President Joe Biden made his long-awaited announcement on federal student loans on Wednesday, saying his administration plans to cancel $10,000 in debt per borrower for people making less than $125,000 a year or households with less than $250,000.
With November’s midterm elections looming, he also announced forgiveness of up to $20,000 per borrower for Pell Grant recipients, along with a final pause on loan repayments.
Here are some early reactions from analysts as well as Republican and Democratic lawmakers.
I see: Biden cancels $10,000 in student loan debt, $20,000 in Pell grants, per borrower
And read: Student debt cancellation unlikely to hold up in court, former Education Department lawyer says
Republicans, former Obama adviser, others criticize Biden’s move
• “President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid off their debt, and every American who chose a particular career path or volunteered to serve in our Armed Forces to avoid taking on debt. This policy is stunningly unfair.” — Senate Minority Leader Mitch McConnell, Republican of Kentucky, in a statement
• “The thing is, we just passed a very large, very difficult piece of legislation, the Inflation Reduction Act, which will achieve some deficit reduction, both in the short term and … in the long term — very, very important given the enormous national debt that we have — and we’re going to do it in a way that pushes in the right direction against inflation. Because immediately reducing the debt or reducing our deficits will help deal with the inflation problem we have and make it easier for the Fed to deal with it. Now it looks like with the stroke of a pen today, the president is going to wipe out all those gains. And in fact, the cost of what I think is being discussed will far outweigh any savings from this legislation that took a whole year to negotiate and was not easy to pass.” — Maya MacGuineas, chairwoman of the Committee for a Responsible Federal Budget, a nonpartisan watchdog, in a Interview with Yahoo Finance
• “In addition to exacerbating inflation, the transfer of student debt does nothing to curb the high costs of higher education, including graduate schools that charge more and more while offering less and less. Forgiveness without accountability is a free pass for failed programs with high costs and poor outcomes, and would be a green light for colleges to continue tuition increases. Indeed, taxpayers may face more costs in just a few years when student debt returns to current levels.” — House Minority Leader Kevin McCarthy, R-Calif., in a statement
Analysts see no further forgiveness, pain for some companies
• “This…is likely to the extent that this administration will move toward canceling student loan debt. Republicans are already criticizing Biden for spending $300 billion to subsidize what the GOP describes as wealthier borrowers. This is a populist pushback against higher education spending aimed at working-class voters without college degrees.” — Jaret Seiberg, an analyst at Cowen Washington Research Group, in a note
• “Student loan forgiveness could result in pressure on student loan servicing fees for servicers such as Nelnet (NNI,
). It could also reduce student loan refinancing for companies like Navient (NAVI,
) and SoFi Technologies ( SOFI,
). Politically, canceling some student debt would fulfill another campaign promise for the President. In our view, the “win” may still face criticism from the left who believe it is not enough, the right who believe the amount disproportionately helps wealthier students, and the right and middle who may believe the actions may increase inflation. In addition, President Biden may face further criticism that student debt forgiveness does not solve the crisis, but is a temporary relief.” — Benjamin Salisbury, director of research at Height Capital Markets, in a note
Democratic lawmakers, progressive group offer praise
• “The positive effects of this move will be felt by families across the country, particularly in minority communities, and it is the single most effective action the President can take alone to help working families and the economy. This action, along with a freeze on federal student loan payments, interest and collections, will improve the financial security of borrowers, allowing them to invest in their families, save for emergencies and pay down other debt.” — Senate Majority Leader Chuck Schumer, D-New York, and Sen. Elizabeth Warren, D-Massachusetts, in a joint statement
• “Finally. President Biden’s bold and urgent action on student debt begins to restore a promise we made to generations of Americans that investing in education is their ladder to opportunity. … This was a bold step. Now, let’s let’s take the next one and actually address the exorbitant costs in higher education. We need to increase funding for the Pell Grant program, hold colleges accountable for poor outcomes, and make broader reforms to the student loan system.” — Patrick Gaspard, President and CEO of the Center for American Progress, a liberal think tank
• “The president’s action today will change lives for the better. By reducing this unfair debt, this decision will help millions of people get by, build generational wealth, raise their families, buy homes and more.” — Democratic Rep. Ayanna Pressley of Massachusetts