Cardona, himself a former fourth-grade teacher, calls an audible as we begin our interview in the library of the Glendora (New Jersey) Elementary School, sat in plush, huge, hand-shaped child seats. “Wait,” he replies. “Let’s terminate this interview and replace these seats.”
That makes perfect sense, Mr. Secretary. The chairs did not function. In light of his current circumstances, the man needs all the solace he can get.
I’m referring to Cardona’s role as the point person for the Biden administration’s contentious student debt relief scheme, which is expected to launch this month with real-time updates.
President Biden issued an executive order in late August that will cancel up to $10,000 in school debt for individuals earning less than $125,000 annually. Those receiving federal Pell grants, which are awarded to students with extraordinary financial need, will earn up to $20,000 in loan forgiveness if their annual income is less than $125,000.
The idea has become a political hot potato, receiving criticism mostly from the political right, as well as from certain constitutional academics and education and personal financial specialists who view it as problematic, insufficient, or both. On the other hand, the roughly 40 million Americans whose student loan debt would be lowered or perhaps eliminated — more than 15% of the U.S. adult population — may be pleased with the president’s resolve to continue through with the proposal despite its opponents.
I asked Cardona why the plan has become a lightning rod.
“If we’re serious about America being the best and leading the world and producing the best thinkers, then we need to invest in education,” he said. “It’s almost hypocritical for folks to be complaining about this yet applauding what we did to keep businesses open during a pandemic, through our PPP [Paycheck Protection Program].”
Biden’s proposal appears to have the backing of the Democratic Party’s far-left wing, some members of which, such as Bernie Sanders, have campaigned for the cancellation of all student debt. New York Representative Alexandria Ocasio-Cortez applauded the proposal but asked her supporters to advocate for even more forgiveness.
“President Biden was responsive to the stories that we amplified, and his action is one that is historic and will change lives for the better,” fellow Squad member Massachusetts Rep. Ayanna Pressley told us. “There were those who considered this issue to be fringe and marginal. We worked with a coalition for two years to prove that it was not, and that canceling student debt would be transformative.”
Pressley stressed that the Biden administration should continue supporting historically black colleges and universities; pushing for tuition-free college; and investing in Pell Grants. “But this is a bold, strong, necessary step in the right direction. It is a victory for everyone,” she said.
‘Illegal and inflationary’
Now for the opposition: Opponents argue that the Biden administration lacks the Constitutional right to erase that much debt, therefore contributing to inflation. Some opponents argue that this is unfair to those who have never incurred student loan debt and that Biden went too far when he offered up to $20,000 in loan forgiveness for Pell Grant winners.
“Student debt is crippling,” Texas Rep. Kevin Brady acknowledged to Yahoo Finance. “And when too much is taken on it can change your life. But this proposal by the president is illegal and inflationary. It is financially irresponsible. But most of all, it’s just unfair. It’s a kick in the teeth to all the blue collar workers and all the Americans who don’t have student loans.”
Brady mentioned a proposed bipartisan bill dubbed SECURE 2.0 as an alternative to the forgiveness scheme, stating that it would allow employers to contribute to the retirement accounts of employees who make student loan payments. For instance, if you contribute $100 to your student loan, your employer may contribute up to $100 to your 401(k) or other retirement plan (k).
“So in effect while that worker is paying off their student debt, they will no longer miss out on putting matching funds into their retirement,” Brady said. “It brings a private sector approach to helping students with their debt while helping them save for the future and for their retirement.”
Additionally, the president’s plan confronts a variety of legal obstacles. Six states, including Iowa, Missouri, Nebraska, Arkansas, Kansas, and South Carolina, have filed a lawsuit against the Biden administration, claiming the plan will harm state education programs and reduce tax revenues.
Sheila Bair, former chair of the FDIC and former president of Washington College, recently wrote for Yahoo Finance that while she favors certain student debt forgiveness, the proposal does not address issues in the student loan ecosystem as a whole. These include intricacy, opaqueness, expensive tuition, and poor results.
She said of Biden’s idea, “It’s too generous. Bair stated, “$10,000 in Pell-eligible student aid would have been far more justifiable.” “If we enter a recession, I believe federal spending should prioritize individuals who have lost their jobs above those with school debt,” This may be a wonderful political issue for Democrats in November, but it will prolong borrowers’ uncertainty and pain.”
With the midterm elections less than a month away, Biden and the Democrats seek to sell student loan relief as a victory to voters.
That is certainly not a guarantee. In the absence of legal obstacles, the government is attempting to thread a needle in order to recalculate millions of dollars in loan payments in January. In the same month, the suspension of student loan payments due to the epidemic would cease.
Should these kids be held accountable for this debt? The argument between those who advocate for a free market and those who advocate for government intervention illustrates an enduring American concern.
The proponents of a free market claim that these young individuals choose to incur debt, thus this is their problem. Insofar as this is an ugly contract, free marketers would argue that the “invisible hand” of the market will render the business of student loans unsustainable, as borrowers shun unattractive loans.
The issue with this perspective is that millions of people are harmed along the way, which is an unacceptable way to operate a society. We cannot allow folks to sell Halloween sweets with ground glass and wait for the market to remedy the situation. People must be protected by the government, and in some cases, made whole if they have been hurt.
The argument is whether the government is required to assist individuals who have already incurred excessive debt. This argument is likely to keep Secretary Cardona in the spotlight.