With U.S. Senator Chuck Grassley
Q: What’s your view on the Biden administration’s move to cancel student debt?
A: Last year, even Speaker Pelosi said President Biden does not have the authority to unilaterally wipe away student debt. His proposal would transfer up to $20,000 in debt for individuals making up to $125,000 (or married couples making up to $250,000) from borrowers to the taxpayer, adding at least $320 billion and up to $980 billion to the national debt over the next decade. On top of that, the president extended the moratorium for restarting student debt payments, a pause that’s already cost taxpayers $150 billion. With that money, we could have doubled the Pell Grant, which helps low-income Americans afford college in the first place. Don’t forget, the payment deferral was put in place to provide relief during the pandemic when the government shut down the economy and tens of millions of people lost their jobs. In 2022, the economy is running at full employment, especially for those with a college degree. Studies show people with college degrees have higher lifetime incomes. A bachelor’s degree raises one’s lifetime earnings by an average of $2.8 million. And yet, the Biden administration is putting the taxpayer on the hook for loans that Americans with advanced degrees and higher earning potential took out to pay for their higher education.
The policy also will fuel the fires of inflation in the short-term. Fiscal policy 101: spend less, not more, to curb 40-year high inflation. What’s more, Biden’s debt transfer takes America down a very slippery slope in the future. It raises expectations of debt forgiveness, encouraging borrowers to take out more loans with scant regard to repay them and forces waitresses, farmers, roofers, janitors and truckers who may not have attended college to pay the way for others who did. It’s unfair to those who already paid off their students loans or worked, sacrificed and saved to pay their own way. Wiping out student debt with the stroke of a presidential pen sets a dangerous precedent that oversteps the constitutional authority of the legislative branch that holds the power of the purse strings. In addition to the reckless decision to wipe out such a sizeable swath of consumer debt, the executive order ignores the underlying issue to make higher education more affordable, not more expensive. Make no mistake. This policy will not cure rising tuition, it will feed tuition growth. Guess what happened when Congress lifted the lid on federal loans? It greased the wheels to borrow more, loosening the reins for colleges to increase tuition.
Q: What can be done to help lower college tuition?
A: Big spenders always think throwing more money at a problem will fix it. Consider how expanding unemployment benefits, continuing rent moratoriums and extending student loan pauses discourage people from reengaging in the workforce, earning money to pay their bills and fulfill their debt obligations. Addressing college affordability requires reforms that give students better value and better bang for their buck. I’ve introduced a package of bipartisan higher education bills to bring more transparency into the student loan market and to empower students with financial literacy tools to be smart borrowers. Specifically, students ought to know up front how much they will pay and whether or not they are likely to be able to pay it back. My bills would provide students and their families with better information about the costs of college from the very start of the college search, through the application process, and to the acceptance financial aid. My legislation would cut red tape and tell students in plain language what the loan amounts are and how that compares to their ability to repay. It would make a universal financial aid tool easily available to students so they can compare financial aid packages between schools. Transparency brings accountability and will help give peace of mind to families and students who are making one of the most consequential financial decisions of their lives. I’m also co-sponsoring the Stop Reckless Student Loan Actions Act that would prohibit the president from canceling student debt, stop the student loan payment pause and prevent a unilateral moratorium in the future.
Q: What should borrowers do if they believe they may be eligible?
A: Borrowers should contact their student loan service provider to ensure their contact information is up to date. The student loan service provider will have the best information specific to an individual’s payment plan and type of loan. In the meantime, borrowers should continue loan payments unless the service provider has confirmed a change has been made. There’s a lot of uncertainty and many details are still up in the air, including whether this executive action is constitutional.
At this time, we still do not know exactly what loans will be eligible or how the process will work. Further, this executive order is on shaky legal ground. President Biden is claiming that, under a post-9/11 law to help service members with loans in times of war or national emergency, he has the authority for a blanket transfer of debt due to COVID-19. Many lawmakers and constitutional scholars are skeptical of that argument. Ultimately, the president’s action to cancel student debt will likely be litigated in the courts.