President Biden’s latest proposal to overhaul the Department of Education’s Income Driven Repayment plan is drawing fire from Republicans.
Lawmakers say the president’s plan to reduce monthly payments and shorten loan forgiveness terms under the Revised Pay as You Earn program is an abuse of executive authority. They warn that the changes would result in an “unsustainable transfer of wealth from hardworking taxpayers to college-educated individuals.”
Rep. Virginia Foxx, chair of the House Education and the Workforce Committee, and Sen. Bill Cassidy, the ranking Republican on the Senate Health Education, Labor and Pensions Committee, are calling on Education Secretary Miguel Cardona to withdraw the administration’s draft regulation, formally introduced last month, and work through Congress on student debt policies.
“Simply put, the proposed rule will exacerbate the problems of rising college costs and excessive borrowing,” the lawmakers wrote in a letter to Mr. Cardona.“This proposal is reckless, fiscally irresponsible, and blatantly illegal and, as such, it should be rescinded.”
The letter, signed by more than 65 House and Senate Republicans, marks the latest GOP pushback to Mr. Biden’s attempts to unilaterally overhaul federal student loan programs.
The administration’s latest proposal would expand the federal government’s income-driven repayment plan by extending $0 monthly payments for borrowers making less than $30,600 per year and reducing monthly payments for those who earn more than $30,600 per year.
Mr. Cardona said the changes “would make student loan repayment more affordable and manageable than ever before.”
“We cannot return to the same broken system we had before the pandemic, when a million borrowers defaulted on their loans a year and snowballing interest left millions owing more than they initially borrowed,” he said. “These proposed regulations will cut monthly payments for undergraduate borrowers in half and create faster pathways to forgiveness, so borrowers can better manage repayment, avoid delinquency and default, and focus on building brighter futures for themselves and their families.”
Mr. Biden in August announced his student debt forgiveness plan, which includes canceling $10,000 in debt for borrowers who earn less than $125,000 per year and an additional $10,000 in debt for those who received Pell Grants.
Republicans said the bailout, which is estimated to cost taxpayers as much as $600 billion, would primarily benefit wealthy people who are on a high-earning career path.
They also faulted it for being more out-of-control spending by Democrats. Republicans insist that increased government spending is a key driver of inflation.
A federal appeals court temporarily blocked the loan cancellation plan last month after six Republican-led states sued, arguing that it would further damage the economy.
The latest proposal to expand the Income Driven Repayment program is being panned by Republicans and non-partisan budget hawks who say it would cost far more than the $138 billion over 10 years estimated by the administration.
The Committee for a Responsible Federal Budget says the administration failed to account for the behavioral effects of the proposal that could significantly expand the price tag.
Those behavioral costs include increased enrollment in Income Driven Repayment plans, increased enrollment in low-value degree programs, increased student loan borrowing and tuition inflation by institutions.
A Penn Wharton Budget Model has pegged the cost of the proposal between $333 billion to $361 billion over 10 years.
Other estimates say the proposal could cost taxpayers more than $1 trillion.
In their letter to the education secretary, Ms. Foxx and Mr. Cassidy said the proposal will turn the federal student loan program into “grants for the educated after they leave college is a smack in the face of taxpayers who never borrowed student loans or who have already paid theirs back.”
“Policy experts agree that the vast majority of students will never fully repay their loans under this proposal,” the lawmakers wrote. “Borrowing for college will become the default for every household, including for those who can afford to pay and otherwise would have paid out-of-pocket.”
“We encourage you to withdraw the latest radical proposal put forth by your Department and work with Congress on meaningful and sustainable student loan reforms,” the lawmakers wrote.