Supreme Court Student Debt Cancellation Decision Sparks Dueling Proposals

By Nick Mordowanec

Republican and Democratic senators on Wednesday issued dueling proposals aimed to deal with the inordinate costs and processes associated with higher education, though both plans are vastly different in their approaches.

The Supreme Court is expected to make a decision this week on whether the Biden administration’s student loan forgiveness plan, which would erase federal student loan debt for approximately 20 million and lower balances for another 20 million, is constitutional. The court will look at two challenges: one involving six Republican-led states, and a lawsuit filed by two students.

President Joe Biden recently vetoed the Congressional Review Act (CRA) resolution following debates about the debt ceiling. The resolution included support from Republican and some Democratic senators and intended to overturn Biden’s student debt cancelation plan and the loan repayment pause which Republicans estimated would cost taxpayers nearly $600 billion.

GOP members estimated that the repayment pause, which is set to expire 60 days after the June 30 Supreme Court deadline, cost taxpayers $5 billion a month in uncollected fees for a total estimated balance of $195 billion. The initial pause was enacted by former President Donald Trump at the beginning of the COVID-19 pandemic.

“The president’s student loan schemes do not ‘forgive’ debt, they just shift the burden from those who chose to take out loans onto those who never went to college or already fulfilled their commitment to pay off their loans,” said Republican Senator Bill Cassidy following the successful 52-46 vote.

“Our bipartisan resolution prevents average Americans, the 87 percent of whom currently have no student loans, from being forced to foot the bill of these unfair and irresponsible policies.”

Republicans’ higher education proposal

Cassidy, along with Senators John Cornyn, Chuck Grassley, Tommy Tuberville and Tim Scott, introduced a five-bill package Wednesday called the Lowering Education Costs and Debt Act.

The legislation intends to “create downward pressure on the cost of colleges and universities” while offering prospective college students and their parents or guardians better information to choose the right school and program to achieve the best return on investment for them—in essence, preventing students from unintentionally taking out more loans than they can pay off in the long run.

These are the five bills:

• College Transparency Act (CTA): This reforms the college data reporting system for students and families to provide better information while assisting businesses and other employers in finding potential employees best suited for a particular field. It was previously introduced by Cassidy and other Republicans and Democrats in April.
• Understanding the True Cost of College Act: It requires higher education institutions to use a uniform financial aid letter with clear indications of the types (scholarships, loans, work-study, etc.) of aid, breaking them down for easy understanding and comparison.
• Informed Student Borrowing Act: Prior to enrollment, students will have more information about their academic needs and financial responsibilities—including the duration of their loan, their expected monthly payment, and how much money they will likely make in their desired career fields.
• Streamlining Accountability and Value in Education (SAVE) for Students Act: It reduces the number of repayment options from nine to two options: the 10-year standard repayment plan, plus REPAYE+ and an income-driven repayment plan that provides earlier forgiveness for low-income, low-balance undergraduate borrowers.
• It also prohibits new federal student loans from paying for undergraduate programs in which half of the former students are unable to earn a salary higher than the median high school graduate and prohibits loans from paying for graduate programs in which half of the former students are unable to earn more than a median bachelor’s degree recipient.
• Graduate Opportunity and Affordable Loans (GOAL) Act: If enacted, it would end inflationary Graduate PLUS loans and limit graduate school borrowing, and allow institutions to set lower loan limits by program to protect students from overborrowing.

Ty Bofferding, spokesperson for the Senate Health, Education, Labor and Pensions (HELP) Committee, told Newsweek that PSLF and the other 25-ish other loan forgiveness programs remain and will be untouched by this bill package. Interest on loan repayments is not addressed in this legislation.

Cassidy said Wednesday during a press conference that the Biden administration’s plan is “not a fix but merely a Band-Aid,” saying this new GOP plan “addresses the root causes.”

“Young people are paying a lot more for higher education and getting a lot less, and that’s wrong…This is one step to restoring sanity to our education system,” Tuberville said. “It’s out of control. We’ve got our work cut out on all levels.”

Cornyn, who went to school for journalism and later became a lawyer, said it’s not about attacks on liberal arts degrees but about personal responsibility and whether students can eventually pay back their loans.

“We’re not painting with a broad brush of saying everyone is gaming the system, but it certainly happens,” said the senator from Texas. “And the consequences can be dire.”

Democrats’ higher education proposal

Also on Wednesday, independent Senator Bernie Sanders, Washington Representative Pramila Jayapal and eight other Democrats introduced the College For All Act of 2023, which would allow students to attend public colleges and universities tuition- and debt-free.

First introduced in 2015, it is labeled as “the most substantial expansion of higher education access since the Great Society and President Lyndon B. Johnson’s Higher Education Act of 1965.”

It would be paid for by the Tax on Wall Street Speculation Act of 2023, also introduced Wednesday by Sanders and California Representative Barbara Lee. It would put a 0.5 percent tax on stock trades, a 0.1 percent fee on bonds, and a 0.005 percent fee on derivatives and other financial instruments.

If passed, it would guarantee tuition-free community college for all students and allow students from single households earning up to $125,000 a year, and married households earning up to $250,000 a year, to attend college without any student debt.

It would also:

• Double the maximum Pell Grant award: $7,395 to $14,790 for the 2024-25 school year for students enrolled at public and private non-profit colleges.
• Establish a $10 billion grant program for states participating in the federal-state partnership to scale evidence-based practices and strategies.
• Triple federal TRIO funding from $1.191 billion in fiscal year 2023 to $3 billion in fiscal year 2024.
• Double GEAR UP funding from $388 million in fiscal year 2023 to $736 million in fiscal year 2024.
• Double mandatory funding for Historically Black Colleges and Universities (HBCUs), tribal colleges and universities, and other minority-serving institutions.

Newsweek reached out to Sanders via email for comment.

Nathan Daun-Barnett, associate professor of higher education administration at the University of Buffalo, told Newsweek that the partisan plans are vastly different and that room for negotiation seems narrow if not nonexistent.

He said the Republican plan is more about “tinkering on the edges” and may have been issued to sync with the Supreme Court decision.

“I do not really object to any of their proposals, but they won’t do much,” Daun-Barnett said. “Their approach is based on providing better information to consumers. Nothing wrong with that, but it won’t do much to address the rising cost. Colleges do not typically compete on cost; they compete on quality. More accurate information on cost will not move the needle much, in my opinion.”

Due to the Democratic plan being more “robust” but requiring new taxes, he believes it will be a non-starter in this divided Congress.

“Community college for all is a reasonable target and, in New York state at least, they could really use the additional enrollments,” he said. “I think the proposal could be streamlined just to cover the cost of college by eliminating the funding for programs (TRIO and GEAR UP) and the state incentive grant for innovative practices.

“They are not necessarily bad ideas—I ran a GEAR UP program and I know what they can do—but they are trying to do too much in the bill.”

The right path could have been to focus more on income-contingent loan repayments, Daun-Barnett added, which could lead to potential common ground in principle.

“I believe the government should assume the risk associated with investing in higher education for lower-income students because while, on average, individuals benefit economically from their degrees, there are no guarantees,” he said. “At the same time, we all are better off as a society economically and socially when more people receive a college education.

“If it pays off in the marketplace, the student will pay and if not, society will still benefit.”