and it should be more targeted and paid for so it doesn’t add to the deficit,” Pappas said, Fox News reported.
Jared Golden, a representative from Maine, said that this plan is simply not something the American people want from the White House at this time.
“This decision by the president is out of touch with what the majority of the American people want from the White House, which is leadership to address the most immediate challenges the country is facing,” Golden said, according to the Bangor Daily News.
The White House fact sheet outlining the plan said that there is $1.6 trillion of student debt among 45 million borrowers and that the burden of debt is hindering many from buying homes, saving for retirement and starting small businesses.
But Biden’s new three-part plan will make a “comprehensive effort to address the burden of growing college costs and make the student loan system more manageable for working families.”
The Department of Education will provide up to $10,000 in debt cancellation for those who have an individual income of less than $125,000, or $250,000 for married couples, the White House fact sheet said.
The Department of Education will also cap monthly loan payments for individuals, reduce the price of college by holding schools more accountable for tuition hikes and repair the “broken” Public Service Loan Forgiveness program to the benefit of any borrowers working for a nonprofit, in the military, or in any form of federal, state, tribal or local government.
But while many Democratic economists and lawmakers are displeased with Biden’s plan, there are others farther left on the political scale who have argued that the administration’s big step in debt forgiveness simply isn’t enough.
Before the administration even announced its official plans, a coalition of advocacy groups urged the president to cancel more than just $10,000 in debt, Forbes reported in June.
Over 500 organizations, including labor unions and civil rights groups, wrote to President Biden and urged him to cancel larger amounts of debt.
“There is growing energy and strong bipartisan public support for immediate broad-based debt cancellation. Such executive action is one of the few available tools that could immediately provide a boost to upwards of 44 million borrowers and the economy,” the coalition wrote.
NAACP President Derrick Johnson said that the black community is in need of greater loan forgiveness and that $10,000 is not enough.
“The average Black borrower has $53,000 in student loan debt four years after graduation, nearly twice the amount as their white counterparts. President Biden, $10,000 will not help those in the lower class who have been devastated by our oppressive system,” Johnson said, according to Forbes.
“The Black community will be watching closely when you make your announcement, but $10,000 is not enough. $10,000 in cancellation would be a slap in the face. President Biden, it’s not about whether you can do it, it’s about whether or not you have the will to do it,” he added.
Yet, despite some progressives’ urging for the administration to take even more drastic debt-canceling measures, other Democrats have not only disapproved of the plan, but are also concerned about its legal and economic viability.
“Because Mr. Biden used executive action, rather than legislation, to forgive the loans, legal challenges are expected,” the New York Times explained Wednesday.
Even the Speaker of the House, Nancy Pelosi, warned of this problem last year.
“People think that the president of the United States has the power for debt forgiveness. He does not. He can postpone, he can delay, but he does not have that power. That … has to be an act of Congress,” Pelosi said.
>> @SpeakerPelosi says Biden does *not* have the power to cancel student loan debt — as some Democrats, led by @SenSchumer, are urging him to do.
“That has to be an act of Congress,” Pelosi says. pic.twitter.com/2V7ALDDG3y
— Michael Stratford (@mstratford) July 28, 2021
Meanwhile, economists, even those generally in step with the Biden White House, have warned people about the cost of student debt cancellation.
Jason Furman, a former Obama administration economist, criticized the plan of debt cancellation.
“Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse,” he tweeted.
Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse.
— Jason Furman (@jasonfurman) August 24, 2022
The Committee for a Responsible Federal Budget agreed that Biden’s plan will make inflation worse.
“Debt cancellation would boost near-term inflation far more than the IRA [Inflation Reduction Act] will lower it,” the committee noted in its publication. “$10,000 of debt cancellation could add up to 15 basis points up front and create additional inflationary pressure over time.”
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