Conservatives and U.S. Education Department consultants are blasting calls for President-elect Joe Biden to take immediate action on the country’s $1.7 trillion student loan debt crisis, claiming taxpayers and poor Americans will end up paying for any forgiveness proposal.
Top congressional Democrats, including Senate Minority Leader Chuck Schumer, are urging Biden to use executive action and to circumvent Capitol Hill inaction in order to forgive $50,000 in student loans for the 45 million Americans drowning in academic debt.
Pushing back this week, however, right-leaning think tanks and financial advisers say they’re not worried about Americans who went to college, claiming a “mass bailout” from canceling such debt only helps a tiny “elite” of graduates with more than $25,000 in loans. The Trump administration remains staunchly opposed to wide-scale debt erasing of any kind, pointing to income-based repayment plans as the most effective tool for paying back the staggering debt totals over time.
An internal Education Department analysis this week said Americans will soon be on the hook for $435 billion from the student loan program, which is “nearly on par with the taxpayers’ tab in the [$535 billion] subprime mortgage crisis!” as conservative TV host Trish Regan complained Saturday.
“We need to stop pretending that student loan debt is actually a ‘crisis.’ The average monthly payment is $200-$299. If you can’t pay that, as a college graduate, it’s your own fault,” wrote Brad Polumbo, fellow at the libertarian Foundation for Economic Education think tank.
A few Republicans such as Senator Lamar Alexander of Tennessee have expressed at least some openness to student debt proposals. But most GOP lawmakers say the universities and colleges themselves must be held more accountable for the degrees they offer and the jobs their graduates acquire.
Former Obama-era treasury department leaders, among them Larry Summers and Constantine Yannelis, say college graduates “made an investment in themselves,” and are attempting to push this financial burden onto the average U.S. taxpayer. But Marshall Steinbaum, a Jain Family Institute senior fellow, said some of “the smart[est] economists in the room” like Summers are too old to even “understand the economics of student debt.”
A 2019 Pew Center survey found the generational age gap is key: more than one-third of all U.S. adults under 30 have student loan debt.
“I’m more worried about the Americans who don’t go to college than the Americans who do,” Summers told Yahoo! Finance Saturday. “So I worry that, unless it’s done carefully, this could be upwards redistribution of income, rather than downwards redistribution of income.”
But New York Post columnist Jonah Goldberg, however, was less candid, accusing those with student loans of “making the working class subsidize the elite!”
“Most people who did go to college have no or very little student debt,” Goldberg wrote in the Post Friday. “According to the liberal-leaning Brookings Institution, roughly 30 percent of undergrads have none. Another 25 percent have up to $20,000 in loans. Despite what you may have heard about the student debt crisis, only 6 percent of borrowers owe more than $100,000. Virtually all of them borrowed so much because they attended graduate school.”
Conservatives are now pointing to an internal Education Department analysis of the federal student loan program reported by The Wall Street Journal this week that found the government is set to lose $400 billion on the “toxic debt” owed by tens of millions of former and current American students. The analysis was commissioned by Education Secretary Betsy DeVos and used FI Consulting and Deloitte accounting to gauge whether government accountants have underestimated how little borrowers pay back over a 10-year period of time.
The report blamed the “no-questions asked lending” practices by private lenders that are backed by the federal government’s loan program for those seeking higher education.
“We make no attempt to evaluate the quality of the borrower, the ability to repay, the effectiveness of the loans,” said Douglas Holtz-Eakin, a former head of the Congressional Budget Office who now leads the conservative think tank American Action Forum, in an interview with the Journal. “The taxpayer ends up picking up the tab.”
Democratic Senators Schumer and Elizabeth Warren in September introduced a resolution that outlined a plan for Biden to “use existing authority under the Higher Education Act to cancel up to $50,000 in Federal student loan debt for Federal student loan borrowers.”
Biden has expressed openness to a $10,000 per student forgiveness plan, but has reiterated he would prefer the perpetually deadlocked Congress try to craft a bill together. With very few Republicans even considering student loan debt anything more than a personal responsibility issue, analysts say that is unlikely to happen. Biden said last week millions of students are deciding between paying their student loans or paying rent.
“If we can provide over $1 trillion in tax breaks to the top 1% and large corporations and $740 billion for the bloated Pentagon, please don’t tell me that we cannot afford to cancel all student debt and make public colleges and trade schools tuition-free and debt-free for all,” Vermont Senator Bernie Sanders tweeted Friday.
Some Republican strategists say the GOP is very aware of the political ramifications of avoiding any student loan debt plan. A GOP-funded Pennsylvania campaign flyer for Trump claimed he “suspended student loan payments” as one of his “promises kept. In reality, he simply signed the bipartisan CARES Act in March.
On March 20, DeVos directed the office of Federal Student Aid to suspend federal student loan payments, stop collections on defaulted loans, and to set interest rates at 0 percent for 60 days. These pandemic provisions were signed into law with Congress’ passage of the CARES Act on March 27. Trump directed DeVos to continue the suspensions until December 31.
Newsweek reached out to the Education Department for additional remarks Saturday evening.
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