President Joe Biden continues to push for student loan forgiveness for millions of borrowers, but his efforts are harming already struggling Americans, experts told the Daily Caller News Foundation.<\/p>\n\n\n\n
The Department of Education forgave<\/u><\/a> another $4.8 billion in student loan debt in December for 80,300 borrowers as a part of its income-driven repayment forgiveness and public service loan forgiveness programs, bringing the total amount forgiven by the Biden administration to $132 billion. Biden\u2019s student loan forgiveness agenda and the resumption of payments will have harmful effects on Americans\u2019 discretionary income, higher education prices, taxpayers, individuals\u2019 fiscal responsibility and the national debt, according to experts who spoke to the DCNF. <\/p>\n\n\n\n \u201cSo there\u2019s a lot of concentrated benefits and dispersed costs,\u201d Adam Kissel, visiting fellow at The Heritage Foundation\u2019s Center for Education Policy, told the DCNF. \u201cSo the dispersed costs to the 100 million taxpaying voters will be spread over generations through the national debt, while the relatively small but significant amount of money on the other side will affect a small percentage of Americans in a more acute and immediate way.\u201d<\/p>\n\n\n\n Biden\u2019s original student loan cancellation plan, which was struck<\/u><\/a> down in June by the Supreme Court, was estimated<\/u><\/a> to cost over $1 trillion for taxpayers over ten years, not counting auxiliary costs from schools raising prices, adding to an already huge federal debt burden. The U.S. sovereign debt exceeded<\/u><\/a> $34 trillion for the first time ever on Dec. 29, 2023, increasing the proportion of taxpayer funds that go toward servicing the debt.<\/p>\n\n\n\n \u201cAnother broader context is that Biden\u2019s high inflation canceled out a lot of the effect of the loan cancellation schemes in people\u2019s lives,\u201d Kissel told the DCNF. \u201cAnd since each person\u2019s situation is unique, that plays out differently for each person. Many people have not prepared well for the resumption of student loan payments, which is a failure of economic education.\u201d<\/p>\n\n\n\n The average student loan payment is estimated to be close to $300 per month, taking a significant chunk out of Americans\u2019 disposable income, according<\/u><\/a> to U.S. News and World Report. Factors like rising prices, which have increased<\/u><\/a> more than 17% since Biden took office in January 2021, and higher interest rates following the Federal Reserve\u2019s rate hikes have made everyday necessities more costly.<\/p>\n\n\n\n Following the Supreme Court\u2019s rejection of Biden\u2019s original student loan forgiveness plan, the White House announced<\/u><\/a> new action, including a credit rating pause in relation to student loan forgiveness. Missing a payment will not hurt borrowers\u2019 credit score until Sept. 30, 2024, and the loans cannot be considered delinquent, in default, or sent to debt collection agencies until that time as well.<\/p>\n\n\n\n \u201cIf I were a lender, I would not be able to trust the credit agencies during this year,\u201d Kissel told the DCNF. \u201cSo instead, I would directly ask a potential borrower, \u2018Are you repaying your student loans or not?\u2019 And that would tell me something about that potential borrower. So the education department is ruining the credibility of credit reporting agencies through no fault of their own.\u201d<\/p>\n\n\n\n Borrowers are taking advantage of the pause, with 8.8 million people, or nearly 40% of student loan holders, missing<\/u><\/a> their payment in October 2023 following the end of the student loan payment pause. October\u2019s numbers are in contrast to the same month in 2019 when only 26% of borrowers failed to make a payment by the middle of the next month when payments were due.<\/p>\n\n\n\n \u201cUniversities are not holding the bag for student debt, so every move to make college more affordable by the federal government enables colleges to raise the price in a general way,\u201d Kissel told the DCNF. \u201cSo there are unintended consequences of every student loan forgiveness scheme in the effects of subsidizing education, making it more expensive.\u201d<\/p>\n\n\n\n Many argue that delivering subsidies for student loans has enabled higher education institutions to raise their own tuition prices. Researchers from the New York Federal Reserve concluded that for every dollar in credit assistance the government gives in the form of subsidized loans, institutions increased their tuition by 60 cents and unsubsidized loans by 15 cents, according<\/u><\/a> to a 2015 study.<\/p>\n\n\n\n \u201cParents are already willing to save and sacrifice in order to afford their children\u2019s college tuition,\u201d Ryan Young, senior economist at the Competitive Enterprise Institute, told the DCNF. \u201cStudent loans won\u2019t change that, and universities know it. They will raise their prices by roughly the amount of the student loan subsidies, and families will continue to save and sacrifice and pay about the same amount they do now.\u201d<\/p>\n\n\n\n The Department of Education spent<\/u><\/a> nearly $200 billion in fiscal year 2023 toward its office of federal student aid, far higher than any other component of the agency. The Office of Elementary and Secondary Education was second, receiving only $27.75 billion.<\/p>\n\n\n\n \u201cStudent loan delinquency rates will increase significantly because of the many borrowers who did not prepare well for the resumption of student loans,\u201d Kissel told the DCNF. \u201cWe may not have good access to those numbers for a while because the department is failing to report them to credit bureaus, but those numbers will go up.\u201d<\/p>\n\n\n\n