It was hard to miss last month’s controversial move by the White House to cancel an estimated half of a trillion dollars in student debt using dubious legal authority. But it was easy to miss an even more consequential move that received lower billing, despite being in that same announcement. The Biden administration is seeking to modify the terms of the income-driven repayment system (IDR) for student loans such that borrowers, current and future, would be on the hook to repay significantly less of the funds they borrow.

Currently, every borrower with federal student loans is eligible to repay through a program that allows them to make reduced monthly payments and, ultimately, have unaffordable balances forgiven. These programs cap monthly payment at a level that’s considered affordable based on income; 10 or 15 percent of their discretionary income (which is defined as the difference between your annual income and 150 percent of the poverty line.) Biden’s proposal would cut that payment at least in half—requiring that borrowers repaying undergraduate debt only make payments capped at 5 percent of their discretionary income, regardless of how much they’ve borrowed.

It’s important that we have a safety net preventing borrowers from unaffordable monthly payments and ensuring borrowers won’t have to carry truly unaffordable debt to their grave. But for a safety net to work as a safety net and not a welfare program, borrowers who can pay should. Unfortunately, if we enact this change that won’t be the case.

Initial analysis by Adam Looney at the Brookings Institution suggests, unsurprisingly, that implementing this option for student loan repayment would dramatically reduce the share of loan dollars that get repaid. He estimates that borrowers would repay, on average, just $0.50 for every dollar they borrow. In the current system, borrowers will repay, on average, $1 for every dollar they borrow (Note that without income-driven repayment, which allows many borrowers to not repay their full balance, interest accumulation would have borrowers repaying more than their initial principal balance).

Looney also estimates that the vast majority of borrowers (85 percent) would be eligible to make reduced payments under this policy and that the majority (70 percent) of borrowers would have at least some of their loan balance forgiven after 20 years of repayment.

Enacting this proposal would make it such that the typical borrower would not expect to ever repay their debt in full. This would encourage students to spend and borrow more for college, with the taxpayers ultimately picking up the bill. The federal student loan program would no longer function as a lending program. Instead, it would become a convoluted system of ex-post grant aid, with dollars going to those who borrow the most instead of those who need it the most. Also, colleges would have little incentive to keep prices in line with the value they provide because students will anticipate that they won’t be on the hook to pay the price.

Unlike the blanket forgiveness provision, this aspect of the president’s plan will be subject to a period of public comment before it will take effect. Perhaps that will give the administration the opportunity to reconsider this move. If they don’t, they will have successfully undermined the entire system of federal student lending in one fell swoop.

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