GOP ramps up efforts to rein in Biden on student debt
Republicans have been ramping up efforts to rein in the Biden administration’s ability to cancel student loan debt, arguing such plans are “wildly inflationary” and would only contribute to climbing prices.
Since the Biden administration extended a nationwide pause on federal student loan payments and interest accrual in the spring, Republicans in both chambers have been introducing legislation targeting the president’s authority on student loans.
Legislation introduced in recent weeks includes multiple measures seeking to keep Biden from greenlighting mass cancellation of student debt without buy-in from Congress, as well as a bill codifying that the president lacks the authority to “blanket cancel federal student loans.”
The bills face an uphill climb in the Democratic-led Congress, but Republicans behind the effort say it’s necessary to combat what they argue will be an unfair burden on taxpayers.
“My constituents are worried about the fact that the government runs heavy deficits every year and borrows the money to cover it,” Sen. Mike Braun (R-Ind.) said. “So, you’re running a deficit when you’re not paying for it, and so it is something that at least Hoosiers, who I represent, are worried about the fiscal health of our country.”
The efforts also coincide with an ongoing push by progressives and advocates for widespread debt cancellation, which has gained steam as the Biden administration has signaled it is closing in on a decision on student debt cancellation.
In May, reports surfaced of one plan under consideration that would provide $10,000 in debt cancellation for some borrowers. The plan included income caps for borrowers to qualify for forgiveness, limiting potential cancellation to individuals earning below $150,000 and $300,000 for couples.
The idea has support from some Democrats as a step in the right direction, but it’s also drawn pushback from both sides of the aisle, with progressives calling for the president to go higher amid GOP opposition.
Republicans have focused their attacks around inflation, a growing concern for voters ahead of the midterms.
A recent example is a bill filed in the House last week that calls out “executive actions that have exacerbated inflation and led to skyrocketing prices,” as well as current consideration in the administration of “harmful economic policies like canceling student debt,” according to a release. The bill was filed by GOP Reps. Jason Smith (Mo.), Patrick McHenry (N.C.) and Elise Stefanik (N.Y.), the No. 3 House Republican.
Experts say there’s a case to be made linking the pause on student loan payments to inflation, but largely downplay the moratorium on student debt’s impact on decades-high inflation.
“Anytime you put cash into the hands of Americans, you are affecting their demand for consumption,” said Beth Akers, senior fellow at the right-leaning American Enterprise Institute. However, Akers, who studies the economics of higher education, also said that “the effect on consumer demand is pretty modest.”
“And so, in a greater discussion about inflation, it’s not going to be a huge consequence,” she said.
Other experts also said the $10,000 reduction the Biden administration is weighing is unlikely to be very inflationary.
Laura Beamer, lead researcher in higher education finance for the left-leaning Jain Family Institute, said most debt holders will still be carrying large loans even with a $10,000 reduction. As a result, the program is unlikely to provide a huge stimulus to consumer spending.
“So, debt cancellation has a long-term impact, equivalent to the amount of time it would take someone to pay back the amount of student debt that they have,” she said.
Any stimulus would depend on “people’s repayment patterns and how long the repayment term is,” which she added, for many, is “much longer than 10 years.”
Akers also downplayed the idea that canceling student loans would stimulate the economy, saying it “largely goes to higher income people; those aren’t people who go out and spend every extra dollar that you get into their hands.”
“The same reason that student loan cancellation is not a good stimulus, it’s also not going to be hugely inflationary,” Akers said.
At the same time, Akers said there are reasons to forgo broader calls for debt forgiveness and to end the pandemic freeze on repayment.
“If we forgive student loans today, or if we continue to pause indefinitely, I think we’re sending a message to student borrowers that any money they borrow today, they probably don’t have to pay back in full,” she said.
“When you do that, you make consumers less sensitive to the prices that they have to pay for college or university, and when that’s the case, you get institutions, even the benevolent do-gooder kind, [that] are going to end up raising their prices as a result, because there’s less pressure on them not to do so,” she said.
The student loan repayment pause is scheduled to lapse at the end of August. The pause was one of the first forms of economic relief rolled out under the Trump administration at the onset of the pandemic in March 2020, and it has been extended six times under both administrations.
Some Democrats are still pushing for the pause to be extended another time, arguing soaring inflation underscores the need for continued relief.
“At a time when families are struggling to pay their bills, restarting student loan payments, which average about $400 a month, would be devastating,” Sen. Elizabeth Warren (D-Mass.) said.
The White House previously indicated a decision on further action on student loans could come in the weeks ahead but has shied away from sharing more details publicly about its plans.
Pressed for a status update on Biden’s deliberations earlier this week, Jared Bernstein, who serves on the Council of Economic Advisers, declined to provide reporters with more information.
“I’m not going to get ahead of the president and give you any kind of a status update,” he said.