WASHINGTON — Education Secretary Miguel Cardona pushed back Wednesday against Republican criticism of the Biden administration’s new student loan debt forgiveness program, saying it would curb defaults and boost the economy.
The program, announced last month, will cancel $10,000 in student loan debt for federal borrowers who earn less than $125,000 a year and $20,000 for recipients of federal Pell Grants, which target low-income students. The move is expected to benefit 43 million loan borrowers, including 20 million whose debt will be completely canceled.
Republicans have attacked the Biden administration’s executive action as a sop to relatively wealthy families that will be paid for by lower-income workers in the form of higher federal debt. The Committee for a Responsible Federal Budget, a nonpartisan research group, estimated the plan could cost roughly $500 billion over a decade.
“President Biden’s student loan socialism is a slap in the face to every family who sacrificed to save for college, every graduate who paid their debt, and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt,” Senate Minority Leader Mitch McConnell said in a recent statement.
But Cardona said the debt forgiveness was a one-time remedy for the economic fallout from the COVID-19 pandemic. He said it would benefit even those students who already paid off their loans.
“The intent of this debt relief is to make sure borrowers are not worse off after this pandemic than they were before,” he told reporters at a breakfast sponsored by the Christian Science Monitor. “But to that person that paid off their loan, having their neighbor not going to default helps the local economy. We know defaults were skyrocketing and we were expecting it to skyrocket even more.”
About one-third of federal student loan borrowers have defaulted at some point over the past two decades, according to a survey by the Pew Charitable Trusts. And of those who defaulted, nearly two-thirds did so multiple times.
Cardona also compared the student loan forgiveness to the pandemic relief provided to small businesses through the Paycheck Protection Program, which offered forgivable loans for employers who kept their workers on the payroll.
“So we invested in businesses. Now we’re investing in Americans to make sure they get back on their feet and move on,” he said.
The plan could face legal challenges. Republicans — and even some Democrats — have suggested only Congress has the power to cancel student debt. But the Education Department issued a legal memo citing a 2003 law that grants the secretary broad authority to provide such relief during periods of war and national emergencies, which it argued should include the pandemic.
“We’re acting on our authority and we believe that we have not only the right but the responsibility to make sure Americans are not worse off after the pandemic,” Cardona said.
The secretary also acknowledged that loan forgiveness alone won’t fix the underlying problem of soaring college costs that promise to ensnare future students with mounting debt. That is why the administration also announced a plan to cut in half borrowers’ monthly payments, from 10% of discretionary income to 5%.
And he said the administration is working on other solutions that include loan forgiveness for public service and more “information transparency” on the part of colleges and universities to ensure “a better return on investment in colleges.”
“The worst thing that could happen is for us to provide debt relief and be in the same position five years from now,” he said. “So if we don’t stop the bleeding, we’re going to be in the same position we’re in.”
Cardona’s appearance Wednesday came as Cabinet secretaries begin a public relations offensive to tout the administration’s accomplishments in advance of the November midterm elections.
On Monday, Cardona will kick off a Road to Success Back to School Bus Tour with first lady Jill Biden, a college professor. The weeklong multistate trip is designed to “underscore the Administration’s commitment to helping students recover from the impacts of the pandemic and continue on the road to success,” the Education Department said in a statement.
Treasury Secretary Janet L. Yellen, meanwhile, will travel to Michigan on Thursday to speak at the Ford Motor Company’s Rouge Electric Vehicle Center in Dearborn, where she will address “what the passage of the Administration’s legislative agenda means for the future of our country,” the Treasury Department said in announcing the trip.
And those trips come on the heels of an announcement by Commerce Secretary Gina M. Raimondo outlining plans for spending $50 billion to boost domestic microchip manufacturing provided in a bipartisan economic competitiveness law enacted last month.
Lindsey McPherson contributed to this report.