Experts flag unintended side-effects of student debt relief

The centrepiece of the student debt-relief plan that United States President Joe Biden announced last month is his decision to cancel up to US$20,000 per borrower in federal loans. But the more far-reaching – and, over time, more expensive – element of the president’s strategy is his blueprint for a revamped income-linked repayment plan, which would sharply reduce what many borrowers pay every month, writes Stacy Cowley for The New York Times.

It could, however, have unintended consequences. Unscrupulous schools, including for-profit institutions, have long used high-pressure sales tactics, or outright fraud and deception, to saddle students with more debt than they could ever reasonably hope to repay. By offering more-generous educational subsidies, the government may be creating a perverse incentive for both schools and borrowers, who could begin to pay even less attention to the actual price tag of their education – and taxpayers could be left footing more of the bill.

“If people are taking out the same or more amount of debt and repaying less of it, then it’s just taxpayers bearing the brunt of it,” said Daniel Zibel, the chief counsel at the National Student Legal Defense Network, an advocacy group.
Full report on The New York Times site