Biden’s proposed income-driven loan repayment plan
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CounterCurrent:
Dreaming of a Free Degree
Biden’s proposed income-driven
loan repayment plan
CounterCurrent is the National Association of Scholars’ weekly newsletter, bringing you the biggest issues in academia and our responses to them.
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Category: Student Loans/Debt; Reading Time: ~2 minutes
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** Featured Article - Biden Plans to Turn Student Loans into Delayed Grants by Andrew Gillen ([link removed])
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I often dream of buying a really nice car (I am, hopefully, joining some majority with this statement). It remains a dream precisely because asking for such a loan would no doubt endanger my banker’s health with the laugh it would elicit. And yet, if I were able to smuggle the loan for my dream car into the Department of Education’s proposed income-driven repayment plans, I might actually stand a chance.
In an article published today at Minding the Campus ([link removed]) , Andrew Gillen of the Texas Public Policy Foundation recounts the dreamy ins-and-outs of this new income-driven repayment plan. Previous iterations of the repayment plan allowed students to pay off their loans without defaulting and equalized consumption over time. This means that a zero-dollar income equals a zero-dollar monthly payment and a higher income equals a higher monthly payment, thus ensuring the burden of repayment is more evenly distributed.
These previous iterations have proven beneficial as a policy tool for multiple presidential administrations who wanted to grease the financial wheels of higher education to encourage greater attendance.
Unfortunately, over the same period the cost of college has begun to burden students and taxpayers alike. With little standing in the way of university bureaucrats multiplying like mechanic charges on a Ferrari, administrative bloat has ballooned at America’s colleges and universities. As we explain in our report Priced Out ([link removed]) , this bloat directly increases tuition and, thus, income from Federal student loan and grant programs.
The Biden administration has no desire to place any responsibility on colleges for increasing tuition. Politically, it can’t keep its hands tied as students take on greater amounts of debt. Thus we get to Biden’s income-driven repayment plan: a lowered cap on the length of repayment from 20 to 10 years and a minimum payment set at 5% of income above 225% of the poverty line.
Gillen notes that this new “plan will result in merely symbolic student loan payments.” Dreamy indeed. More from Gillen:
Nor will the median bachelor’s degree graduate repay any of his loans. Recent bachelor’s degree graduates earn a median of $47,000, and among borrowers, the median amount borrowed was $24,000. The median student would have a monthly payment of $68, and his annual payments ($816) wouldn’t even cover the interest on his loan ($1,200). Thus, the median bachelor’s degree graduate will repay none of what he borrowed and will have about one-third of the interest waived as well.
While this plan is an obvious boon for Americans still paying student loans and those thinking of attending college, it is a drain on the public purse. Worse, it does nothing to encourage the fiscally responsible administration of America’s colleges and universities, and it “breaks borrower discipline.” As Gillen notes, “we are no longer talking about a loan repayment program. Instead, the Biden Administration has converted student loans into a delayed grant program.”
Until next week.
Chance Layton
Communications Director
National Association of Scholars
Read More ([link removed])
For more on student loans and American higher education:
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November 17, 2022
** Statement on Recent Student Loan Court Decisions ([link removed])
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Teresa R. Manning
The Biden Administration's student loan forgiveness plan is overreaching and includes no reforms to the existing financing system. Recent court decisions point Biden to legislative, not executive, action.
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November 5, 2022
** Top Five Underappreciated Scandals from Biden’s Student Loan Forgiveness Plan [MTC] ([link removed])
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Andrew Gillen
While we wait on the courts to decide whether Biden’s actions are legal, we should make sure not to forget about the top five underappreciated scandals that accompanied the announcement.
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October 05, 2022
** 0% Interest on Student Loans Is the Next Debt Forgiveness ([link removed])
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Neetu Arnold
Interest-free student loans benefit the higher education system and the wealthy. But they are not in the interest of most Americans.
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February 24, 2021
** Priced Out: What College Costs America ([link removed])
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Neetu Arnold
This report details the spending habits of 50 universities across America and provides perspective from students, parents, and college administrators.
** About the NAS
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