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The moral and financial hazards of Biden’s student-loan forgiveness plan
Plus: Helping students recover from COVID school closures; how cash payments affect those who receive them; and Trump’s misguided approach to crime
Biden’s student-loan forgiveness makes reform urgent: Last week, President Biden announced a plan to forgive up to $20,000 in student loans for millions of borrowers—a plan that could easily cost upwards of $1 trillion. But, as FREOPP Senior Fellow Preston Cooper wrote in The Wall Street Journal when the news broke, the astronomical cost is only one of the problems with the plan. Forgiving student loans without reforming the federal student-loan program creates real moral and financial hazards for students and sets the country on a course of rising costs, more worthless degrees, and taxpayer-funded forgiveness. As Preston describes, Republicans should embrace student-loan reform, and a new bill in Congress—which incorporates many of Preston’s recommendations—would be a good start.
But wait, there’s more. A less-discussed aspect of the president’s proposal may end up being even more costly than the loan forgiveness. Preston outlines how a sweeping expansion of income-based repayment (IBR) plans could lead more students to take out even larger loans and then spend decades making payments that barely cover the interest. The change could cost the government billions of dollars more while leaving another generation of borrowers drowning in debt. A way to get the problem under control? Fix IBR plans to align costs with value.
→ Watch Preston discuss his own decision-making regarding student loans and the way the president’s plan will change incentives for students and colleges on FOX Business.
Helping kids recover from learning losses from COVID school closures: Meanwhile, in K-12 education, new research from the National Assessment of Educational Progress, “the nation’s report card,” confirmed that FREOPP Senior Fellow Dan Lips’ many warnings about COVID-19 school closures were prescient: The study found that the closures caused “historic” learning loss. Reading and math scores dropped across the board, with declines among low-income students even higher than among their peers and the achievement gap between Black and White students increasing to 33 points. Dan argues that new legislation in Congress could address this problem by giving parents access to the billions of dollars of unspent COVID relief funds to help their children recover from the damage done.
Cash for housing is better than more building alone: In Forbes, FREOPP Research Fellow Roger Valdez digs into studies on the effect of COVID-related direct cash payments to find lessons for helping low-income Americans afford housing. The takeaway? While cash payments don’t necessarily lower recipients’ anxiety about finances, they do make it easier to afford pressing needs, pay down debt, and save for the future. These findings provide support for policies that aim to modernize housing assistance so that it can help people live near their jobs and families, rather than funneling ever-increasing (and highly inflationary) amounts of cash toward subsidies to build expensive housing.
Trump’s misguided approach to real crime problems: Last month, former President Trump spoke about public-safety policy and the growing crime problem in many American cities. Unfortunately, his proposals—which included deploying the National Guard to supersede local police departments and forgoing due process in punishing suspects—are unlikely to make anyone safer. Not only that, observes FREOPP Research Fellow Jonathan Blanks, but because the Constitution grants policing powers to states and localities, not the federal government, Trump’s approach would—rightly—not survive judicial scrutiny. Instead, Jonathan writes, the critical role belongs to local law enforcement. The most rigorous and evidence-based studies show that targeted, visible police presence in the sections of neighborhoods where infractions are concentrated can have an outsized impact on reducing crime and improving public safety.
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