Both parties react to Biden's radical debt plan - The Horn News

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Both parties react to Biden’s radical debt plan

By: The Horn editorial team

On Wednesday, President Joe Biden returned from vacation to announce his long-awaited plan to forgive billions and billions of dollars in student debt… and not everyone is happy.

Biden faced pressure from liberals to provide broader relief to hard-hit borrowers, and from moderates and Republicans questioning the fairness of any widespread forgiveness.

“Today’s announcement is an insult to every American who played by the rules and worked hard to responsibly pay off their own debt,” Sen. John Barrasso, chair of the Senate Republican Conference, said in a statement.

Republican Leader Mitch McConnell called the move a “slap in the face,” for working American families.

“President Biden’s inflation is crushing working families, and his answer is to give away even more government money to elites with higher salaries,” McConnell said. “Democrats are literally using working Americans’ money to try to buy themselves some enthusiasm from their political base.”

Republicans criticized the plan for potentially ballooning the deficit.

The Biden administration has also faced criticism for delaying the announcement until the 18th month of his presidency, more than two years after the initial pause on debt collection and only a week before the pause’s expiration date.

Prior to Biden’s announcement, many student debtors were confused about whether to resume their monthly payments on Sep. 1.

Biden’s long deliberations have led to grumbling among federal loan servicers, who had been instructed to hold back billing statements while Biden weighed a decision.

Industry groups had complained that the delayed decision left them with just days to notify borrowers, retrain customer service workers, and update websites and digital payment systems. Scott Buchanan, executive director of the Student Loan Servicing Alliance, voiced such a complaint in an interview with the Associated Press.

“At this late stage I think that’s the risk we’re running,” he said. “You can’t just turn on a dime with 35 million borrowers who all have different loan types and statuses.”

In addition, the Biden plan has faced criticism for being extremely bureaucratic and complicated. Even Biden’s own aides, speaking to the Associated Press, acknowledged a vexing set of political and policy choices. The aides spoke on the condition of anonymity to discuss Biden’s intended announcement ahead of time.

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Biden’s new huge spending plan has drawn praise from a wide spectrum of Democrats, but appeared unlikely to completely appease any of the factions that have been jostling for influence as Biden weighs how much to cancel and for whom.

It remains unclear whether the new plan will affect Biden’s popularity with Democrats, which has recovered in recent weeks. In any case, it could offer a windfall to a swath of the nation’s upper middle-class in the run-up to this fall’s midterm elections.

“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,” said Sen. Elizabeth Warren claimed on Wednesday in a joint statement with Senate Majority Leader Chuck Schumer.

Tweeted Rep. Pramila Jayapal, the chair of the House Progressive Caucus: “This will bring real relief to 43 million people and is a MASSIVE step in the right direction.”

The Justice Department released a legal opinion on Wednesday concluding that the Higher Education Relief Opportunities for Students Act gives the Education secretary the “authority to reduce or eliminate the obligation to repay the principal balance of federal student loan debt.” The legal opinion also concluded that the debit could be applied on a “class-wide” basis in response to the coronavirus pandemic. Still, some conservative groups were considering potential legal challenges.

During the 2020 presidential campaign, Biden was initially skeptical of student loan debt cancellation as he faced off against far-left candidates for the Democratic nomination. Sens. Warren, D-Mass., and Bernie Sanders, I-Vt., had proposed cancellations of $50,000 or more.

Ahead of 2020’s general election, Biden proposed canceling $10,000 per borrower. On Wednesday, the White House announced a much more complicated plan.

For one thing, the White House emphasized that no one in the top 5% of incomes would see any loan relief.

In addition to the one-time forgiveness, the White House also announced some longer-term reforms.

Under the Biden plan, the Education Department could only demand up to 5% of an undergraduate debtor’s income per month. Previously, the department could collect up to 10%. Under the Biden plan, they would still be able to collect 10% for graduate school loans.

Plus, the Education Department will no longer collect any debt from people making less than 225 percent of the federal poverty wage. 255 percent of the poverty wage amounts to around $15 per hour — or $30,000 per year.

Biden’s plan will also stop excess interest from accruing as long as the borrower makes the monthly payments. This new rule is unusual, and it also applies to low-income people whose payments are $0 per month.

The Department of Education has yet to start taking applications for debt forgiveness… or even to announce how to apply.

 

The Horn editorial team and the Associated Press contributed to this article.