Newsweek - USA (2021-02-12)

8 NEWSWEEK.COM FEBRUARY 12, 2021

take out more loans and for colleges

to keep raising tuition without end.

Instead, there are two superior

alternatives to pursue. First, Congress

should ease bankruptcy laws to make

repaying student loans more feasible.

Democratic Senator Elizabeth War-

ren of Massachusetts has proposed

such legislation, and while her latest

version is too broad regarding bank-

ruptcy generally, she’s got the right

idea. Bankruptcy offers a way out for

deeply indebted borrowers, but it also

entails consequences that encourage

thoughtful decision-making. Bor-

rowers should also be required to pay

back a portion of the loans for at least

five years before being eligible.

Congress should make it quicker

and easier for borrowers to pay

back student loans. For example, the

Employer Participation in Repayment

Act has gained wide bipartisan sup-

port in Congress and would empower

employers to assist workers tax-free.

Of course, the above doesn’t

address costs for future students. For

them, colleges and universities should

have skin in the game and share some

risk for the losses on future loans that

are defaulted or discharged. Warren

has cosponsored a risk-sharing pro-

posal along these lines, but Congress

can do more. It should overhaul the

student loan and college accreditation

systems and reorganize Pell Grants

into a Pell Voucher.

Biden led us into this student loan

inferno, yet his new concoction of

debt forgiveness is more like gasoline

than suppressant. Only a sensible

solution will tame the flames.

Ơ Jimmy Sengenberger is host of jim-

my at the crossroads, a webshow and

podcast with the washington examin-

er, and The Jimmy Sengenberger Show

on Denver’s News/Talk 710 KNUS. The

views in this article are the writer’s own.

risks to lenders and thus incentivized

both more loan demand and more

loan disbursement.

Biden is now exploring three

options: One is for Congress to pro-

vide $10,000 in student loan cancel-

lation for every borrower “because

COVID.” Another would enhance

income-driven repayment plans, cap

monthly payments at 5 percent of dis-

cretionary income (down from 10–

percent currently), automatically for-

give debt after 20 years and make the

canceled debt tax-free—in addition

to forgiveness off the top. The third

would wipe clean all tuition-related

student loans for public colleges and

universities only for those earning

$125,000 or less annually.

There are many reasons to oppose

all three proposals, but the most cru-

cial is that Biden’s ideas will make

things worse. Once again, it comes

down to incentives. If current borrow-

ers have their debt canceled, incoming

students will expect theirs will also be

forgiven. There will be every reason to

Beginning in 1978

and culminating in

2005—ironically, thanks

to then-Senator Biden—

Congress made it

virtually impossible

to discharge student

loans in bankruptcy. C.

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