President Biden'sto forgive between $10,000 and $20,000 of student loan debt for borrowers making less than $125,000 a year has incurred criticism from Republicans, some economists — and even some Democrats.
The plan, the White House says, will benefit up to 43 million Americans, wiping out billions of dollars of student loan debt. But critics of the debt cancellation argue it will contribute to already high inflation, does nothing to help low-income people who never attended college, is unfair to people who already paid off their student debt, doesn't address the underlying cost of college and even could be struck down by courts.
is crushing many American families' budgets. Senior administration officials told reporters on a call Wednesday that the resumption of loan repayments in January will offset any inflationary effects of forgiving loans, but not all economists agree on that point.
Former top Obama economic official Jason Furman tweeted Wednesday, "Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless."
The Center for a Responsible Federal Budget, a nonprofit and nonpartisan organization, estimated the student loan announcements Wednesday will cost more than double the amount saved through the climate and tax Inflation Reduction Act, "completely eliminating any disinflationary benefit from the bill."
"Unfair" to Americans who never attended college or paid off their loans
Another criticism of the president's plan is that it doesn't help Americans who never attended college, who, on average, earn less over their lifetimes than those who graduated from college.
The Social Security Administration says men with bachelor's degrees earn about $900,000 more in median lifetime earnings than their high school graduate counterparts. Women with bachelor's degrees earn $630,000 more over the course of their lifetimes than their counterparts who only attended high school.
Republicans were quick to point out the plan doesn't help those who never attended college.
"I think it is a bad idea," Senate Minority Leader Mitch McConnell said in Kentucky Wednesday. "An awful lot of Americans choose not to go to college."
GOP Senator Ted Cruz of had a similar criticism during a Wednesday press conference on hurricane systems in Galveston, Texas.
"What President Biden has in effect decided to do is to take from working class people," Cruz said. "To take from truck drivers and construction workers right now, thousands of dollars in taxes in order to redistribute it to college graduates who have student loans. "
Another criticism of the president's plan is that it's "unfair" to those who worked diligently to pay off their student loans. Senator Richard Burr, the top Republican on the Senate Health, Education, Labor and Pensions Committee, made that point.
"President Biden's announcement that he intends to cancel student loan debt is irresponsible, unfair, and deeply cynical," Burr said in a statement Wednesday. "He's asking taxpayers to subsidize debt held by some of America's highest earners in order to court votes. Every American who paid back their student loans, who put themselves through school by saving and working extra jobs, or who chose not to go to college at all should be outraged right now."
The plan doesn't address the underlying cost of college
College tuition has rapidly outpaced inflation in recent decades, and the president's plan doesn't address the underlying costs of college for future students. The Center for a Responsible Budget estimates that student debt will again be at a total of $1.6 trillion, its current level, within five years.
"We estimate that cancellation will eliminate $550 billion of federal student loan debt," the nonprofit organization said in an analysis of the announcement. "However, we project that the overall amount of outstanding federal student loan debt will return to $1.6 trillion (its current level) within five years."
Democratic Congressman Chris Pappas of New Hampshire voiced concerns over the ongoing cost of college.
"This announcement by President Biden is no way to make policy and sidesteps Congress and our oversight and fiscal responsibilities," Pappas said in a statement. "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. The president's plan also doesn't address the underlying issue of the affordability of higher education, and it is clear that the high cost continues to limit opportunities available to students."
That the plan doesn't address the underlying cost of college was one of Burr's criticisms as well.
"This move will not solve sky high college tuitions," Burr said. "This will pour fuel on the fire, increasing college prices and accelerating inflation. It will encourage more schools to increase costs and encourage more students to take out loans they cannot pay back in the hopes they'll never have to do so."
Education Secretary Miguel Cardona, in a Wednesday interview with CBS News Radio White House correspondent Steven Portnoy, said keeping tuition costs down is a priority for him.
"We've improved and enhanced our college scorecard, which gives credit to universities that are inclusive, that have better completion rates, that have a better return on investment," Cardona said. "And we're going to continue increasing accountability in our higher education institutions to make sure that students are leaving with access to jobs, high-paying jobs. This is work that we take very seriously at the department. You can't have student loan forgiveness and keep the system the way it was."
The legal basis for the decision is likely to face challenges in court
The president and Cardona are using a post-9/11 law called the HEROES Act, which allows for debt cancellation when it's "in connection with a war or other military operation or national emergency." The national emergency, according to the Biden administration, is the ongoing outlined its legal argument in Tuesday memo., even as the administration touts the general strength of the economic recovery. The Department of Education
"I have the authority under the HEROES Act to ensure that folks are not worse off after the pandemic than before," Cardona told CBS News. "And we're exercising that to provide targeted loan relief to those who are struggling. We know the pandemic exacerbated disparities. And what we're doing here is making sure we're addressing some loan forgiveness and taking a system that's broken so that more students can have access to college and continue on with their lives."
But some attorneys aren't so sure that legal justification will hold up in court. And even House Speaker Nancy Pelosi has previously said she doesn't believe the president possesses the authority to unilaterally cancel student debt.
"People think that the President of the United States has the power for debt forgiveness. He does not," Pelosi said in July 2021. "He can postpone. He can delay. But he does not have that power. That has to be an act of Congress."
Jed Shugerman, a professor at Fordham Law School, called a Tuesday Justice Department memo rationalizing the president's decision "weak."
"The rationale is COVID emergency, but it does not even mention Roberts Court rulings against eviction moratorium & vaccine mandate," Shugerman tweeted, referencing times when the Supreme Court struck down uses of unilateral authority for COVID-19 reasons. "I don't see this order surviving a legal challenge."
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