Indiana lawmakers react to Biden student loan plan
INDIANAPOLIS (WISH) — President Joe Biden’s Democratic allies hailed Wednesday’s student loan announcement while Republicans sounded the alarm over inflation.
Rep. Andre Carson, one of Indiana’s two Democrats in Congress, said the decision to forgive a portion of federal student loan debt and restructure payment plans was a relief for working-class Hoosiers. The Indianapolis resident said not only does it make the loan system more manageable, it helps mitigate the fear of debt that can dissuade many Americans from seeking a college education in the first place.
“This measure is monumental for middle class families, hard working Hoosiers and Americans who deserve some relief,” he said. “There has never been, there has never been as bold a measure to ease the burden of student loans.”
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Biden on Wednesday announced the government will forgive up to $10,000 worth of federal loans, or $20,000 for students who took Pell Grants. He said the move would affect about 43 million people in all, including 27 million Pell Grant recipients. Twenty million people would have all their remaining debt canceled under the plan. The move also changes the rules for repaying federal loans. Borrowers could not be forced to put more than 5% of their discretionary income toward paying down debt. Any remaining debt after 20 years would be canceled, as would debts for anyone with at least 10 years of employment at either a government agency or a nonprofit.
Republicans denounced the measure as another example of excessive spending. U.S. Rep. Larry Bucshon said the move is not fair to the majority of American adults who either lack a college degree or currently do not have any college debt. He said programs already exist to help borrowers pay down their loans. Bucshon said existing federal aid programs merely incentivize colleges to raise tuition when the federal government should instead encourage the opposite.
“What’s going to happen is, is people are going to have a windfall of money and they’re going to throw that into an overheated economy which is going to continue to drive inflation,” he said.
U.S. Rep. Greg Pence issued a statement.
“It forces Hoosiers – whether you took out loans or not – to finance someone else’s college education. Worse still, this plan is nothing short of political pandering during the election season and will only serve to make the decades-high Bidenflation squeeze more painful.”
Michael Hicks, a professor at Ball State University, said inflationary pressure from loan forgiveness will depend on what people do with the money they save. He said most college debt is associated with professional degrees such as business or medical school and those graduates have either no debt or far more than Wednesday’s announcement would cover. Hicks said additional consumer spending will drive up inflation but paying down other outstanding debt will not.
“If households that have this debt still hold onto additional debt, which will be the case for most of them, it’s probably not going to cause a big increase in spending by those households,” he said. “For the most part, I think (inflation from the plan) is going to be fairly muted.”
Republicans including Bucshon said they question whether the Biden administration has the authority to unilaterally change the rules on student loans without going through Congress. Hicks said not to be surprised if the plan gets put on hold due to litigation as a result.