Student loan cancellation became the early focus today during hearings on Capitol Hill.
Here’s what you need to know.
In a Senate Judiciary Committee hearing today, senators discussed a new, bipartisan student loan bill that would make it easier for more student loan borrowers to get student loan cancellation in bankruptcy. However, the early focus of the hearing turned toward wide-scale student loan forgiveness. Sen. Chuck Grassley (R-IA), the committee’s ranking member, addressed the issue of student loan cancellation, its impact on student loan borrower, and potential reasons for American’s high student loan debt. Here’s what he said:
Student loan cancellation: why student loans are broken
Grassley said that the federal student loan system is broken, and it’s hurting both student loan borrowers and taxpayers. He referenced various proposals to cancel student loans, whether it’s $10,000 or $50,000, for example, for each student loan borrower. Grassley noted that the amount of student loan debt has doubled in the last 10 years, with the federal government now owning 92% of all outstanding student loan debt. Why? According to Grassley, student loan debt has risen due to the rising cost of tuition, implying that colleges and universities have directly led to more student loan borrowing. Grassley says we have to correct the underlying problem of student loans.
Here’s what else Grassley said about having a broken student loan system:
- “Federal student loans are available without regard to who can pay and in excess of need.”
- “Colleges have a limitless supply of funding, which creates no incentives for colleges to reduce costs.”
- Grassley noted that some senators want to hold colleges and universities more accountable for student outcomes such as job placement, but that’s challenging in practice because “different schools have different standards” and that still may not solve problem.
- Grassley also didn’t address whether student loan cancellation would stimulate the economy, although recent research says student loan cancellation isn’t the best financial stimulus. He also didn’t address recent news that several colleges have cancelled student loans for student loan borrowers.
- Grassley is strong proponent of information disclosure so that students better understand college costs. He has introduced three separate bills in Congress to provide students with better information about searching for colleges and understanding the full cost of financial aid.
- Grassley believes that this will lead to “more transparency, more informed choices, and more price competition among colleges.”
- Most importantly, Grassley says more transparency will limit borrowing to what each student loan borrower can afford.