Weekly Column: From The Mailbag--Student Loan Debt Cancellation

As participants in the decisions made in Congress, Idahoans contact me with valuable input about the issues our country faces.  Concerns with President Biden’s announcement of student loan debt cancellation are among the issues Idahoans have contacted me about recently.  The following is my response: 

Since President Biden assumed office in January 2021, many Democrats have continued to call for mass student loan debt cancellation through executive action.  On August 24, 2022, President Biden announced he would cancel $10,000 of student loan debt per borrower earning under $125,000 per year or $250,000 for married couples and up to $20,000 for recipients of Pell Grants.  Additionally, President Biden extended the payment pause on most federal student loans through December 31, 2022, and announced a new Income Driven Repayment (IDR) plan that will be released in forthcoming rulemaking. 

The current higher education system warrants careful review as rising tuition costs and the amount of loans disbursed for education continue to saddle students and graduates with financial difficulties.  But, placing the burden of our nation’s outstanding student loan debt on taxpayers is both irresponsible and unaffordable.  Student loan relief is not free, and will ultimately have to be paid for—in part by the 87 percent of Americans who do not benefit, but are already grappling with record high inflation.  

The Penn-Wharton Budget Model estimates that loan cancellation alone will cost taxpayers $519 billion, and that the total cost of Biden’s plan could climb as high as more than $1 trillion when loan forbearance and the newly proposed IDR plan are taken into account.  President Biden has already extended the pandemic era pause of student loan debt repayment four times at a cost of $85 billion, while also implementing a number of targeted student debt changes that will cost another $165 billion, according the Committee for a Responsible Federal Budget (CRFB). 

Further, broad student loan debt cancellation does nothing to address the underlying issue, which is the exorbitant cost of tuition.  Mass cancellation only worsens the ballooning tuition costs by increasing moral hazard.  Students will now be inclined to borrow more and colleges will raise expenses even faster.  According to CRFB, student debt will return to its current level of $1.6 trillion in just five years if there are no policy changes to address rising education costs.  

While we must find solutions that will reduce the financial burden on students and graduates, mass student loan debt cancellation is regressive policy that benefits few Americans, disproportionately rewards the affluent, and is unfair to those who never went to college, and those who paid back their student debt or never took out any student loans.  The wealthiest 20 percent of households hold three times as much loan debt as the bottom 20 percent, and more than half of loan debt is held by graduate school borrowers.   

We must instead seek commonsense reforms to the federal student loan program that will properly align incentives and reduce the burden on students and graduates without negatively affecting our nation’s economic growth.  As education measures proceed before the Senate for consideration, I will keep the needs of Idaho’s students, graduates and taxpayers in mind.  Furthermore, I will encourage the Senate Health, Education and Labor Committee to continue to review all policy proposals enhancing access to higher education with an eye toward efficiency and cost-effectiveness.  

My Senate website, http://crapo.senate.gov, contains information about the issues before the U.S. Senate as well as news releases, photos, contact information and other items of interest.  The messages you send me help to shape my approach on a number of important matters. 

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