(The Center Square) – About 12.5% of Virginia residents owe some student debt that could be reduced through President Joe Biden’s student loan forgiveness plan, but some academics warn the plan could have negative consequences .
More than 1.08 million people in the Commonwealth owe money on their student loans and the average amount of debt per borrower is one of the highest in the country. According to the Education Data Initiative, the average borrower owes more than $39,000, the fourth highest rate in the nation. In total, Virginians owe about $42.4 billion in student debt.
Only 14% of borrowers in Virginia owe less than $5,000 and 2.4% owe more than $200,000. Just under a quarter of borrowers have between $20,000 and $40,000 in debt.
Late last month, Biden took executive action to reduce student loan debt. Under the plan, Pell Grant recipients can receive up to $20,000 in student loan forgiveness and non-Pell grantees can get up to $10,000 in forgiveness. Those earning less than $125,000 per year will be eligible for the rebate.
Although many recent graduates praise the policy, some people warn of the negative consequences.
Aaron Smith, director of education policy at the libertarian Reason Foundation, told The Center Square that the president’s plan is both bad policy and immoral.
“It does nothing to reform a terribly flawed system that is characterized by … rising costs,” Smith said.
Smith warned that canceling student loans could send signals to colleges that they can charge as much money as they want, regardless of student performance. The plan does nothing to curb the tuition hike that has been rising over the past two decades, he added, and it signals to colleges that they can raise tuition fees without any serious repercussions, because they can expect future bailouts from the federal government.
With the inflation rate high, Smith added that it’s possible the loan bailout could contribute to inflation.
On the morality front, Smith said this policy is providing billions of taxpayer dollars to people who don’t need it.
Because Biden used his executive power to approve student loan forgiveness, rather than going through Congress, his constitutionality was called into question. If someone takes legal action against the plan, it may have to be settled in court.
