Recently,
the
Senate
passed
their
version
of
“The
One
Big
Beautiful
Bill
Act,”
which
among
other
things
would
limit
the
amount
of
federal
student
loans
someone
can
borrow.
Americans
owe
over
$1.7
trillion
in
student
loan
debt,
and
the
current
repayment
system
is
one
big
ugly
mess.
For
over
15
years,
the
government
focused
on
helping
borrowers
after
graduation
by
introducing
various
income-driven
repayment
(IDR)
plans.
These
plans
generally
set
the
monthly
repayment
based
on
the
borrower’s
income
and
forgave
the
loan
balance
after
25
or
even
20
years.
The
first
IDR
plan
was
the
Income
Contingent
Repayment
plan.
Later,
the
Income
Based
Repayment
plan
was
introduced
in
2009.
A
few
years
later,
it
was
followed
by
the
Pay
As
You
Earn
plan,
followed
by
the
Revised
Pay
As
You
Earn
Plan.
In
August
2023,
the
government
introduced
Saving
on
a
Valuable
Education,
which
not
only
had
the
lowest
repayment
plan
compared
to
the
other
plans
but
also
capped
interest
accrual
and
provided
early
loan
forgiveness
for
low-balance
borrowers.
But
Republican
lawmakers
challenged
the
SAVE
plan
in
federal
court
and
had
the
plan
invalidated.
The
loans
were
also
designed
to
provide
another
source
of
revenue
for
the
government.
But
according
to
the
Economist,
the
government
loses
25
cents
for
each
dollar
lent.
Also,
officials
expect
the
student-loan
portfolio
to
cost
around
$450
billion
over
the
next
nine
years.
Lastly,
it
is
arguable
that
the
student
loan
crisis
has
been
politicized.
In
2020,
then
President
Donald
Trump
declared
a
moratorium
on
federal
student
loan
payments
due
to
COVID-19
and
the
government-mandated
shutdowns.
When
President
Joe
Biden
was
elected
in
2021,
he
kept
the
student
loan
moratorium
due
to
public
pressure
even
though
COVID-19
cases
were
dropping
significantly.
It
should
be
noted
that
Democrats
controlled
the
White
House
and
Congress
from
2021
until
2023,
and
no
loan
forgiveness
bill
was
brought
for
a
vote
during
that
time.
Biden
issued
an
executive
order
forgiving
$10,000
for
each
borrower
or
$20,000
if
the
borrower
had
Pell
grants
provided
they
met
income
thresholds.
The
Supreme
Court
invalidated
this
order
ruling
that
the
economic
significance
was
strong
enough
to
require
congressional
approval.
Democrats
were
quick
to
blame
the
Republican
court.
When
Biden
finally
lifted
the
loan
repayment
moratorium
due
to
pressure
from
the
Republicans,
he
created
a
backdoor
moratorium
by
announcing
that
delinquent
accounts
will
not
be
sent
to
collections,
nor
will
the
government
report
late
payments
to
credit
agencies
and
resort
to
enforced
collections
such
as
bank
levies
and
wage
garnishments
on
delinquent
accounts.
Democrats
might
have
been
hoping
that
voters
with
large
student
loan
bills
would
vote
blue
across
the
board
because
a
Republican
president
would
resume
collections.
The
proposed
bill
would
cap
annual
federal
loan
borrowing
to
$20,500
per
year.
For
professional
schools
(including
law
schools),
the
annual
amount
is
increased
to
$50,000.
Also,
the
total
amount
of
loans
will
be
capped
at
$100,000
for
master’s
degrees
and
$200,000
for
professional
degrees.
Under
the
current
plan,
borrowers
can
pay
the
full
cost
of
attendance
through
GRAD
PLUS
loans.
Law
schools
will
need
to
limit
their
total
cost
of
attendance
to
$66,666
per
year
so
their
students
will
be
able
to
fully
finance
their
education
through
federal
loans.
Many
law
schools
will
not
meet
this
requirement
due
to
local
housing
costs.
At
some
law
schools,
tuition
alone
exceeds
this
amount.
Students
will
be
responsible
for
covering
any
shortfalls.
Some
may
have
savings
or
family
assistance.
But
some
won’t
have
these
resources
and
may
have
to
consider
not
attending.
That
brings
us
to
the
main
argument
against
capping
loans.
Qualified
people
with
low-income
backgrounds
and
no
financial
resources
will
not
be
able
to
afford
an
education
with
which
to
obtain
social
mobility.
They
will
have
to
resort
to
obtaining
private
loans.
Private
lenders
do
not
accept
all
loan
applications
as
they
do
a
routine
credit
check.
Assuming
an
applicant
gets
a
private
loan,
they
may
not
get
much
sympathy
from
their
servicer
if
there
is
a
financial
emergency
such
as
a
layoff.
Most
private
loan
companies
do
not
have
IDR
plans
so
borrowers
must
stay
with
their
agreed
payment
plan
unless
they
qualify
for
a
forbearance.
Also,
private
loan
companies
have
strengthened
creditor
protections
in
case
a
borrower
decides
to
file
bankruptcy.
Bankruptcy
petitioners
must
show
that
they
will
suffer
“undue
hardship”
if
they
are
forced
to
pay
the
loan
in
full.
Indeed
it
is
unfortunate
if
some
people
will
not
be
able
to
attend
law
school
due
to
loan
maximums.
But
many
law
schools
were
established
with
the
working
class
in
mind.
If
a
large
percentage
of
the
student
body
find
themselves
unable
to
pay
tuition,
room,
and
board,
schools
may
have
to
lower
tuition
or
risk
losing
so
many
students
that
they
will
not
have
enough
money
to
operate.
Also,
at
the
undergraduate
level,
many
top
schools
are
offering
full
scholarships
based
on
financial
need.
So
long
as
a
family
earns
below
a
certain
amount,
and
has
assets
below
a
certain
value,
students
will
qualify.
No
law
school
has
followed
this
model
but
will
most
likely
be
used
by
top
schools
that
generally
have
large
endowments.
The
proposal
to
limit
federal
student
loans
seeks
to
fix
a
broken
system
that
is
costing
the
government
and
taxpayers
money.
It
will
take
a
few
years
to
see
how
schools
will
react
to
federal
loan
caps
and
whether
it
will
start
reducing
the
total
student
loan
debt.
Will
schools
keep
their
tuition
steady
and
hope
their
students
find
creative
ways
to
obtain
the
necessary
funding?
Or
will
they
be
forced
to
cut
tuition
and
operating
costs
in
response?
Steven
Chung
is
a
tax
attorney
in
Los
Angeles,
California.
He
helps
people
with
basic
tax
planning
and
resolve
tax
disputes.
He
is
also
sympathetic
to
people
with
large
student
loans.
He
can
be
reached
via
email
at
[email protected].
Or
you
can
connect
with
him
on
Twitter
(@stevenchung)
and
connect
with
him
on LinkedIn.