President Joe Biden’s student loan plans have been causing quite a stir since the Supreme Court knocked down the $400 billion debt transfer. The Biden White House has been frantically working to regroup and attack the issue on multiple fronts. It’s getting so complicated that even professional loan forgiveness followers are having trouble keeping up. The director of the Cato Institute’s Center for Educational Freedom, Neal McCluskey, admitted, “I find it very hard to track what is happening and how they’re doing it. So I imagine that the average person is unable to follow any of this. I don’t know whether that is intentional or not.” Seems like the Biden administration is really trying to keep everyone on their toes.
Biden initially announced a flashy plan back in August 2022, just before the midterm elections, but it was a no-go after the Supreme Court took it down in June 2023. Despite repeated pledges that there was no Plan B if the high court overturned the program, the Biden administration bounced back by unveiling the Saving on a Valuable Education (SAVE) plan. This plan would seriously decrease the amount that most student loan borrowers would have to pay back, and most loans could be written off completely after 20 years. But critics, like Adam Looney from the Brookings Institution, believe it could benefit those who have the least career success the most.
Changing majors: Biden revamps, scales down student debt schemes
— Washington Examiner (@dcexaminer) November 10, 2023
Now, that SAVE plan is aimed at future borrowers, not those who are already in the hole with student loans. For them, the Department of Education introduced new loan forgiveness initiatives, including identifying groups of borrowers who might see their loans forgiven. These groups could include those with loan balances exceeding their original balance, loans that are more than 25 years old, those who are struggling with “unreasonable debt loads or provided insufficient earnings,” and those who are eligible for repayment plans but haven’t applied for them. There’s even talk of a fifth group being added later for those experiencing financial hardship not adequately addressed by the current student loan system.
It’s a lot of promises being made, but McCluskey points out that the talk of easy forgiveness might actually make colleges hike up their prices because students might feel like they can get away without paying them back. He also raised concerns about the administration’s vague language around forgiveness giving false hope to incoming college students. And he’s not the only one—House Education and the Workforce Committee Chairwoman Virginia Foxx (R-NC) thinks the administration’s plan is just “more of the same garbage” meant to secure votes and doesn’t address the root issue of skyrocketing college costs.
The rulemaking process for these new loan forgiveness initiatives is a lengthy one, including public comment and six meetings by a 16-member committee consisting of students and officials from various colleges, along with loan servicers, state officials, and advocates. These negotiations are being scrutinized closely by advocates of transferring student debt, who are eager to see some broad debt cancellation. And with a final rule set to be released early next year, it’s clear this won’t be wrapping up anytime soon.
Despite all the noise around student loans, data from the College Board reveal that the average size of federal loans per student has actually been decreasing since 2010, as the burden of loan debt has started to get more attention. It seems that students and voters are becoming more conscious of the trade-offs of attending college, especially the heavy debt that can come with it. Looks like the old saying “knowledge is power” really rings true here!