"The language has not come out yet, we only have about four pages of material to look at, but what I would say is the Biden administration has been nibbling at the edges of the student debt problem and has done almost everything it can short of actually forgiving regular alumni student loans," says Adam Kissel, visiting fellow at The Heritage Foundation, a center-right think tank headquartered in Washington, DC. "This new move still doesn't get to that, and instead continues to fiddle at the edges even though it would affect about $85 billion worth of student loan debt … and $85 billion is a small fraction of the $1.6 trillion in federal student debt."
The Biden administration stands by its actions, saying their objective is to overhaul relief programs that have been criticized for their burdensome paperwork requirements and long processing times. Meanwhile, the proposal would reshape a debt forgiveness process for students whose colleges deceive them, along with other programs for borrowers who are disabled and those with careers in public service. Kissel debates the equity in the proposal.
"I think a lot of people will be even further upset that the transfer of money from the less-educated, less-wealthy in America to the more-educated, more-wealthy is happening – and people will see that as unfair," says the Heritage fellow.
"People who paid off their student loan will feel like chumps because they did the right thing, and others who have kept their debt up are still paying and will have their loans forgiven to some degree."
Kissel adds that income-driven repayment options are available to people with loans.
"Income-driven repayment, by definition, makes your student debt affordable," explains Kissel, "because you're only paying 10% of your disposable income and you have 20 or 25 years' worth of payments – and that's very affordable. So, there's no one whose debt is unaffordable."
Supporters of student loan forgiveness say many borrowers are buried in debt and some didn't get the jobs they thought their degree would deliver. Even so, Kissel says students are made aware of the terms of their student loan.
"Students get financial counseling when they take out their student loan but it's perfunctory and doesn't really show them what will happen in a way that they can remember," says Kissel – who argues that that reflects a failure of high schools in teaching financial literacy.
"Students [often] don't even understand what they're being told when they take out their student loans," he contends.