Why Obama’s Student Loan Forgiveness Plan Is Disappointing to Progressives
There’s some skepticism over Biden’s plan to cancel student loan debt. Progressive Democrats are upset that the plan will limit forgiveness to borrowers who received federal loans and is based on nonsensical means-testing. And what about the impact of this plan on borrowers who don’t have a college degree? Here are three reasons why the plan is disappointing to progressives. You can read more about them at the links below.
Biden’s plan to cancel student loan debt is a major disappointment for progressive Democrats
A recent poll by data for progress, a progressive think tank, found wide support for a student loan debt cancellation plan. However, there was no statistically significant difference in support for a $10,000 or a $50,000 cancellation. Additionally, the poll also found little enthusiasm for the plan among Democrats outside of the progressive wing of the party. While Biden has previously expressed support for student debt cancellation, his latest remarks indicate that the majority of voters in this demographic do not tune in to Washington.
While Biden may have a plan for a student debt cancellation, he has so far failed to implement it. The Biden administration is currently studying whether to give a presidential executive order to forgive student loans. And, in an apparent attempt to avoid any political fallout from his student loan debt cancellation plan, the incoming president didn’t mention it at all during his State of the Union address. Instead, he seemed to focus on policing and immigration reform.
Limiting forgiveness to federal student loan borrowers
President Joe Biden is taking a hard look at the idea of forgiveness for federal student loans. It seems like the president is trying to avoid the political backlash that accompanies such an ambitious proposal, but a broad plan would leave out the 43 million borrowers it is most designed for. In fact, he’s hinted that he may limit student loan debt forgiveness to borrowers who owe at least $10,000 on their loans.
While a modest increase in the per-borrower forgiveness amount does shift the percentage of forgiveness from lower-income borrowers to higher-income groups, it also shifts a larger share of the debt to older borrowers. For example, those over 60 years old get the least forgiveness, as they represent 32 percent of the total U.S. population. Yet, they receive only six percent of the forgiven dollars – a share roughly in line with their share of federal student loan debt.
Nonsensical means-testing of forgiveness
The education department’s new plan to erase debt for former students is far from a perfect solution. In fact, means-testing is counterproductive, as it shuts out those who deserve it while punishing others for being undeserving. Not only does means-testing result in depressing statistics, but it also makes people hate the federal government and relief programs in general.
This plan would make matters worse, as it wouldn’t fix the problems with current student loan policies. The portfolio of borrowers would be back to the current level in four years, and the overall debt for all borrowers would be at the pre-cancellation level by 2026. As a result, means-testing will only make student loan debtors’ financial situation worse and raise higher education costs.
The Biden administration’s plan is also flawed because it excludes a large segment of the population. A means test for student loan forgiveness Plan Is Disappointing to Progressives will likely result in the government building a verification system for student debt that cuts out a significant portion of the population. A government program that aims to reduce student debt should be able to recognize and accommodate all borrowers, regardless of income or net worth.
Impact on borrowers with no degree
The government’s decision to purchase privately-held student loans would add 2% to the national debt burden. Its plan to forgive at least 10 percent of borrowers’ debt is also controversial. According to the government’s website, a bill to cancel up to $10,000 in student loans would require the signing of a bill by Vice President Biden. Although Congress is far from introducing legislation to provide loan forgiveness, the Obama administration has shown the potential for bold executive action on this issue.
Biden announced the pause in student loan payments for the third time. This means that borrowers will be interest-free until May 1, 2022. He did not mention a loan cancellation or forgiveness program but urged borrowers to be prepared for repayment. The Biden administration’s plan has already impacted millions of borrowers, so he did not intend to make his decision without having discussed the matter with the public.