In the Wings, Another $Trillion Biden Push: Student Loans

young student making presentation to classmates and teacher

It might seem like every major domestic spending program of the U.S. government is caught up in the multi-trillion-dollar budget “reconciliation” negotiations, but no. A significant exception is the huge college-student loan program and the massive ($1.7 trillion?) debt outstanding. It’s a separate agenda item.

The Biden administration, under constant progressive pressure, is trying to find ways to relieve or forestall repayments, which are due to resume in February after nearly a two-year pause. This is a ticking bomb for many households and indeed for the federal fisc. The Politico website reported this week on the latest ins and outs at the Education Department as it readies collections but also looks to spare as many hardships as possible and also reconnect with the 7 million borrowers who’ve already defaulted.

So far, the president, besides acting to exempt who he can in “public service,” has said he wants to trim $10,000 off everybody’s tab.  The congressional left wants at least $50,000. There are programs for adjusting payments to lower income levels, and the White House might go for a “self-reporting” period to qualify for that break. (Remember “liar loans” in the subprime housing crisis?) In any case, the more stringent collection steps taken under previous Education Secretary Betsy DeVos have been tossed out the window. The longer-run political question is whether much of this debt (the biggest amounts typically taken out for advanced degrees, often by offspring of affluence) is ever going to be recovered.

Meantime, expenses at post-secondary institutions continue to climb (the political right argues that the loan programs foster these increases). And after some pandemic disruptions, enrollment chugs along. At some public campuses like the University of California, which have lower but still substantial charges, the jumps are notable. But across the broader academic landscape, the dropout rates continue to be worrisome, and of course these add to the outstanding-loan problem, as they prefigure an earnings shortfall that threatens default even among those who do feel an obligation to repay.

So, once we have the huge Build Back Better legislation off the burner, we will soon be finding out what other powers this president has to “transform” the social contract between Americans and Washington. It’s clearly more than a classroom exercise.

Published by timwferguson

Longtime writer-editor, focusing on topics of business and policy, global and local.

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