In May, the Education Department will begin collecting on student loans that are in default, including the garnishing of wages for potentially millions of delinquent borrowers. The Education Department announced that on April 21.
As Legal Insurrection explains,
Currently, roughly 5.3 million borrowers are in default on their federal student loans.
The Trump administration ’s announcement marks an end to a period of leniency that began during the COVID-19 pandemic. No federal student loans have been referred for collection since March 2020, including those in default. Under President Joe Biden, the Education Department tried multiple times to give broad forgiveness of student loans, only to be stopped by courts.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said.
Beginning May 5, the department will begin involuntary collection through the Treasury Department’s offset program, which withholds government payments — including tax refunds, federal salaries and other benefits — from people with past-due debts to the government. After a 30-day notice, the department also will begin garnishing wages for borrowers in default.
The vast majority of borrowers have the ability to pay off their student loans on schedule. The people with the largest amount of student loan debt tend to be people with fancy graduate degrees or lucrative law or medical degrees, not people who just went to college to get a bachelor’s degree, whose debts tend to be much smaller. The New York Post reported in 2022 that the “biggest beneficiaries of” of pausing student loan repayments were “doctors, lawyers and people with graduate degrees, according to the nonpartisan Committee for a Responsible Federal Budget.”
In the Washington Post, Yglesias noted that the long pause in student loan payments beginning in 2020 disproportionately benefited the wealthy, at the expense of taxpayers who mostly don’t have college degrees. Yglesias also noted that Biden’s suspension of student loan repayments helped drive up the inflation rate.
Canceling or forgiving student loan debt is a bad idea. It encourages colleges to jack up tuition, by making it more attractive to take out big loans to cover college tuition. When students are willing to borrow more to go to college, colleges respond by raising tuition. The Daily Caller notes that “each additional dollar in government financial aid translated to a tuition hike of about 65 cents,” according to the Federal Reserve Bank of New York.
Canceling student loan debt is “regressive and unfair,” notes Katherine Abraham, a former adviser to Obama who served as Commissioner of the Bureau of Labor Statistics during the Clinton administration. As Greg Price points out, “Only 37% of Americans have a 4-yr college degree, only 13% have graduate degrees, and a full 56% of student loan debt is held by people who went to grad school. Biden’s plan to cancel it would be like taking money from a plumber to pay the debt of a lawyer.” Even the liberal Washington Post called Biden’s student-loan bailout “a regressive, expensive mistake.”
Last year, the Wall Street Journal criticized Joe Biden’s new plan to write off student loans after the Supreme Court ruled his old plan was illegal, arguing that his new plan “will encourage colleges to raise costs, especially in graduate programs for which there are no federal loan limits. Who cares if students can’t repay? They will be forgiven one way or another.”
