U.S. Secretary of Education Miguel Cardona spoke with NextShark on Thursday to discuss student loan relief, inflation and the future of higher education.
President Joe Biden announced on Wednesday a historic three-part plan to cancel up to $20,000 of student loan debt for people with annual incomes under $125,000. The proposal has divided Democrats and Republicans, with lawmakers, economists and social media users voicing their opinions from across the political spectrum.
During his video call with NextShark, Secretary Cardona addressed online criticisms of the relief plan and concerns that debt forgiveness may exacerbate inflation in the U.S.
NextShark: There seem to be two main criticisms of the plan across social media: that the proposed debt forgiveness amount is not enough or that any debt forgiveness is unfair to those who have already paid off their own student loan debts or did not attend college. Could you address these criticisms?
Cardona: The intention yesterday of yesterday’s announcement is to provide debt relief to millions of Americans; 43 million Americans who are middle-class or below middle-class struggling to make ends meet as a result of the impact of this pandemic. We want to make sure people are not worse off now than they were before the pandemic. This loan relief, up to $20,000 for those who qualify for Pell, is going to help them get back on their feet and reduce the number of defaulted loans that we get in January. When we start repaying, 90% of the money is going to go to people making $75,000 or less. So it’s not aimed at the 2017 tax bill — that 80% of the money went to people making over $85,000. It’s not for that. It’s intended to get people out of the challenge that they’re in now because of the pandemic. The president campaigned on $10,000, and yesterday he delivered $20,000 to those who qualify for Pell.
So in my opinion, the president is not only delivering on his promise, but going further. And to those that say we shouldn’t be doing this because their loans are paid, look, small businesses got some support last year when they were struggling to keep their doors open because the pandemic affected their businesses. And we understood that. It’s so un-American to think, “Well, if I’m not going to benefit, no one else should benefit.” As a matter of fact, if your neighbor is struggling, that’s going to hurt your local economy. And everyone knows someone who’s struggling in debt. So let’s make our community stronger, more economically vibrant. Let’s let that person now go buy a house and contribute to the tax base into the economy. I think this is the right mix. Some argue more. But look, the goal here is to help people get out of the pandemic issue. And $20,000 in loan relief in one event has never, ever been done before. I mean, this administration is really pushing hard to level the playing field and address inequities that existed long before the pandemic.
There are concerns that colleges may raise their tuition prices to benefit from debt forgiveness. The Aug. 24 fact sheet released by the White House proposes “reducing the cost of college and holding schools accountable when they hike up prices” and says that “This Administration has already taken key steps to strengthen accountability.” What are some of the steps the Biden administration has taken, and what are the areas that have been strengthened compared to the previous administration?
Loan forgiveness alone is not going to cut it. It’s great, but we need to make sure that we’re not sitting here talking about the same things five years from now. So we have to make sure college, the return on investment with college, is better. College costs have skyrocketed, and part of that is college is just raising the tuition, and we have to hold folks accountable for a good value, educational value. So that doesn’t mean you’re graduating $100,000 in debt and getting a job for $25,000. But we also have to make sure our states are putting in their fair share of funding in education. The federal government doesn’t pay 100% of education. In fact, we pay a small portion. There are states that have gone down in their funding of education. So that’s an issue that we have to also look at.
In terms of our comparison between the last administration, look, it was almost encouraged in the past for these for-profit colleges to grow at the expense of students who they’re preying on to take out these loans and then provide them with a poor education. We’re stopping that. We’ve gone after Corinthian College, got those folks their loans discharged. ITT college got their loans discharged. We discontinued the accreditation privileges of a company whose job it was to give accreditation to colleges. We shut it down because they were giving accreditation to colleges or institutions, higher education programs that would take advantage of first-generation college students, telling them that they’re going to get an education and job placement. That wasn’t true, so we shut them down. So we’re tightening it up. We’re being more vigilant. We’re expecting higher return on investment from our colleges. We’re also pushing states to do their fair share of ensuring that schools have enough money so the tuition doesn’t go up.
Other potential impacts of the plan include Americans being encouraged to borrow even more and further expectations of future debt forgiveness. Are there any aspects of the proposal that aim to protect people from taking on more debt than they can pay back, and is a plan to make borrowing more difficult being discussed?
The income-driven repayment changes to me are just as consequential, if not more consequential, than the debt relief because it’s long-lasting. And what it does is allow people to make smaller payments half the size on loans so that they’re not paying 10% of their income and not being able to have a better quality of life or buy a house or get married and continue with life. So we’re lowering those costs and we’re capping it at 20 years. You shouldn’t be held down by student loans for the rest of your life. We’re capping it at 20 years.
What we’re trying to do here is make college more accessible. And if we continue to work hard to make it more affordable, which is also what we’re doing, we anticipate more people will be able to get to college and not have mounds of debt like the mess that we’re in now because it was not being monitored. And institutions were able to run roughshod over students who didn’t know what they were doing and were taking out huge loans. So we’re going to monitor it better. We’re going to push for a better return on investment. We’re going to call out people that are not doing it, and we’re going to go after colleges that are preying on students. We’re going to continue to do that.
President Biden recently passed the Inflation Reduction Act, which is expected to reduce budget deficits by approximately $275 billion. The University of Pennsylvania’s Penn-Wharton Budget Model estimated that a policy of $10,000 forgiveness under a $125,000 individual income limit would cost the federal government $300 billion. How might the proposed student debt cancellation affect the Inflation Reduction Act, and how are concerns that the cancellations may undermine the bill’s disinflationary gains being addressed?
Well, look, the president, as was noted, the policies that he’s pushing forward are reducing the deficit. This is going to help folks get back on their feet, which prevents defaults. And in terms of the inflation, I mean, it really cancels itself out. There’s funding that’s going to be going toward helping people not have debt, but also for folks making over $125,000, they’re going to resume payment in January. So it offsets each other in terms of inflation.
Senate Minority Leader Mitch McConnell said the policy would “give away even more government money to elites with higher salaries.” Penn-Wharton researchers’ assessment of which borrowers would benefit conflicted with that of the White House fact sheet, concluding that between 69% and 72% of the debt forgiven would accrue to households in the top 60% of the income distribution. How will the White House ensure that financial relief is going to those that need it the most?
I’ve seen analysis that show that middle-class are going to benefit most from this. Eighty or 90% of the money going out are going to go to people making less than $75,000. That’s in contrast to what Senator McConnell voted for in 2017. The tax bill that had 85% of the tax giveaway going to people making more than $75,000 a year, or the $2 trillion tax cut that was passed that didn’t help the poor, the people who are struggling with the pandemic. So let’s put facts out on the table. Do you want to provide tax packages for those who are millionaires, billionaires? Or do you want to help people who are struggling to make ends meet?
That’s what this is doing. And that’s a clear decision right there. You choose who you want to help. Right now, the president is moving forward to help people recover from the pandemic and then fixing a system that’s broken that makes college unreachable for so many people, especially people of color. No, this is very clear for us. We’re going to make sure we’re on the side of our students, not on billionaires. And that’s why the Inflation Reduction Act, the president, we’re taxing folks who are billionaire corporations, they got to pay their fair share. And people like Senator McConnell don’t want to hear that. But look at the facts. Look at the facts. And we’re proud of our record. And we’re going to continue to make sure we’re fighting for everyday Americans or middle-class, those who are struggling the most, and helping them get on their feet so they can move forward in life.
Featured Image via NextShark, PBS NewsHour