US President Joe Bidens decree to forego loans under the government-funded PELTs scheme is in danger of being shelved by the GOP as Speaker Kevin McCarthy backed by the Republican members introduced a bill to nullify it on grounds of depleting the government’s treasury.
Biden had planned to cancel up to $20,000 of debt per student borrower, but McCarthy’s bill seeks to cancel this and end the freeze on monthly repayments with interest on the borrowings, media reports said.
Thousands of students in the US who had borrowed money for their higher education are on tenterhooks.
The Republican-dominated House has been in a logjam over the debt ceiling being raised as it breached the $1.4 trillion dollar limit and Treasury Secretary Janet Yellen had warned that she could hold on till june this year after which she would have to take extraordinary measures, which meant prioritising the loan and interest payments that could hit social welfare programmes.
The US has never defaulted on interest obligations, and if it does it would have international ramifications in the money markets as most investors hold US treasury bonds.
The Republican bid to annul the student loan forgiveness by Biden – about $1.7 trillion from 45,000 borrowers cumulatively – is part of an overall strategy to limit government expenditure and avoid raising the debt limit too much.
The GOP bill, if it goes through, would block Biden’s signature on the student debt cancellation programme and take the GOP war on Biden directly to his administration’s other student loan policies.
Biden had announced last year during fall that his administration would forgive loans of students whose families income fell below $125,000 per person or as a couple in the family per annum. It was highly criticised by some economists and the GOP as a measure that would bleed the treasury of the government.
Speaking on the House floor on Wednesday, McCarthy characterised Biden’s plan as “student loan giveaway for the wealthy”. He claimed that the repeal of the student debt relief would actually protect 87 per cent of adults without student loans from paying the loans of just 13 per cent who do, Politico reported.
McCarthy’s legislation would also prohibit the Biden administration from going ahead with a new income-driven repayment plan that reduces monthly payments for most borrowers and limits the timeline to loan forgiveness for some borrowers.
The GOP plan would permanently ban the Education Department from issuing any executive action seeking to enhance the long-term cost to the government of operating the federal student loan programmes, reports said .
Politico pointed out that any such sweeping legislation, if adopted, would imperil the administration to provide additional relief to student loan borrowers. And that covers any backup option for cancelling large amounts of student debt, if the Supreme Court rejects Biden’s student debt relief plan in the coming months.
The Republicans are coming up with dozens of policy changes and spending caps that the GOP members have included in their 320-page legislation to give in to raise the debt limit by $1.5 trillion or until March of next year, whichever comes first.
Republicans want to extract concessions from the Biden administration that lower the federal deficit and reduce spending in exchange for their votes to raise the nation’s borrowing limit.
McCarthy said he hopes to pass the bill in the House next week. But the proposal stands no chance of passing the Democrat-controlled Senate, reports said as the Senate is controlled by the Democrats. That would result in a stalemate on the issue.
Biden, meanwhile, rejected McCarthy’s proposal as a nonstarter.
“That’s the MAGA economic agenda: Spending cuts for working and middle class folks,” Biden said, reacting to the GOP plan.
“It’s not about fiscal discipline, it’s about cutting benefits for folks that they (GOP) don’t seem to care much about.”
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