CRFB: Auto-Pay Expansion Is 'Backdoor' Debt Cancellation
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- Education Department announced it will quadruple the auto-pay incentive, cutting enrolled borrowers' interest rate by 1 percent through 2028, up from the quarter-point discount in place since 1999.
- Committee for a Responsible Federal Budget (CRFB) estimated the expansion will cost at least $5 billion and questioned its legality, citing court rulings that rolled back prior executive student debt cancellation attempts.
- Maya MacGuineas, president of CRFB, called the move 'debt cancellation by another name' and said it wipes out loan balances rather than lowering monthly payments, disproportionately benefiting high-earning professionals already in repayment.
- CRFB warned that once expanded, nothing stops a future president from implementing a 5% auto-pay discount, effectively making federal student loans interest-free for those in repayment.
- CRFB argued Congress's new Repayment Assistance Plan already delivers the interest subsidy, and urged the administration to instead work with Congress on closing the $100 billion-plus Pell Grant shortfall.
Why it matters: The 1% auto-pay expansion shifts at least $5 billion in student debt relief costs onto taxpayers while primarily benefiting higher-earning borrowers already in repayment, per CRFB. It bypasses a congressional Repayment Assistance Plan that already addresses interest subsidies and revives the legal fight over executive student debt authority after the Supreme Court blocked prior cancellation efforts.
