A. Wayne Johnson
Mirco Lazzari gp | Getty Images
A senior government official appointed by Education Secretary Betsy DeVos resigned on Thursday, saying the current student loan system is “fundamentally broken” and calling for billions of dollars in debt to be forgiven.
A. Wayne Johnson was hired as the chief operating officer of the Office of Federal Student Aid, which manages the country’s $1.6 trillion outstanding student loan portfolio. He later worked in a strategic role, directing how student loans are serviced for borrowers.
Just last week, DeVos called Democrats’ plans to erase student debt “crazy” in an interview on Fox News. “Who do they think is actually going to pay for these?” DeVos said.
Johnson told The Wall Street Journal that he arrived at his position after watching climbing defaults and realizing that a majority of student debt will never be repaid.
Indeed, five years into repayment, half of student loan borrowers haven’t paid even $1 toward their debt’s principal, according to the Education Department’s own data. And 40% of student loan borrowers could default by 2023, according to an analysis by the Brookings Institution.
“We run through the process of putting this debt burden on somebody … but it rides on their credit files — it rides on their back — for decades,” Johnson, who wrote his dissertation at Mercer University on student debt, told The Wall Street Journal.
“The time has come for us to end and stop the insanity,” he added.
Johnson proposes forgiving $50,000 in student debt for all borrowers, about $925 billion, according to the newspaper report. For people who’ve already repaid their debt, he suggests offering them a $50,000 tax credit. The plan would be paid for with a 1% tax on corporate earnings.
At the same time, Johnson announced he’d be running for an open Senate seat in Georgia.
“Wayne Johnson got an inside look at how student loans are hurting borrowers, and he could not deny the evidence: America’s student loan program is a massive failed experiment that is hurting borrowers and our economy,” said Julie Margetta Morgan, a fellow at the Roosevelt Institute.
Johnson joins a chorus of government officials and presidential contenders calling for student debt cancellation.
Sen. Elizabeth Warren, D-Mass., has proposed canceling $640 billion of the debt. Sen. Bernie Sanders, I-Vt., said he’d erase all $1.6 trillion of it. At a recent campaign event, Sen. Kamala Harris, D-Calif., hinted that she’d be rolling out a plan to forgive the student loan debt of families who earn less than $100,000 a year.
“Johnson’s plan is more expensive than Warren’s but less expensive than Sanders,'” said Mark Kantrowitz, a higher education expert.
Yet Johnson stands apart from the others in a more critical way. “It’s the first Republican support for widespread student loan forgiveness,” Kantrowitz said. “That makes it a bipartisan issue.”
Source : CNBC