Canceling the student loan has become a top priority today during the Capitol Hill hearing.
Here’s what you need to know.
At a Senate Judiciary Committee hearing today, Senators discussed a new bipartisan student loan bill that would make it easier for more student loan borrowers to cancel student loans in the event of bankruptcy. However, in the beginning, the hearings focused on the widespread forgiveness of student loans. Senator Chuck Grassley (R-IA), a senior committee member, raised the issue of student loan cancellation, its impact on the student loan borrower, and the potential causes of high student loan debt in the United States. Here’s what he said:
Student Loan Cancellation: Why Student Loans Don’t Work
Grassley said the federal student loan system is not working, and this is hurting both student loan borrowers and taxpayers. Grassley noted that student loan debt has doubled in the past 10 years and now the federal government owns 92% of all outstanding student loan debt. Why? Student loan arrears have increased due to rising tuition fees, which means colleges and universities have directly led to an increase in student loan borrowing, Grassley said. Grassley says we need to tackle the basic problem of student loans.
Here’s what else Grassley said about the broken student loan system:
- “Federal student loans are available no matter who can pay and beyond need.”
- “Colleges have unlimited funding, which does not provide an incentive for colleges to cut costs.”
- Grassley noted that some senators want colleges and universities to be more accountable for student outcomes such as employment, but in practice this is difficult because “different schools have different standards,” and that may still not solve the problem.
- Grassley is a strong advocate of disclosure to help students better understand the cost of college. He presented three separate bills to Congress to provide students with more complete information on finding colleges and understanding the full cost of financial aid.
- Grassley believes this will lead to “more transparency, more informed choices and increased price competition among colleges.”
- Most importantly, Grassley said, greater transparency will limit borrowing to what every student loan borrower can afford.
Student Loan Cancellation: Grassley Says Student Loan Forgiveness Is “Regressive”
Grassley addressed student loan abolition as a policy. Discussing the idea of large-scale student loan forgiveness, Grassley said:
- “Canceling a student loan is a dubious idea.”
- “Canceling the student loan would be an extremely regressive idea and in the vast majority of cases would benefit the rich at the expense of others.”
- “We shouldn’t ask those who did not go to college to pay for those who did.”
- Grassley says President Joe Biden has no legal authority to cancel student loan arrears.
- Grassley quoted House Speaker Nancy Pelosi, California, who also said last week that Biden has no legal authority to decide to cancel a student loan without explicit congressional approval. Quoting Pelosi, Grassley said, “The President cannot do this. So this is not even a discussion. “
- “We have to consider moral hazard and taxpayer costs.”
- Grassley said that any re-authorization of the Higher Education Act needs to consider the factors that lead to high student loan debt and high cost levels, and then focus on how to address each one.
Student Loans: Why We Have High Student Loan Debt
Grassley began to explain why America has such high student loan debt:
- Grassley says “we have some bad federal politicians.”
- “We have federal policies that encourage young people to take on more debt than they should.”
- “When you have banks that provide loans, there is more emphasis on how much loan you have to borrow, rather than on what a direct loan from the government gives.”
- “We have a federal policy that encourages our universities to inform students maximum the amount they can borrow, and therefore they borrow more than they owe.
- “We shouldn’t encourage people to borrow more than they need.”
Student Loans: Higher Education Disrupted
“Incentives in higher education are severely impaired,” Senator John Cornin (Texas) said during the hearing. Kornin added that teens have to borrow tens of thousands of dollars to get a good job, only to find out when they graduate, they have a limited number of jobs, or their job doesn’t match their field of study, creating a mismatch for student loan payments. … Kornin also said:
- “Student loans can open the door to a better life.”
- Kornin doesn’t want to stand in the way of a student loan borrower taking a student loan.
- “Schools sell a product for a price, and that price should match what the students get from it.”
- “Some schools have used the services of American taxpayers.”