Coburn calls federal student loan program 'welfare for the wealthy'

The IBR program helps borrowers struggling to repay their federal student loans after college by limiting payments to a percentage of income, then discharging any balance after 20 years of payments. Coburn said the New America Foundation’s study found that low-income borrowers will see “minimal new benefits” under IBR, but a law school graduate with a starting salary of $70,000 could have $100,000 in debt discharged.

“Government welfare for the well-off is unacceptable at a time when we are drowning in debt,” Coburn said Tuesday. “I commend the New America Foundation for drawing attention to a flawed student aid policy that, if left unchanged, will provide huge financial windfalls to people who are among the most financially well-off graduates in today’s job market. It’s time for Congress to reform this program.”

Coburn said the Affordable Care Act reduces payments to 10 percent of a borrower’s income. He added that the new version of IBR could become available to borrowers as early as this year if Congress doesn’t make changes.

“Taxpayers need to ask hard questions about not just the equity of programs like IBR but also their effectiveness,” Coburn said. “Throughout government we see this principle at work: The best way to make something expensive is for government to make it affordable. That principle is particularly true in two areas of the economy — healthcare and education. Government’s attempts to control college costs have caused those costs to skyrocket by creating an incentive for colleges and university to increase tuition along with so-called federal aid.”

The New America Foundation is a nonpartisan, nonprofit think-tank based in Washington, D.C.

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