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Harder than it sounds: Income-targeted student loan forgiveness invites a ‘train wreck’

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President Joe Biden’s advisers are looking at ways to limit student loan forgiveness based on borrowers’ income to avoid sending benefits to higher-earning Americans. But that approach is already angering progressives and could be a nightmare to implement before the November elections.

The first hurdle is within Biden’s own administration, where Education Department officials have privately raised concerns about the complexity of adding an income test to student loan forgiveness. They’re warning the White House that the agency lacks the data to automatically cancel loans based on a borrower’s earnings, according to three people familiar with the discussions.

As Biden weighs a final decision on canceling “some” amount of federal student loan debt — a major priority for progressives — his aides have been working on proposals that would target the relief to certain borrowers, such as those earning less than $125,000 per year.

Those potential income limits are aimed at fending off criticism that across-the-board loan forgiveness would benefit some Americans with higher incomes who don’t need the help. But imposing income caps may carry other potential risks for the Biden administration, especially if the Education Department is unable to swiftly execute on whatever loan forgiveness Biden might announce in the coming weeks.

An Education Department spokesperson, speaking on condition of anonymity, said in a statement that the agency “continues to assess its options for implementing broad debt cancellation by executive action.”

The Education Department doesn’t have individual income information for most of the 45 million Americans who have federal student loans.

The Internal Revenue Service has relied on Americans’ prior-year tax information to dole out benefits tied to income, such as stimulus checks and Democrats’ expanded Child Tax Credit payments. The Education Department, by contrast, does not have access to that trove of income data. Federal law tightly restricts how the IRS can share taxpayer information with other agencies.

The result, Education Department officials have concluded, is that the agency is unable to cancel federal student loans based on a borrower’s income level without requiring some action from the borrower. Department officials have told the White House they would need to set up some sort of application process to determine whether borrowers qualify for relief, according to the people familiar with the discussions.

That added layer of bureaucracy would likely take longer for the Education Department to implement compared with across-the-board forgiveness, and it would mean that borrowers would miss........

© Politico

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