Here are 5 reasons why student loan forgiveness is a bad idea, according to a top 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 detailed speech on why wide-scale student loan forgiveness is bad policy. Among his arguments:
1. Student loan forgiveness disproportionately benefits wealthier Americans
First, Blunt notes that more than 80% of Americans don’t have student loans. Why? They either paid off student loan debt or never went to college. There are approximately 45 million student loan borrowers and approximately 250 million adult Americans. Notably, 60% of student loan debt is held by households that earn more than $74,000 of income annually. According to Blunt, student loan forgiveness disproportionately benefits wealthier Americans. Are there individual student loan borrowers who are struggling financially? Certainly. However, Blunt notes that having the opportunity to attend college and earn a college degree, is an asset that on average leads to higher income. As an alternative to student loan forgiveness, Blunt would rather have Congress increase Pell Grants to lower the cost of college for students who are financially vulnerable. “The top 40% of American households hold 60% of the student loans,” Blunt said. “The bottom 40% have less than 20% of the student loans. If you were going to talk about this at all, maybe you ought to talk about—maybe we should be talking about the bottom 40% of incomes, not the essentially the top 40% of incomes, [with] an across-the-board forgiveness of debt.”
2. Biden doesn’t have the legal authority to cancel student loans
Second, Blunt says that President Joe Biden doesn’t have the legal authority to enact wide-scale student loan cancellation without congressional authorization. Sen. Elizabeth Warren (D-MA) disagrees, noting that the Higher Education Act of 1965 granted the president (through the U.S. Secretary of Education) an unlimited power to cancel an unlimited amount of student loan debt for an unlimited amount of student loan borrowers. However, Blunt says you don’t have to take his word for it. Speaker of the House Nancy Pelosi (D-CA) and Biden have said the president doesn’t 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 wide-scale student loan forgiveness
Third, Blunt notes that despite the rhetoric to cancel $10,000 of student loans for borrowers, the Biden administration hasn’t prioritized wide-scale student loan cancellation. Yes, Biden has canceled $25 billion of student loans since becoming president. That student loan cancellation, however, has been targeted at specific borrowers, such as public servants or borrowers with a permanent disability. Blunt notes that Biden didn’t include any request for wide-scale student loan cancellation in his most recent legislative budget. Last week, U.S. Secretary of Education 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 proposals for student loan forgiveness in Congress, but Blunt says that the president hasn’t sent a proposal, which a friendly Democratic colleague could introduce and then the Senate can debate. While Democrats control the Senate, for example, Senate Majority Leader Chuck Schumer (D-NY) hasn’t even brought wide-scale student loan forgiveness to the Senate floor to a vote.
4. Biden should lower inflation rather than cancel student loans, which can increase inflation
Fourth, Blunt says that wide-scale student loan forgiveness could increase inflation. “What Americans really need right now is relief from the crushing inflation we see, not more bad policies that put more money into the economy and drive inflation to an even greater height,” Blunt said. If the economy is doing so well, Blunt asks, then why is the president potentially spending more than $300 billion to cancel student loans, which benefits wealthier Americans? Blunt also questioned why student loans would be cancelled rather than mortgage debt, credit card debt or auto debt.
5. Student loan forgiveness won’t lower the cost of college
Fifth, Blunt says wide-scale student loan forgiveness will increase the cost of college. Why? Future student loan borrowers will borrow student loans and think they won’t have to pay them back. It sends the wrong message about personal responsibility, Blunt has argued.
Supporters of wide-scale student loan cancellation say wide-scale student loan forgiveness offers multiple benefits. This includes economic stimulus, reduction of disparities and financial relief for student loan 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, make sure to focus on your game plan for student loan repayment. Start here as you consider all your options for your student loans:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)