Cassidy, Foxx Call Out Administration’s Potential $1 Trillion Student Loan Repayment Scheme, Rushed Public Review Process
WASHINGTON – Today, U.S. Senator Bill Cassidy, M.D. (R-LA), Ranking Member of the Senate Committee on Health, Education, Labor and Pensions (HELP), and Representative Virginia Foxx (R-NC), Chairwoman of the House Committee on Education and the Workforce, rebuked the administration’s reckless Income Driven Repayment (IDR) rule proposal and called on Education Secretary Miguel Cardona to extend the rushed public comment period.
On January 11th, the Department of Education released a proposed rule on IDR, which would reduce the amount of student loan debt borrowers will have to pay back by 40 percent. The administration estimates the plan will cost taxpayers at least $138 billion over the next ten years, but a non-partisan student loan expert has estimated that the true cost could be $1 trillion. This is a separate proposal from the administration’s loan cancelation effort that is currently before the Supreme Court and is estimated to cost taxpayers $400 billion.
“This proposed regulation would cut future borrowers’ payments in half and eliminate the expectation for these borrowers to pay back even the principal on their loan. This would fundamentally break our higher education financing system.” said the lawmakers. “This rule would route hundreds of billions of taxpayer dollars towards college-educated middle- and upper-income individuals and away from our constituents who never went to college or worked hard to pay off their loans.
“You have ignored prior requests to extend comment periods in order to give the American people more time to provide input on your costly rules,” they continued. “By extending the public comment period by at least 30 days, the American public has time to review what could very well be the most costly regulation in our nation’s history.”
The proposed rule would
- Reduce payments to 5% of borrowers’ discretionary income monthly on undergraduate loans. This is down from the current 10%.
- Raise the amount of income that is considered non-discretionary income and therefore is protected from repayment to 225% of the Federal Poverty Line from 150%.
- 225% ($32,805 for an individual/$67,500 family of 4)
- 150% ($21,870 for an individual/$45,000 family of 4)
- Cover borrowers’ unpaid monthly interest, so that unlike existing income-driven repayment plans, no borrower’s loan balance will grow.
- Forgive loan balances after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.
- Allow graduate borrowers to pay a percent of discretionary income between 5% and 10% based sizes of amount borrowed for undergraduate and graduate loans.
Read the full letter here or below
Dear Secretary Cardona:
On January 11, the U.S. Department of Education (Department) released a Notice of Proposed Rulemaking (NPRM) that would make sweeping changes to the federal student loan program through a new income contingent repayment plan. We write today to oppose the Department’s push for a rule of such magnitude without giving Congress and the public sufficient time to consider such changes. For this reason, we request an extension of the public comment period by no less than an additional 30 days.
These regulations are yet another example of your Department usurping the power of the purse, an authority solely held by Congress. This proposed regulation would cut future borrowers’ payments in half and eliminate the expectation for these borrowers to pay back even the principal on their loan. This would fundamentally break our higher education financing system. A scholar at the Brookings Institution estimated that the rule would result in the average borrower repaying only 50 cents on the dollar, turning a federal loan program into an untargeted grant program. As a result, this rule will be costlier and more harmful to taxpayers than the President’s illegal mass student loan cancellation policy awaiting judgement by the U.S. Supreme Court.
Putting aside the galling overreach in the proposal, more time to comment is necessary to address the proposed rule because the Department’s impact analysis does not add up. The Department estimates the cost of the rule to the American taxpayer will be $138 billion. Yet, previous Congressional Budget Office estimates for less generous changes to income-driven repayment programs than those proposed by this administration showed costs that were much higher. A non-partisan student loan expert has estimated that the true cost of the NPRM could be $1 trillion.
This rule would route hundreds of billions of taxpayer dollars towards college-educated middle- and upper-income individuals and away from our constituents who never went to college or worked hard to pay off their loans. Further, this proposal unleashes vast moral hazard for college administrators and for students and parents by making the decision over whether to or how much to borrow irrelevant to how much must ultimately be repaid. Colleges and students will be leaving money on the table if they take less than the maximum loan offered by the federal government. Yet the Department’s impact analysis does not consider this.
You have ignored prior requests to extend comment periods in order to give the American people more time to provide input on your costly rules. Before fundamentally transforming our higher education financing system, we implore you to follow the Clinton-era Executive Order 12866, which strongly suggests at least a 60-day comment period. By extending the public comment period by at least 30 days, the American public has time to review what could very well be the most costly regulation in our nation’s history.
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