President Joe Biden on Tuesday launched a promotional blitz for his new program that helps student loan borrowers repay their debt, just weeks before millions of Americans are set to receive a loan bill for the first time since the beginning of the pandemic.
The Biden administration is mobilizing to convince borrowers across the country to sign up for the new income-driven repayment program — dubbed the “SAVE plan” — which caps interest accrual and lowers the monthly payment amount for many borrowers.
“It’s the most affordable student loan plan ever,” Biden said in a video released by the White House on Tuesday, describing the program as a major reform to a student loan system “that hurt borrowers for much too long.”
“If you’re eligible for the SAVE Plan, sign up now so you can lower your monthly payments in advance of payments resuming this fall,” Biden said.
From what I saw, briefly looking around, the interest rate is a fair bit lower for government loans than private ones, and when you add in inflation and administrative costs, I could imagine the actual profit margin on public loans being relatively low. Regardless though, I strongly agree with the fundamental point that investments in education are generally a really good use of government money.
That said, subsidizing demand like that does give universities a lot of leeway to dramatically increase costs (as well as giving state governments cover to slash funding to state universities). Additionally, given that university graduates go on to make quite a lot more money than non-grads - even if the first several years out can be a bit rough dealing with loan payments - throwing them even more money isn’t exactly the most progressive use of tax funds if you’re aiming to help the poor. I’d much much rather graduates who are actually able to re-pay their loans, even if it involves a bit of belt-tightening for a bit, to do that so that that money can be used to help fund education costs for more people who truly need it. The median student loan debt is about the same as the median cost of attending a public university for one year, so every person that decides to just not pay their debt back is one less student in true need of assistance that won’t be able to go to college. It’s more than reasonable for people who benefited from loans to help fund the next wave of students, and doing so makes the financials much much more scalable and sustainable.
I think there is an obscured part of the student loan debate were federal loans were never really quite enough to fund college alone. Rising tuitions have meant a private loan becomes a basic necessity for covering the costs unless you have something like generational wealth, or specific subsidy like a scholarship.
It’s created a feedback loop where students are funneled increasingly towards taking on private loans to complete their degree, or have to drop out and have all the debt for nothing. To the point one could argue people aren’t benefitting from the loans to begin with.
Subsidizing without regulation just raises costs.