Democrats are calling on President Biden to use the pandemic to cancel $50,000 in student debt per borrower. What many people forget is that in 2010 they used the last recession to justify a federal takeover of student loans that have since more than doubled to $1.6 trillion, according to a Wall Street Journal editorial. Now they’re using the pandemic to justify loan write-offs they said would never happen. The student loan conundrum began in 2010 when Democrats used budget “savings” from ending the federal guaranteed-loan program to pay for the Affordable Care Act, according to the editorial. An analysis for the Education Department last year estimated that $435 billion in student loans (excluding private originated loans that are federally guaranteed) will eventually be written off. One reason: Democrats in 2010 created “income-based repayment plans” that limited borrower monthly payments to 10% of discretionary income and discharged the remaining balance after 20 years. These plans now comprise a third of new undergraduate and nearly 60% of graduate loans. Since many borrowers are making only de minimis payments, their balances continue to grow and accrue interest, although most will be forgiven. In other words, the feds are already set to write down a large chunk of debt. A University of Chicago study in December estimated that the top 10% of households by income would receive seven times as much benefit from a $50,000 loan write-down as the bottom 10%. Doctors and lawyers with six-figure salaries should be able to repay their loans and don’t need the $50,000 write-off, according to the editorial. Read more. (Subscription required.)
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
