Biden’s new student debt forgiveness plan faces criticism

U.S. House Education Committee Chair Rep. Virginia Foxx, R-NC, is taking aim at the Biden Administration’s recently announced student loan forgiveness action, stating the executive branch is “trampling the rule of law.”

In a recent press release, the U.S. Department of Education announced they would forgive $39 billion worth of student loan debt for more than 800,000 borrowers.

The announcement comes weeks after the U.S. Supreme Court struck down the administration’s previous student debt plan in Biden v. Nebraska. In a 6-3 decision, Chief Justice John Roberts opined that the administration had no legal authority to forgive student loan debt unilaterally and must seek Congressional approval.

Soon after the Supreme Court’s decision, Biden said in a statement that “this fight is not over,” signaling his plan to continue considering avenues to forgive loan debt.

Now, Biden’s SAVE (Saving on A Valuable Education) plan intends to “cut payments” for those who owe student loans through income-driven repayment (IDR) plans, according to the administration. The SAVE plan has become the focal point of the administration’s efforts to relieve student debt.

However, administration officials are characterizing the Education Department’s action not as a part of the SAVE plan, but as an administrative “fix” meant to correct inaccurate IDR payment amounts.

“For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress towards forgiveness,” said Secretary of Education Miguel Cardona.

However Foxx, representing North Carolina’s 5th District, did not buy the administration’s explanation, characterizing it as an attempt to go around the Supreme Court’s recent decision on loan debt.

“The Biden administration’s blatantly political attempt to circumvent the Supreme Court is shameful. The Biden administration is trampling the rule of law, hurting borrowers, and abusing taxpayers to chase headlines,” said Foxx.

“Biden’s student loan scam is far from over. From day one, this administration has encouraged borrowers not to repay their loans and has expected taxpayers to foot the bill. Today’s celebration of counting no payments as payments is just the latest example of the ongoing delusion at the White House,” she added.

According to 2022 Department of Education figures, North Carolina ranks the eighth highest state on the average amount of student debt owed, with the average borrower owing $37,920. An estimated nearly 1.4 million North Carolinians currently owe student loans.

A separate study from WalletHub out this week ranked two North Carolina cities among the ten most educated in the nation, with the state ranking 26th overall for residents’ level of education.

Biden’s plan

According to the U.S. Department of Education, 804,000 borrowers will be forgiven a combined $39 billion in federal student loans. Officials characterize the act as “a result of fixes implemented by the Biden-Harris Administration to ensure all borrowers have an accurate count of the number of monthly payments that qualify toward forgiveness under income-driven repayment (IDR) plans.”

The federal government issues IDR plans in four types and are intended for low income individuals. Officials state that amounts due on IDR plans have been inaccurate, vaguely blaming them on “historic failures.”

The department also said borrowers will be eligible for forgiveness if they have made 20 or 25 years of consistent monthly IDR payments.

Most analysts expect a legal challenge to the $39 billion loan forgiveness. Experts are divided on the legality of the plan, with some believing that the administration’s action will likely withstand legal scrutiny due to differences between Biden’s previous, large-scale debt forgiveness plan that failed Supreme Court judicial review and the act of the Education Department forgiving debt as part of a department-wide “fix.”

However, George Leef, Director of External Relations for the N.C.-based James G. Martin Center for Academic Renewal, called the move “patently illegal,” in a statement to Carolina Journal.

“It is illegal because under the Constitution, the executive branch has no authority to ‘forgive’ any kind of payment that is due to the Treasury,” said Leef. “The powers of the executive are clearly defined and do not include any such authority. Only Congress has the power to change the fundamental terms of student loan repayments.”

Concerns for taxpayers

On Monday, the Penn Wharton Budget Model released a study stating Biden’s plan to forgive IDR payers through the SAVE plan will cost nearly $559 billion over the next ten years. This figure exceeds the projected costs of $276 billion previously reported by the Congressional Budget Office (CBO).

Opponents of the plan, such as Louisiana GOP Senator David Cassidy, characterized it as a “burden” on taxpayers and those who do not owe loans.

Leef lamented the possible effects of Biden’s student loan debt policies going through, stating, “the consequences would be very bad: colleges would increase tuition, taxpayers will have to carry still more of the burden of college costs, and students will have less incentive to study diligently since they will have less of their own money at stake.”

The $39 billion of IDR plan forgiveness is set to go in effect this fall, around the same time student loan repayments start-up again after over two years of a payment freeze due to the COVID-19 pandemic.

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