What to Know About Biden’s Student Loan Forgiveness Program

Borrowers must make under $125,000 ($250,000 for married couples) in order to qualify.

Demonstrators protest near Grand Army Plaza during a rally to cancel student loan debts.
Demonstrators protest near Grand Army Plaza during a rally to cancel student loan debts. (photo: Ben Von Klempere / Shutterstock)

WASHHINGTON — President Biden’s student loan forgiveness announcement last week unleashed a flurry of opinions from both sides of the political and economic aisles, including Catholics. 

What Does the Plan Propose?

The Biden administration has long promised student loan forgiveness, a policy it carved out as a key platform on the campaign trail.

The cost of college in the United States has soared in the last few decades. The average American student owes $28,950 after college, adding up to a total of $1.75 trillion in student loan debt across the nation. 

The plan, which was revealed last Wednesday, proposes three major policies that the administration says will “cancel” debt for certain Americans and “make the student loan system more manageable for working families.”

A fact sheet released by the White House says that the Department of Education will cancel $20,000 in debt to Pell Grant recipients and $10,000 for non-Pell Grant recipients, whose loans are held by the department. 

Borrowers must make under $125,000 ($250,000 for married couples) in order to qualify. 

The policy only applies to federally-held loans. Those who have had their federal loans consolidated in private lenders, like SoFi or Navient, do not qualify for debt cancellation. 

The administration is also proposing updates to how borrowers repay their loans by lowering monthly payments and building on the already-existing Public Service Loan Forgiveness (PSLF) plan, which allows Americans who work in public service, the military and non-profits, to reach loan forgiveness after a certain threshold. 

The fact sheet also previews upcoming announcements by the Department of Education to hold colleges “accountable,” including publishing an annual “watch list” of programs with the highest debt levels in the country.  

Catholic Economist Says Plan Doesn't Reform factors Underlying Education Costs

Patrick T. Brown, a fellow at the Ethics and Public Policy Center (EPPC) and former Senior Policy Advisor to Congress’ Joint Economic Committee (JEC), told CNA in an email that Biden’s proposal does not fix the root of the problem.

"Catholics have a moral obligation to have a preferential option for the poor, but this broad-based student loan bailout goes far beyond what is necessary,” he wrote. “A better approach would have been to pursue better repayment options for people who failed to complete their degree, or were taken advantage of by predatory schools.”

Brown’s work focuses on pro-family economic policies. He has examined the link between the cost burdens of higher education and the trend of young adults who put off marriage and having children. 

He suggests pursuing solutions like increasing options outside traditional higher education, income-driven repayment, and social support for families. 

“There are much better ways to ease the burden on people struggling with high student loan debt burdens without allocating what could be $1 trillion for a one-time quick fix that will do nothing to reform the underlying factors driving the cost of college ever higher,” he said.

Critics Say Policy Will Raise Inflation

Critics on both the left and the right have had a lot to say in the last week, many of whom believe the policy will not hold up in the courts.

Last July, Speaker of the House Nancy Pelosi said that “people think that the President of the United States has the power of debt forgiveness. He does not. He can postpone, he can delay, but he does not have that power. That has to be an act of Congress.”

Pelosi issued a statement praising the proposal last week, but critics across the political spectrum are saying the benefits of Biden’s plan will come at the cost of higher inflation and steeper taxes.

Jason Furman, former Chairman of President Obama’s Council of Economic Advisors (CEA) and a professor of economics at Harvard University, said Wednesday, “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.”

“Everyone else will pay for this either in the form of higher inflation or in higher taxes or lower benefits in the future,” Furman wrote in a tweet thread, adding that “A number of lawyers (and political leaders) have argued inconsistent with the law.” 

On Wednesday, The Washington Post’s editorial board called the plan “ill-conceived and misdirected.”

“Mr. Biden’s student loan decision will not do enough to help the most vulnerable Americans. It will, however, provide a windfall for those who don’t need it — with American taxpayers footing the bill,” the Board wrote.

The Wall Street Journal’s Editorial Board added that the plan will further entrench the college debt cycle in America, cost over $300 billion and “benefit mostly college-educated households that don’t need the help.”

“Colleges are sure to exploit the promise of repeated cancellations by hiking tuition and opening new degree programs of questionable value,” the board wrote

Rep. Tim Ryan, D-Ohio, joined those saying the plan will impose burdensome costs on those who have already paid off their loans or chose to forgo college.

“Waiving debt for those already on a trajectory to financial security sends the wrong message to the millions of Ohioans without a degree working just as hard to make ends meet,” he said Wednesday.

This echoes many on the right, who are saying the plan amounts to “debt transfer.”

The non-partisan Penn-Wharton Budget Model says costs for the total plan “could exceed $1 trillion.”  

Catholic Nonprofit Will Continue Helping Those Discerning Priesthood, Religious Life

One Catholic nonprofit says Biden’s policy will not change its mission to help those discerning religious life to become debt-free so they can pursue their vocation. 

The Labouré Society provides Catholics who are pursuing a vocation to the priesthood or religious life with financial assistance who still have outstanding education loans. 

Most religious institutions require that those in discernment must be debt-free before being accepted because the communities cannot assume the costs. This presents a problem at a time in which the Church faces a historically low number of aspiring priests, nuns, and brothers. 

Student debt prevents 42% of aspirants from pursuing their vocation, the average amount of which adds up to $60,000, according to the Labouré Society.

In a phone interview with CNA, Executive Director John Flanagan said that the program is not all that “altruistic”: “The bottom line is, as Catholics, we need priests, sisters, and brothers. If there's anything that we can do as laity to help open the doors to those who are going to give their life in service of us, we need to.” 

The society accomplishes this through a rigorous training program and direct financial aid to aspirants whose student loans stand between them and their call to serve the Church. 

“We believe that people need to take responsibility for their commitment, and that God honors commitments. [It’s] a formation process for them,” Flanagan said. 

Aspirants who go through the Labouré program are grounded in Catholic philanthropic principles and trained to engage with the Church properly so that they can take responsibility for their debt even if they do not pay it off directly.

“They're taking ownership and learning skills,”  Flanagan said, “that are going to serve them in their life as a religious, as a priest – doing so in a way that is not only responsible, but also uniquely Catholic.”