5 reasons why student loan forgiveness is a bad idea
Here are 5 reasons why student loan forgiveness is a bad idea, according to a leading Republican U.S. Senator.
Here’s what you need to know — and what it means for your student loans.
Sen. Roy Blunt (R-MO), the top Republican on the Senate Appropriations Subcommittee on Labor, Health, and Human Services, delivered a speech detailed discourse on why large-scale student loan cancellation is bad policy. Among his arguments:
1. Canceling student loans disproportionately benefits the wealthiest Americans
First, Blunt notes that over 80% of Americans don’t have student loans. Why? Either they paid off their student loan or they never went to college. There are approximately 45 million student borrowers and approximately 250 million American adults. Notably, 60% of student debt is held by households earning more than $74,000 in annual income. Blunt says student loan forgiveness disproportionately benefits wealthier Americans. Are there individual student borrowers experiencing financial difficulty? Certainly. However, Blunt notes that the ability to go to college and earn a college degree is an asset that leads to higher income on average. As an alternative to canceling student loans, Blunt would prefer that Congress increase Pell Grants to reduce the cost of college education for financially vulnerable students. “The richest 40% of American households hold 60% of student loans,” Blunt said. “The bottom 40% have less than 20% of student loans. If you were to talk about that, maybe you should talk about—maybe we should talk about the bottom 40%, not the top 40%, [with] widespread debt forgiveness.
2. Biden has no legal authority to cancel student loans
Second, Blunt says President Joe Biden does not have the legal authority to enact large-scale student loan forgiveness without congressional authorization. Senator Elizabeth Warren (D-MA) disagrees, noting that the Higher Education Act of 1965 granted the president (through the U.S. Secretary of Education) unlimited power to cancel an unlimited amount of student loan debt for an unlimited number of student borrowers. . However, Blunt says you don’t have to take his word for it. House Speaker Nancy Pelosi (D-CA) and Biden said the president does not have unilateral authority to cancel student loans. Rather, Congress must pass legislation or otherwise authorize the president to act on student loan forgiveness.
3. Biden has shown no commitment to large-scale student loan cancellation
Third, Blunt notes that despite the rhetoric of canceling $10,000 in student loans for borrowers, the Biden administration has not prioritized large-scale student loan cancellation. Yes, Biden has forgiven $25 billion in student loans since becoming president. This student loan cancellation, however, targeted specific borrowers, such as government employees or borrowers with permanent disabilities. Blunt notes that Biden did not include any requests for large-scale student loan forgiveness in his latest legislative budget. Last week, US Education Secretary Miguel Cardona met with Blunt and his colleagues on Capitol Hill to discuss the education budget, but it didn’t include any student loan requests. There are several student loan forgiveness proposals in Congress, but Blunt says the president hasn’t sent a proposal, which a friendly Democratic colleague could present and then the Senate could debate. While Democrats control the Senate, for example, Senate Majority Leader Chuck Schumer (D-NY) didn’t even pass large-scale student loan cancellations in the Senate.
4. Biden should cut inflation rather than cancel student loans, which can increase inflation
Fourth, Blunt says large-scale cancellation of student loans could increase inflation. “What Americans really need right now is relief from the crippling inflation we’re seeing, not more bad policies that pump more money into the economy and drive up inflation. on an even higher level,” Blunt said. If the economy is doing so well, Blunt asks, then why is the president potentially spending over $300 billion to forgive student loans, which benefits the wealthiest Americans? Blunt also questioned why student loans would be forgiven rather than mortgage debt, credit card debt or auto debt.
5. Canceling student loans will not reduce the cost of education
Fifth, Blunt asserts that large-scale student loan forgiveness increase the cost of college. Why? Future student borrowers will take student loans and think they won’t have to pay them back. This sends the wrong message about personal responsibility, argued Blunt.
Proponents of large-scale student loan forgiveness claim that large-scale student loan forgiveness provides multiple benefits. This includes economic stimulus, disparity reduction, and financial assistance for student borrowers to get married, start a family, buy a home, save for retirement, or start a business. With temporary student loan relief ending soon, Biden could decide the future of student loan forgiveness in the coming weeks or months. Until then, be sure to focus on your student loan repayment game plan. Start here when considering all of your student loan options: