Biden’s student loan options are reasonable

Student loan borrowers hoping that President Joe Biden would forgive any significant portion of their debt are likely gnashing their teeth. The White House has left loan forgiveness out of its upcoming budget proposal, as the administration focuses on passing legislation it already has introduced.

Some advocates and Democratic lawmakers are urging Biden to use his executive authority to eliminate some of students’ debt, $10,000 being a popular figure, but critics claim this is an overreach. In either case, forgiving student loans outright in any amount isn’t equitable. Biden’s decision to focus on updating and overhauling current repayment programs, some of which already offer significant forgiveness at the end of their repayment periods, is the right call. On the campaign trail, Biden had promised loan forgiveness as a means of tackling the country’s $1.6 trillion student loan debt, currently distributed among some 45 million Americans. However, offering forgiveness to some penalizes others who may have chosen safer, more affordable educational paths.

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It also ignores the fact that current income-based repayment plans are, largely, reasonable.

Many more Americans might have chosen to attend college or other post-secondary institutions if they had known that money they borrowed from the federal government would be forgiven. Many who worked diligently to pay off their loans could rightfully feel cheated if those who graduated after them receive aid and assistance while they did not.

It simply isn’t fair to offer such assistance in hindsight and, legally, it’ll likely face reasonable challenges that such government spending isn’t an appropriate use of taxpayer funds. Student loans are not gifts. They are loans, and borrowers signed on the dotted line promising to one day repay those loans.

Additionally, a working paper published by the University of Chicago’s Becker Friedman Institute for Economics in April points out that those who borrowed the most in student loans tend to have higher incomes later in life: for example, law school and medical school graduates will both rack up more debt but they will earn more over their lifetimes than graduates who pursued bachelor’s degrees only. Forgiving loans for those who most likely will have the means to pay them off one day is unreasonable.

Finally, there are currently several repayment options for borrowers who have low incomes to reduce the heavy lift. Generally, an income-based repayment plan caps a borrowers payment at 10% of their discretionary income, calculated as the difference between a borrower’s adjusted gross income and 150% of the U.S. Department of Health and Human Services Poverty Guideline amount for the borrower’s family size and state.

Some borrowers wind up paying nothing — yes, nothing — if their income is low enough. And for those worried that the accruing interest will be debilitating, whatever remains unpaid at the end of 20 years is forgiven by the government. Such plans are not overly burdensome.

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Under President Donald Trump and now Biden, federal loan interest and payments have been frozen due to the economic stresses of the coronavirus pandemic. That temporary suspension expires Oct. 1. As the economy lurches back into action, asking graduates to begin repaying loans is necessary, and those still struggling still have options available to them.

— Pittsburgh Post-Gazette

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