Biden: “Forgive us some of your debts, but not all”

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I come back to a recurring theme in recent blogs, student loans. In the title above, I shamelessly borrow, distorting the famous wording of the Lord’s Prayer found in the book of Matthew in the Christian Bible. Going to college these days is often a matter of “debts” and “debtors”.

At a public meeting recently hosted by TBEN in Wisconsin, President Joe Biden said he would not write off $ 50,000 in student debt for those who borrow to finance college through a management decision. the federal guaranteed student loan program. In making the statement, he rejected demands from Democratic heavyweights such as Senate Majority Leader Chuck Schumer and Senator Elizabeth Warren. He did, however, consider the possibility (probability?) Of approving a $ 10,000 rebate plan.

True, some of us still consider that the U.S. Constitution governs these matters and that any significant change in federal law (in this case the Higher Education Act, must require the approval of Congress, the House and the Senate simply pass a bill requiring a loan forgiveness of $ 50,000? One possible reason: they don’t have the votes, especially in the Senate.

There has been a lot of speculation as to whether President Biden has been captured by the relatively far-left leaders of his party or whether he will adhere to his historic, distinctly left-wing but not drastic positions, those which he believes current Democratic Party standards, are relatively in the middle of the road. Biden is aware that he can only do so much through executive action, and, in addition to annoying much of the electorate, aggressively progressive measures will offend relatively moderate Congressional Democrats whom he will need like Joe Manchin from West Virginia or Kyrsten Sinema from Arizona. , possibly preventing its ability to pass a law.

I guess the president feels the urge to do some student loan cancellation, mirroring the campaign’s promises and a sense that it might help some struggling Americans and perhaps provide a modest boast to the economy. But I suspect some of his advisers told him what was also said recently in this space: many large student loan borrowers are relatively high income people who are do not in financial difficulty, for example doctors and lawyers. In addition, the resentment of millions of Americans who have repaid their loans but have not obtained special relief from the government could be a political handicap. So a compromise is reasonably likely: the president by executive action may write off $ 10,000 in debt for student borrowers. The political calculation is that it will win the support of millions of people and keep an election promise without unduly infuriating those who do not. In addition, the financial blow to the federal government, although measured in the hundreds of billions, would be much less than with a pardon of $ 50,000.

What surprises me a little is that we hear very few calls for major changes to the seriously flawed student loan system. Since its inception, the proportion of recent low-income college graduates has declined, but has not increased as expected. Student loans have allowed colleges to aggressively increase their fees. The current discussions are tinkering with the system, not changing it.

Two reforms that are not too drastic and that show promise are forcing colleges to get “their skin in the game” and encourage loan-less forms of college funding, including revenue sharing agreements (with investors buying a share of the revenue). postgraduates in return for help paying college fees.) These are good government-like changes that aren’t inherently ideological – neither Democrats nor Republicans.

Each of these ideas has certain limitations. The “skin in the game” proposal would encourage schools to reduce the granting of loans to students who they know are high risk, who may not repay the obligation. The problem is that the schools that have the most problems with defaulting students are mostly poor and financially unable to pay much of the cost of defaulting. In addition, the United States has very limited experience with revenue sharing agreements, so there are questions about how to make them work effectively. But we know the current system isn’t working, and most of the forgiveness proposals strike me as a bit like rearranging the Titanic’s lounge chairs.

My latest book is Restoring the Promise: Higher Education in America.

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