Fact Checking Criticisms of Biden’s Student Loans Plan

WOn Wednesday, President Joe Biden made the announcement that he would forgive some federal student loans held by many millions of Americans. This sparked a national debate from almost every ideological corner.

“An entire generation is now saddled with unsustainable debt,” Biden said at the White House. More than 44 million Americans carry more than $1.7 trillion in student loan debt—a situation that economists and higher education experts cite as a pressing obstacle to upward mobility for many of them.

Biden’s plan will cancel $10,000 education debt for individuals who make less than $125,000 per year and couples earning less than $250,000. Pell Grant recipients with the same income level can also get $20,000 of relief. President Biden also extended loan repayment halts until the end, as well as new guidelines to reduce debt burden. Notably, he launched an income-based repayment plan that caps borrowers’ monthly payments at five percent of their salary.

However, just like the policy decision gave joy to millions who felt the weight lifted off of their shoulderss, Republicans viewed the decision as an overreach by the executive that was not only morally wrong but also economically disastrous. It wasn’t necessarily a slam dunk with every Democrat, either. It was opposed by a number of Democratic frontline candidates, while prominent progressive activists criticised it as not taking enough steps.

But the lion’s share of the attacks on the president’s plan have come from the right. Here’s a list of some prominent critiques.

1. It’sBailouts for the Rich

Argument:Soon after the White House made its announcement, Republican leaders denounced it and called it a gift for the wealthy. “The median American with student loans has a significantly higher income than the median American overall,” Senate Minority Leader Mitch McConnell saidIn a statement. “Experts who studied past proposals found that the overwhelming benefit of student loan socialism flows to higher-earning Americans. Democrats specifically wrote this policy to make sure that people earning six figures would benefit.”

We know this: While the median income of student borrowers does exceed that of non-borrowers, it’s not the full story. The obvious conclusion is that those who take out loans in order to obtain a degree are likely to make more than those who have never received one. Americans with large amounts of debt are those that have it from professional graduate programs such as law or medical school, which lead to well-paying careers.

An average undergraduate student debt amount is just $30,000. A decrease of 10% or 20% in this balance can make a big difference to the middle class. According to research, student loan debt can be one of the greatest barriers to owning and getting married.

When asked by TIME to clarify the studies backing up McConnell’s claim that the highest earners would gain the most from student loan forgiveness, a spokesperson cited a University of Chicago study, saying it “found that if the federal government forgave $50,000 per borrower, the bottom 20% of earners would get 8.5% of the benefit. The top 20% of earners would get 22% of total debt wiped out.”

This analysis included evaluating the proposals of Sens. Bernie Sanders and Elizabeth Warren to forgive $50,000 of student debt from each borrower—a different plan than Biden’s. The GOP Senate aide also cited a 2019 report from the Brookings Institution focused on Warren’s specific proposal.

To prevent richest Americans not taking advantage of this program, the White House plans to put guardrails in place. For $10,000 forgiveness, only individuals and married couples earning less than $125,000 annually are eligible. Pell Grant recipients who receive $20,000 are also eligible for $10,000 forgiveness.

2. This will increase inflation and cause colleges to raise tuition.

Argument: One of the most prominent Republican broadsides has been that Biden’s plan will have an inflationary effect. “Biden’s debt transfer scam will make inflation even worse and does nothing to stop the runaway cost of college for most families,” tweetedKevin McCarthy, House Minority Leader

Arguments are that this will raise the deficit, and allow borrowers with forgiven loans to spend more. This will help boost the economy. Some scholars also believe that the forgiveness of these loans could encourage colleges and universities raise prices.

We know this: Whether Biden’s plan will aggravate inflation is unclear. There will be no federal expenditures. The government is essentially agreeing to not be reimbursed for existing loans and interest. Many of these loans, according to higher education professionals, were not going to be paid in full because they were to be forgiven within 20 years. (Biden’s plan made it so that loans can be forgiven for each borrower after 10 years of repayment going forward.)

It is difficult to predict whether the college tuition will rise or if it will encourage students to pay higher tuition. It’s conjecture, after all, and expert opinion is mixed. “It might actually be doing damage to what I think is the biggest problem in this country, which is the cost of college,” says Martin Van Der Werf, the director of editorial and education policy at Georgetown University’s Center for Education and the Workforce. “Colleges might look at this and might use it as an excuse to maintain their high prices.”

But Julie Peller, executive director of the bipartisan advocacy group Higher Learning Advocates, says there’s reason to suspect it won’t. The argument, she says, is the latest iteration of what’s known as the Bennett Hypothesis, the theory that colleges raise tuition whenever financial aid is increased. (It comes from Ronald Reagan’s education secretary, William Bennett.) “The data has shown it doesn’t really pan out,” Peller says, citing research that has shown a lack of empirical support for increased financial aid causing an increase in tuition prices.

3. It’s not fair

Argument: The plan has been criticized by many Republicans for being unethical. It excludes those who have worked hard to repay their loans and military veterans who helped to prevent going into debt. “It’s completely unfair,” saidOn Newsmax, Rep. Marjorie Taylor Greene (Republican of Georgia), (The White House fired backHer business had received more than $183,000 in Loan Protection Program forgiveness loans.

We know this: This attack line is a natural one from the critics. It’s one of the reasons even some Democrats have pushed back on it. In the coming midterms, this will be a major battle line.

The plan will provide relief for millions of Americans with low and moderate incomes, according to Democrats who support it. The Democrats are likely to highlight other inequalities which bother voters. Biden was asked the same question Wednesday. “Is it fair to people who, in fact, do not own multi-billion-dollar businesses if they see one of these guys getting all the tax breaks?” the president told reporters. “Is that fair? What do you think?”

Republicans claim that Democrats are really interested in energizing young voters. They have a majority of their support from Democrats.

4. It doesn’t address the root cause of the problem

Argument: This isn’t just a Republican charge; many progressives and thought leaders in the higher education space have leveled the same critique. While the plan may bring some much-needed relief to more than 20 million borrowers, it doesn’t do enough to address the exorbitant costs of higher education. The cost of college is higher than for any other service or good, except that of hospital care.

We know this: While Biden’s plan is a narrow solution to a huge, complicated problem, there’s not much that he could have done to lower college costs with the stroke of a pen. There are very few proposals that would lower the cost of college.

Conservatives insist that the solution is consumer-based. Students would stop enrolling at colleges if the cost was too steep, and colleges would have to adopt the best way to increase enrollment, which is to lower the price. Others have pushed for the federal government to institute price controls on college tuition, a controversial policy that would need to pass out of Congress—an impossibility in the current climate.

Instead of imposing an income-based repayment program, which allows undergraduate borrowers only to repay five percent each month of their income, the administration instead instituted it. That’s a big deal and a welcome move in higher ed circles. Peller believes that this aspect is the most crucial, as it allows borrowers to make more manageable payments.

Biden’s plan also said it would publish a list of colleges with a bad track record of leaving their students with high debt and bad outcomes. It’s not necessarily a new idea. To little avail, the Department of Education published for many years the College Affordability and Transparency List and College Scorecard.

The Biden administration also vowed to keep trying to “double the maximum Pell Grant and make community college free.” The latter idea was part of the original Build Back Better Bill but quickly got shot down by Republicans and moderate Democrats as too expensive.

5. Black borrowers are still left with unacceptably high levels of debt

Argument: Criticism of the plan hasn’t just come from the right. In a statement, Derrick Johnson, President of NAACP stated that too many Black people would be left with debts crippling their credit. “President Biden’s decision on student debt cannot become the latest example of a policy that has left Black people—especially Black women—behind,” he said. “This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020.”

We know this: Black Americans are most affected by the student debt crisis. According to PBS Newshour, 40% of Black college graduates left school with more than $30,000 in student debt. This compares with 29% for white students and 23% for Hispanic students. Black women are more vulnerable than white students, with an average debt of $41,466 a year after graduation. That’s compared to $33,851 for white women and $27,606 for Asian women, according to the American Association of University Women.

It’s not clear what Biden could have done to reduce the disparity, but it’s a reality that will continue to reverberate around the country. In addition, the administration highlighted how $20,000 of forgiveness to Pell Grant recipients will help borrowers of color. Pell Grant recipients make up approximately 72% of Black students who are full-time, undergraduate students.

6. It’sAn abuse of executive authority

Argument: Beyond the merits of the proposal, there’s a debate about whether such a move was within Biden’s scope of authority, and the plan is expected to face legal challenges in the courts. The 1965 Higher Education Act grants the president the power to cancel student loans, but the question is whether he can do so on such a sweeping level, or whether it’s limited to more targeted relief.

We know this: Biden once questioned whether it was possible to unilaterally forgive loans worth billions of dollars. “I don’t think I have the authority to do it by signing with a pen,” he said in February 2021. Nancy Pelosi of California was the House Speaker. “People think the president of the United States has the power for debt forgiveness,” she said in July 2021. “He does not. He has the ability to postpone. He can delay. He does not possess that power. That has to be an act of Congress.”

Although some experts believed Biden had such authority under 1965’s statute, administration officials cited another law to support their claim that broad loan forgiveness is possible.

The Heroes Act, passed after the Sept. 11 attacks, gives the secretary of education the power to “waive or modify” any provision of the law “in connection with a war or other military operation or national emergency.” Because former President Donald Trump declared the Covid-19 pandemic a national emergency, and Biden extended it, the White House argues it could use the law to freeze student loan repayments and cancel a portion of the federal education debt.

Already theories exist circulating on social media that either outcome—the courts upholding the executive action or striking it down—would be a political winner for Biden. The federal judiciary could throw out the decision, reaching as high as the conservative majority Supreme Court. This would spark a lot of protest and increase turnout for the next elections.

Of course, that’s just a theory. But it is easier to take a gamble when there’s reason to believe you can still win by losing. While there’s no telling yet how the issue will play out in the courts or on the political battlefield, it has no doubt inserted something of a Rohrschach test into American politics. Washington still has some way to go before the nation can respond.

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