American Action Forum chairman Doug Holtz-Eakin argues that forgiving student loans ‘does nothing’ to improve education and would ‘burden taxpayers’.
President-elect Joe Biden can deliver on his campaign promise to cancel billions of dollars in student loan debt after Democrats became the Senate last week, securing a monopoly on power for the first time in more than a decade.
The next Biden government plans to ask Congress to immediately cancel $ 10,000 in student debt for all borrowers – a move that is likely to attract criticism from both Republicans, who are concerned about the country’s growing deficit, and progressive Democrats who want the president move further to the left question.
Sens. Chuck Schumer, DN.Y. and Elizabeth Warren, D-Mass., as well as Reps. Alexandria Ocasio-Cortez, DN.Y., and Ayanna Pressley, D-Mass., Urged Biden to use an executive in order to cancel $ 50,000 of outstanding federal student loans per borrower.
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Warren said Biden could use the existing executive authority under the Higher Education Act to order the Department of Education to cancel student loan debt. Previous estimates show that the proposal would provide total forgiveness to more than 75% of borrowers and partial forgiveness to more than 95%.
“We have to put a lot of pressure on the Biden government,” Ocasio-Cortez told Punchbowl News last week. “This whole thing, ‘We can’t cancel student loan debt’, is not going to work.”
But Biden said it is “debatable” whether the president has the power to forgive $ 50,000 in student debt without Congressional approval.
“I’m going to be in trouble for saying that, [but] it is debatable that the president may have the executive power to forgive up to $ 50,000 in student debt, ”Biden told The Washington Post in December. “Well, I find that quite questionable. I’m not sure about that. I am unlikely to do that. “
Under legislation endorsed by Biden, borrowers in economic distress would immediately have $ 10,000 in student debt forgiven. The government would also cover monthly loan payments to people with private student loans until September 2021 and forgive $ 10,000 of their debt.
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“Immediate forgiveness of $ 10,000 in student loans, helping people with real problems,” said Biden in November. “They are having to make choices between paying the student loan and paying the rent. Those kinds of decisions. “
Critics of debt cancellation of large stocks also argued that it would disproportionately benefit individuals with higher incomes, who probably did not lose their jobs during the pandemic-induced recession. More than 70% of the dismissed workers do not have a bachelor’s degree, including 43% who have not attended any college.
Less than a third of all student debt is held by families without a bachelor’s degree – while nearly two-fifths of debt is held by families with graduate degrees. Recent research conducted by the Pew Research Center shows that most of the economic suffering from the crisis is concentrated among individuals with less education.
The analysis of the Committee for a Responsible Federal Budget shows that canceling student loan debt is an ineffective stimulus measure: eliminating $ 1.5 trillion in loans would translate into just $ 90 billion or less in cash available to spend in 2021 and $ 450 billion over the next five years.
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“Most of those most affected by the current economic crisis probably have little or no student debt,” said the analysis, noting that more than 70% of unemployed workers do not have a bachelor’s degree. “It is unlikely that the widespread cancellation of student debts is well targeted at those who are experiencing loss of income.
Outstanding student loan debt has doubled in the past decade, reaching an impressive $ 1.7 trillion. About one in six American adults owes money on federal student loan debt, which is the largest amount of non-mortgage debt in the United States. It was cited as a major obstacle in people’s “economic life” by Federal Reserve Chairman Jerome Powell.
Biden also promised to extend the Trump administration’s pause on federal student loan payments, which is scheduled to expire this month. It is unclear how long Biden would extend the payment freeze.
“On the first day, the president-elect will instruct the Department of Education to extend the existing pause in student loan and interest payments to millions of Americans on federal student loans,” said David Kamin, the next deputy director of the National Economic Council.