The centerpiece of the student debt-relief plan that President Biden announced last month is his decision to cancel up to $20,000 per borrower in federal loans. But the more far-reaching — and, over time, more expensive — element of the president’s strategy is his blueprint for a revamped income-linked repayment plan, which would sharply reduce what many borrowers pay every month, the New York Times reported. It could, however, have unintended consequences. Unscrupulous schools, including for-profit institutions, have long used high-pressure sales tactics, or outright fraud and deception, to saddle students with more debt than they could ever reasonably hope to repay. By offering more-generous educational subsidies, the government may be creating a perverse incentive for both schools and borrowers, who could begin to pay even less attention to the actual price tag of their education — and taxpayers could be left footing more of the bill. “If people are taking out the same or more amount of debt and repaying less of it, then it’s just taxpayers bearing the brunt of it,” said Daniel Zibel, the chief counsel at the National Student Legal Defense Network, an advocacy group. Experts are particularly concerned about how the new subsidies could be manipulated by for-profit colleges, many of which have a record of persuading people to take on high debt for degrees that often fail to deliver the kind of earnings boost the schools advertise. Past efforts to rein in poorly performing institutions have been derailed by lobbying, litigation and shifting political tides. The government’s most forceful hammer — a regulation put in place during the Obama administration known as the “gainful employment” rule, which threatened to cut off federal aid funds to for-profit schools whose students earned too little to pay off their loans — was scrapped in 2019 by Betsy DeVos, the education secretary under President Donald J. Trump. The new subsidies could also make students less cautious about taking on high debt. The Education Department has not yet published the details of Mr. Biden’s new repayment plan, but the outline the president described last month could transform higher-education financing, especially for undergraduate degrees, by shifting more of the costs from borrowers to taxpayers.
