by Tyler Arnold
About 12.5% of Virginia residents owe some amount of student debt that could be reduced through President Joe Biden’s student loan forgiveness plan, but some scholars are warning that the plan could have some negative consequences.
More than 1.08 million residents 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, which is the fourth highest rate in the country. In total, Virginians owe about $42.4 billion in student debt.
Only 14% of Virginia borrowers owe less than $5,000 and 2.4% owe more than $200,000. Just under a quarter of borrowers fall between $20,000 and $40,000 in debt.
Late last month, Biden took executive action to reduce student loan debt. Per the plan, Pell Grant recipients can receive up to $20,000 in student loan forgiveness and non-Pell recipients can get up to $10,000 in forgiveness. Those who make less than $125,000 per year will be eligible for forgiveness.
Although many recent graduates are praising the policy, some people are warning of negative consequences.
Aaron Smith, the 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 broken system that is characterized by … rising costs,” Smith said.
Smith warned that student loan forgiveness could send signals to colleges that they can charge as much money as they want, regardless of student outcomes. The plan does nothing to curb the rising tuition rates that have climbed up over the last couple of decades, he added, and it tells colleges that they can raise tuition rates without any serious repercussions because they can expect future bailouts from the federal government.
With the high rate of inflation, 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 do not need it.
Because Biden used his executive authority to approve student loan forgiveness, rather than going through Congress, its constitutionality has been called into question. If someone brings a lawsuit against the plan, it may need to be settled in the courts.
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Tyler Arnold reports on Virginia and West Virginia for The Center Square. He previously worked for the Cause of Action Institute and has been published in Business Insider, USA TODAY College, National Review Online and the Washington Free Beacon.
Photo “Aaron Smith” by Reason Foundation. Background Photo “College Graduates” by Emily Ranquist.
