Administration Is Engaging in Backdoor Student Debt Cancellation
Committee for a Responsible Federal Budget • • business
Key Points:
- The Education Department plans to quadruple the auto-pay incentive, reducing student loan interest rates by 1% through 2028 for borrowers enrolled in auto-pay, at an estimated cost of $5 billion.
- Maya MacGuineas, president of the Committee for a Responsible Federal Budget, criticized the move as a form of debt cancellation targeting borrowers already making payments, arguing it mainly benefits higher earners without improving monthly affordability.
- MacGuineas questioned the legality of the expanded incentive and raised concerns about increasing the federal deficit without clear justification.
- She noted that the existing 0.25% auto-pay discount has been effective since 1999 and warned that expanding it could lead to even larger discounts, potentially making federal student loans interest-free.
- MacGuineas urged the administration to work with Congress on addressing the Pell Grant shortfall to help low-income students rather than expanding executive actions that increase federal spending.
