House Subcommittee Hearing Takes Aim at Biden’s Student Loan Cancellation Plan

By Maria Carrasco, NASFAA Staff Reporter

The House Higher Education and Workforce Development Subcommittee on Thursday held a hearing on President Joe Biden’s student loan cancellation plan, focusing on what the cost of the program will have on taxpayers along with solutions for student loan reform. 

Rep. Burgess Owens (R-Utah), chair of the subcommittee, began the hearing by criticizing Biden’s cancellation plan, saying that it is “a patchwork attempt to fix a structural problem.” In August last year, Biden announced his student loan cancellation plan, which would cancel up to $20,000 for eligible borrowers. The plan, which the Congressional Budget Office estimated would cost $400 billion, is currently in limbo as the Supreme Court deliberates on two lawsuits challenging the plan.

“This hearing … addresses what I believe is one of the greatest concerns pressing American education and our economic competitiveness,” Owens said during the hearing. “The purpose of this hearing is to examine the impact of the president’s radical agenda to push his free college through the federal student loan program at the expense of students, institutions, and taxpayers.”

Rep. Frederica Wilson (D-Fla.), ranking member of the subcommittee, argued that Congress has a responsibility to solve the underlying problems in the student loan system, and asked what solutions can help improve things for future students. She noted that she and Rep. Bobby Scott (D-Ill.), ranking member of the House Committee on Education and the Workforce, reintroduced the Lowering Obstacles to Achievement Now (LOAN) Act, which would double the federal Pell Grant by increasing the maximum award over a five-year period to $14,000 and alter the Public Service Loan Forgiveness (PSLF) program. 

“The LOAN Act will help improve the lives of student loan borrowers both now and in the future by making loans cheaper to take out and easier to pay off,” Wilson said. “To the students in the room, tuning in, please know that your advocacy sends the clear message that reforming our student loan system is a sound investment for students, for workers, and for our economy.”

The hearing had four witnesses, including Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget; Adam Looney, executive director of the Marriner S. Eccles Institute for Economics and Quantitative Analysis at the University of Utah; Carlo Salerno, an education economist and former vice president of CampusLogic; and Sameer Gadkaree, president of The Institute for College Access & Success (TICAS). 

Owens began by asking Looney what recommendations he has for Congress to create an effective income-driven repayment (IDR) plan that protects students but also protects taxpayers. Looney said a lot of the problems that borrowers face with defaulting on their loans is because students enroll in a program where the tuition is too high or where students systematically leave those institutions without a degree. 

“I think in order to have a coherent income-based repayment system or repayment system in which students are expected to repay their loans, you have to have a front end that has some underwriting or accountability for the institutions that ensures that taxpayer money flows to those institutions that provide a good quality degree,” Looney said. “Likewise, I think you need to have policies that put downward pressure on tuition and borrowing, things like restoring limits on graduate debt that used to exist, that ensured that borrowers didn't take on debt that was too high relative to the programs that they enrolled in.”

The federal Pell Grant program was brought up several times during the hearing, with Gadkaree noting that investing in the program is a clear solution to addressing the student debt crisis. In his opening remarks, Gadkaree said policymakers need to start by investing in the Pell Grant program, which goes overwhelmingly to students from families with incomes below $40,000.

When asked by Wilson on what Congress and the Department of Education should do to address racial and socioeconomic disparities in student loan use and student loan defaults, Gadkaree again noted that doubling or increasing the maximum Pell Grant would be a solution. On Wednesday, NASFAA joined TICAS and a number of other higher education organizations in a letter urging Congress to increase the maximum Pell Grant award to $13,000.

Lawmakers also focused on financial aid offers, which have come under scrutiny in recent months following a recent report from the Government Accounting Office (GAO) that found institutions are not providing students clear and standard information in their financial aid offers. Rep. Glenn Thompson (R-Penn.) asked Salerno what maximum financial aid transparency looks like. NASFAA and nine other organizations in November announced that they created the Paying for College Transparency Initiative to focus on creating a set of financial aid offer principles and standards. 

Salerno responded by saying that data on students’ financial aid needs to be presented to them as consumers, such as breaking down the information of student loan payments and expected salary earnings in monthly numbers. He added that another solution is presenting financial aid offers in a better way. 

“Right now we package [financial aid offers] to cover the cost of attendance, but as I said in my oral testimony, we don't always need to cover indirect costs,” Salerno said. “There are some students who only want to borrow for tuition and fees. It would be sensible for Congress to consider ways to split out [aid offers] or sequentially drive them in a way so that if I don't want to cover additional costs, I'm not presented with the option to. That alone would reduce borrowing for a sizable percentage of borrowers who may never want it, but feel compelled to borrow it because of the way it's presented currently.”

Rep. Virginia Foxx (R-N.C.), chair of the House Committee on Education and the Workforce, asked several questions about the cost of Biden’s student loan cancellation plan, including if there ever has been an executive action or regulation costing as much as the plan or the Biden administration's proposed regulations for revamping income-driven repayment. Goldwein responded that he isn’t aware of any other executive actions. 

Another topic discussed during the hearing is if institutions should discourage prospective students from taking out loans, where Salerno noted students can borrow up to the cost of attendance. Rep. Glenn Grothman (R-Wisc.) asked Salerno if that system should be changed. 

“I think it should,” Salerno said. “And I think if we impose accountability standards or risk-sharing on institutions, we give them the opportunity to put those kinds of controls in place.”

In terms of the FAFSA Simplification Act and the FUTURE Act, Rep. Alma Adams (D-N.C.) asked Gadkaree to speak about how the implementation of the legislation will make the FAFSA process and student loan programs easier for students and borrowers to navigate. 

“Sharing that information will make it much easier to streamline the servicing system,” Gakaree said. “And it's important to give the Office of Federal Student Aid the resources that it needs to make improvements like that to the servicing system as we prepare to transition borrowers back into repayment.”

Owens ended the hearing by saying this is the beginning of a bipartisan effort to address the student debt crisis and hold institutions accountable for student outcomes. 

“We're at a point now where we need innovative disruption,” Owens said. “The system we've had now for the last 150 years is not working for our kids today. … And it's now time for us to address that.”


Publication Date: 3/24/2023

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