https://www.wsj.com/articles/joe-biden-student-debt-forgiveness-supreme-court-income-based-repayment-plan-11f1c5fa?mod=opinion_lead_pos1
President Biden is determined to make student loans for college a new entitlement even after the Supreme Court struck down his $430 billion cancellation. The Education Department on Friday wrote off another $39 billion in debt. And this is only a down-payment on the President’s bigger plan to sweeten Obama-era repayment plans. Call it debt cancellation on the installment plan.
Obama-era repayment plans cap borrower monthly payments at 10% of discretionary income and let borrowers discharge unpaid debt after 10 to 25 years. Yet the Education Department said Friday that borrowers will receive credit for payments even during months when they weren’t making them. This adds up to $39 billion in new loan forgiveness.
The Administration also boasted that it has approved $116.6 billion in loan forgiveness to date, including $45 billion through “improvements” to public-service loan plans. That’s $68,828 of writeoffs on average for each qualifying government and nonprofit worker. Now the Administration plans to “improve” repayment plans for all borrowers.
The Education Department plans to slash payments to 5% of discretionary income, which would be redefined to exclude more earnings. Borrowers earning less than $32,800 wouldn’t pay a cent. Even years in which they don’t make payments, as during the pandemic, would be counted toward their required payments.
The Administration estimates that a typical graduate of a four-year public university would save nearly $2,000 a year, or about $40,000 over 20 years. That’s several thousand dollars more than the already generous Obama writeoffs, and loan balances wouldn’t grow from unpaid interest as they do now.
A grad earning $50,000 with $50,000 in debt would have to pay only $860 a year compared to some $6,200 under a standard payment plan. Borrowers would have an incentive to take out more debt, and colleges would raise tuition. The Biden plan includes no reforms that would mitigate this debt ratchet.