President Joe Biden on Wednesday made his long-awaited announcement on federal student loans, saying his administration plans to cancel $10,000 in debt per borrower for individuals making under $125,000 a year or households making less than $250,000.
With November’s midterm elections nearing, he also announced forgiveness of up to $20,000 per borrower for Pell Grant recipients, along with one final pause for loan repayments.
Below are some initial reactions from analysts as well as Republican and Democratic lawmakers.
Republicans, former Obama adviser, others criticize Biden’s move
• “President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt. This policy is astonishingly unfair.” — Senate Minority Leader Mitch McConnell, a Kentucky Republican, in a statement
• “The issue is that we just passed a very large, very difficult to pass piece of legislation, the Inflation Reduction Act, which will accomplish some deficit reduction, both in the short term and … the long term — very, very important, given the huge national debt that we have — and will do so in a way that will push in the right direction against inflation. Because immediate debt reduction, or bringing our deficits, down will help deal with the inflation problem we have, and make it easier for the Fed to fight that. Now it appears that with the stroke of a pen today, the president is going to erase all of those gains. And in fact, the cost of what I think is being discussed will outweigh all of the savings from this legislation that took an entire year to negotiate and was not easy to pass.” — Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan watchdog organization, in a Yahoo Finance interview
• “In addition to making inflation worse, transferring student debt does nothing to curtail runaway costs in higher education, including graduate schools that charge more and more while delivering less and less. Forgiveness without accountability is a free pass for failed programs with high costs and poor outcomes and would be a green light for colleges to continue tuition hikes. Indeed, taxpayers may face more costs in just a few years when student debt returns to its current level.” — House Minority Leader Kevin McCarthy, a California Republican, in a statement
Analysts see no further forgiveness, pain for some companies
• “This … is likely as far as this administration will go in canceling student loan debt. Republicans already are criticizing Biden for spending $300 billion to subsidize what the GOP describes as wealthier borrowers. This is a populist pushback against higher education spending aimed at working class voters without college degrees.” — Jaret Seiberg, analyst at Cowen Washington Research Group, in a note
• “Student loan forgiveness could result in student loan servicing fee pressure for servicers, such as Nelnet (
). It could also reduce student loan refinancings for companies such as Navient (
) and SoFi Technologies (
). Politically, canceling of some student debt would fulfill another campaign promise for the President. In our view the ‘win’ may still face criticism from the left who feel it’s not enough, the right who feel the amount disproportionately helps more affluent students, and the right and middle who may feel the actions may add to inflation. Additionally, President Biden may face further criticism that forgiving student debt does not solve the crisis but is instead a temporary band-aid.” — Benjamin Salisbury, director of research at Height Capital Markets, in a note
Democratic lawmakers, progressive group offer praise
• “The positive impacts of this move will be felt by families across the country, particularly in minority communities, and is the single most effective action that the President can take on his own to help working families and the economy. This action, along with the pause on federal student loan payments, interest, and collections will improve borrowers’ economic security, allowing them to invest in their families, save for emergencies, and pay down other debt.” — Senate Majority Leader Chuck Schumer, a New York Democrat, and Sen. Elizabeth Warren, a Massachusetts Democrat, in a joint statement
• “At last. President Biden’s bold and urgent action on student debt begins to restore a promise we’ve made to generations of Americans that investment in education is their ladder to opportunity. … This was a bold step. Now, let’s take the next one and actually confront runaway costs in higher education. We must increase funding for the Pell Grant program, hold colleges accountable for poor outcomes, and make broader reforms to the student loan system.” — Patrick Gaspard, president and CEO of the Center for American Progress, a liberal think tank
• “The president’s action today will change lives for the better. By reducing this unjust debt burden, this decision will help millions of people to make ends meet, build generational wealth, grow their families, purchase homes, and more.” — Democratic Rep. Ayanna Pressley of Massachusetts