Republicans say student loan forgiveness is 'not a solution' to rising cost of college

Ahead of President Joe Biden's first State of the Union address, the GOP Committee on Education & Labor urged Biden that widespread student debt cancelation 'is not a solution' to address the rising cost of college.

Republicans on the committee accused the Biden administration of "appeasing the progressive wing of the Democratic Party" rather than solving the root of the problem. They argue that the federal student loan system provides incentives for colleges and universities to raise tuition costs.

"Reckless loan forgiveness policies are a short-sighted answer that would crush American taxpayers and leave our higher education system more broken than before."

- House Committee on Education & Labor Republicans

Although many progressive Democrats have been calling on Biden to cancel federal student loan debt via executive action before payments resume in May, his administration has not yet announced plans for widespread debt relief. 

Keep reading to learn more about the likelihood that Biden will deliver on his campaign promise of canceling $10,000 worth of student loan debt per borrower, as well as your alternative debt repayment options like refinancing. You can compare student loan refinance rates on Credible for free without impacting your credit score. 

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GOP: ‘Reckless’ student loan forgiveness benefits the wealthy

Republicans on the House Education & Labor Committee told the president that "reckless" student debt forgiveness policies would benefit the wealthy and worsen inflation. Consumer prices surged 7.5% annually in January, which is the highest rate of inflation since 1982.

"Blanket forgiveness would compound the nation’s 40-year-high inflation rate, while disproportionately benefiting high-income borrowers," GOP lawmakers wrote.

The authors cited a Brookings Institute report finding that student debt is concentrated among wealthy households, meaning that broad student loan forgiveness would be most beneficial to high-income Americans. 

However, not all lawmakers agree that canceling student debt would benefit the wealthy. Rep. Alexandria Ocasio-Cortez, D-N.Y., said it's a "ridiculous assertion" that student loan debt is for the privileged during a Dec. 2 testimony on the House floor.

"Do we really think that a billionaire's child is taking student loans?" she asked. "Come on. If you are taking on student loan debt, it's because you are likely a working or middle-class person."

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Will Biden cancel student loans?

A group of Senate Democrats led by Sen. Elizabeth Warren, D-Mass., and Senate Majority Leader Chuck Schumer, D-N.Y., introduced a resolution on Feb. 4 urging President Biden to use his executive authority to "broadly" cancel up to $50,000 worth of student debt per borrower — the legislation did not mention an income cap.

Although the president has not yet commented on this resolution, White House Chief of Staff Ron Klain recently said that Biden is considering how he can provide student loan relief before forbearance expires in May. 

"I think the president's going to look at what we should do on student debt before the pause expires, or he’ll extend the pause," said Klain.

Notably, Biden did not mention student loan cancellation during his State of the Union address. With no clear promise of debt forgiveness, borrowers may need to start preparing their finances for federal student loan payments to restart as scheduled.

One way to reduce your monthly student loan payments is to refinance to a private loan at a lower interest rate. Keep in mind that refinancing your federal student debt would make you ineligible for income-driven repayment plans, deferment programs, COVID-19 administrative forbearance and federal student loan forgiveness programs. You can learn more about student loan refinancing by visiting Credible.

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How student loan borrowers can prepare for repayment

About 9 in 10 student loan borrowers aren't ready to resume monthly payments in May, according to a recent survey of more than 23,000 borrowers. More than a quarter (27%) said that they'll never be financially prepared to make payments.

If you're among the vast majority of borrowers who are unprepared for federal student loan repayment in less than two months, consider these strategies:

• Income-driven repayment (IDR): The Education Department offers four types of IDR plans that allow federal student loan borrowers to limit their monthly payments to 10-20% of their discretionary income. After paying on your loans for a period of 20 or 25 years, the remainder of your student loan debt will be discharged.
• Federal deferment: It may be possible to suspend payments on your federal student loans for up to 36 months by applying for deferment. Keep in mind that interest may accrue on your debt while your loans are deferred, which can add to the overall cost of borrowing. You can learn more about the eligibility requirements on the Federal Student Aid (FSA) website.
• Student loan refinancing: Refinancing to a private student loan at a lower interest rate may help you reduce your monthly payments, pay off debt faster and save money over time. A recent Credible analysis found that real-life borrowers who refinanced to a longer-term loan were able to save more than $250 on their student loan payments.

It's important to remember that refinancing your federal loans would make you ineligible for blanket student loan forgiveness and other federal loan discharge programs like Public Service Loan Forgiveness (PSLF).

You can browse current student loan refinance rates in the table below. Then, you can use Credible's student loan refinancing calculator to see if this option is right for your financial situation. 

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