Last week’s statement by President Biden about forgiving student loans sparked a rush of commentary from people on both political and economic sides, including Catholics.
What is the proposal in the plan?
Student debt forgiveness is a promise made by the Biden administration that dates back to its campaign days.
In the past several decades, the price of education has skyrocketed in the United States. After graduation, the typical American student owes $28,950, amounting to a national student loan debt of $1.75 trillion.
The administration claims that the plan, which was unveiled last Wednesday, includes three key proposals that would “eliminate” debt for certain Americans and “make the student loan system more affordable for working families.”
According to an information sheet issued by the White House, the Department of Education would forgive $10,000 in debts it holds for Pell Grant winners and $20,000 in loans it holds for non-Pell Grant applicants.
To be eligible, borrowers must have an annual income of less than $125,000 ($250,000 for married couples).
The rules only apply to loans owned by the government. Debt cancellation is not available to anyone who have had their federal loans consolidated through SoFi or Navient, for example.
By reducing monthly payments and expanding on the Public Service Loan Forgiveness (PSLF) program, which enables Americans who work in public service, the military, and non-profits to achieve loan forgiveness after a certain threshold, the administration is also recommending changes to how borrowers repay their loans.
In order to hold universities “accountable,” the Department of Education will soon make many announcements, one of which is the publication of an annual “watch list” of the courses with the greatest debt loads in the nation.
Catholic economist: proposal doesn’t change the reasons that drive up the expense of education.
Biden’s approach does not address the underlying issue, according to Patrick T. Brown, a fellow at the Ethics and Public Policy Center (EPPC) and a former senior policy advisor to the Joint Economic Committee of Congress (JEC).
Although this widespread student debt bailout “goes much beyond what is required,” he stated, “Catholics have a moral imperative to offer a preferred alternative for the poor.” A better strategy would have been to seek out better repayment alternatives for those who dropped out of school early or were taken advantage of by predatory institutions.
Brown’s research focuses on family-friendly economic principles. He has looked at the connection between young persons delaying marriage and having children and the high costs of higher education.
He proposes exploring remedies such as expanding opportunities for postsecondary education outside of the conventional model, income-driven repayment, and social assistance for families.
“There are far better methods to lessen the strain on those coping with high student loan debt loads without dedicating what may be $1 trillion for a one-time fast fix that would do little to alter the fundamental issues pushing the expense of education ever higher,” he added.
Critics claim that the program will cause inflation.
The previous week has seen a lot of criticism from both the left and the right, many of whom think the policy won’t stand up in court.
According to Nancy Pelosi, Speaker of the House, “people believe that the President of the United States has the authority to forgive debt. Neither does he. He can delay and postpone, but he lacks that ability. That must be a congressional act.
Although Pelosi praised the concept in a statement last week, skeptics from both political parties contend that the advantages of Biden’s plan would be offset by greater inflation and more taxes.
Professor of economics at Harvard University Jason Furman, a former chairman of President Obama’s Council of Economic Advisors (CEA), stated on Wednesday that adding about half a trillion dollars’ worth of fuel to the already-burning inflationary fire would be foolish.
Furman said in a twitter thread that “a lot of attorneys (and political leaders) have argued inconsistent with the law,” adding that “everyone else will pay for this either in the form of greater inflation, more taxes, or lesser benefits in the future.”
The editorial board of The Washington Post referred to the strategy as “ill-conceived and misplaced” on Wednesday.
“Mr. Biden’s student loan choice won’t benefit the most disadvantaged Americans enough. However, it will result in a windfall for people who don’t need it, with American taxpayers bearing the cost, according to the Board.
The proposal would cost over $300 billion, entrench the cycle of student loan debt in America, and “benefit largely college-educated families who don’t need the support,” according to the Wall Street Journal Editorial Board.
The board said that colleges would “certainly take advantage of the promise of frequent cancellations by raising tuition and introducing new degree programs of doubtful merit.”
Rep. Tim Ryan (D-OH), a Democrat, along with others who said that the proposal would place excessive fees on those who had previously repaid their student loans or decided not to attend college.
“Sending the incorrect message to the millions of Ohioans without a degree working just as hard to make ends meet conveys the wrong message to those already on a trajectory to financial stability,” he said on Wednesday.
This supports the claim made by many on the right that the proposal amounts to a “debt transfer.”
According to the apolitical Penn-Wharton Budget Model, the whole plan’s expenditures “may reach $1 trillion.”
Catholic charity will keep assisting individuals thinking about entering the priesthood or monastic life.
According to a Catholic group, Biden’s policy won’t impact the organization’s goal of assisting individuals considering religious life in becoming debt-free so they may follow their vocation.
The Labouré Society offers financial support to Catholics with unpaid student debts who are pursuing a vocation to the priesthood or convent life.
Because the communities cannot bear the expenditures, the majority of religious organizations stipulate that persons undergoing discernment must be debt-free before becoming welcomed. This is problematic since there are now fewer prospective priests, nuns, and brothers than ever before.
According to the Labouré Society, 42% of aspirants are prevented from continuing their career because of student debt, which costs $60,000 on average.
Executive Director John Flanagan said that the initiative is not particularly “altruistic” in a phone conversation with CNA. In the end, we need priests, sisters, and brothers as Catholics. If there is anything the laity can do to aid those who are willing to sacrifice their lives for us, we must do it.
The organization does this via a demanding training program and by providing direct financial help to aspirants who feel called to serve the Church but are prevented from doing so by college loan debt.
“We hold the views that commitment is a personal obligation and that God upholds commitments. For them, [it’s] a process of formation,” Flanagan added.
Through the Labouré program, aspirants learn how to properly interact with the Church and are anchored in Catholic philanthropic values so they may accept responsibility for their debt even if they do not personally pay it off.