Biden’s Attempts To Forgive Student Debt Were a Disaster
In the January 2025 issue of Reason, we’re giving performance reviews of Joe Biden’s presidency. Click here to read the other entries.
Biden’s changes to education policy are among the central achievements of his first—and only—term in office. Chief among them are his sweeping reforms to the federal student loan program, increasing opportunities for debt forgiveness. While the largest of these changes has now been blocked in court, Biden has nonetheless managed to forgive billions in federal student loans.
In August 2022, Biden announced a blanket forgiveness of up to $20,000 in federal student loans for single borrowers earning less than $125,000 or couples earning less than $250,000. This plan—estimated to cost over $500 billion—was swiftly blocked in federal court, and the Supreme Court later struck it down as an unconstitutional exercise of the spending power.
While Biden couldn’t quite bring home the grand prize, he managed to cancel billions in student loans through now-blocked changes to the federal student loan program. Unsurprisingly, these changes also led to a big increase in the estimated 2024 federal deficit—a $145 billion hike.
The seminal achievement of Biden’s student loan overhaul was the introduction of the Saving on a Valuable Education (SAVE) plan, an income-driven repayment plan that dramatically reduces most borrowers’ monthly payments. Under the previous version of the program, borrowers were directed to pay 10 percent of their discretionary income (calculated as earnings above 150 percent of the federal poverty rate) for 20 years before receiving forgiveness. Borrowers will now pay just 5 percent of their discretionary income (now estimated as earnings more than 225 percent of the federal poverty level
Article from Reason.com
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