More Information Is Needed Before Student Loan Changes Take Effect
The Department of Education yesterday announced several changes to the student loan program, including a one-time policy to retroactively count any payment made on a loan toward forgiveness in income-driven repayment plans for most borrowers. It also appears the policy would cancel debt for anyone who has been paying back their loan for 20 or 25 years (based on several factors) – regardless of how much they’ve paid and whether or not they enrolled in an income-driven repayment program. The ultimate cost of the policy is unclear due to a lack of data and detail provided by the Department of Education, but some high-income borrowers with large debt balances due to advanced education – especially doctors, dentists, and lawyers – are likely to reap large benefits. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
It makes sense to improve and reform income-driven repayment programs, but the Administration’s approach appears to violate the principles behind income-driven repayment. The Administration is retroactively taking the “income” out of income-driven repayment.
This policy could end up being a costly giveaway to high-earning doctors and lawyers. The public deserves to know the full implications of the change before it moves forward.
As the Department of Education continues to make significant and costly modifications to the student loan program, it should provide cost and distributional estimates as well as accompanying policies that offset the cost of these changes. It should also end the costly, inflationary, and regressive repayment pause as scheduled.
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