Personal Finance

Ex-Trump official says Republicans, not just Democrats, should support forgiving student debt

Key Points
  • Wayne Johnson, who was in charge of student debt under the Trump administration, is now calling for most of the debt to be canceled.
  • Before Johnson's announcement, student debt forgiveness had been proposed only by progressive Democrats.
  • Johnson says his vision for higher education is shaped by Republican values.

MACON, Ga. — Wayne Johnson didn't even wait for the sun to rise when he submitted his resignation from the Trump administration. He had been overseer of the country's $1.6 trillion in student loan debt held by 44 million borrowers.

After mulling the decision and finally deciding to stay home in Georgia, he tossed and turned most of Wednesday night of last week and handed in his resignation at 5:01 a.m. the next morning to Education Secretary Betsy DeVos. Around an hour later, Johnson made a different announcement that hurled him into headlines: Most of the student debt he'd managed should be canceled.

"By 7 a.m., requests started pouring in from around the country for interviews," the 67-year-old Johnson said during an interview with CNBC on Sunday night at a gated retirement community he owns in Macon. Even though the interview was on a Sunday night, he wore a black suit and tomato-red tie.

Wayne Johnson at the Gables of Wolf Creek, the retirement community he owns in Macon, Georgia
Annie Nova | CNBC

Before long, CBS, NBC, CNBC, MSNBC and Fox News had all booked news segments with Johnson, who is now seeking to fill an open U.S. Senate seat in Georgia.

There's interest, of course, in why the government official who had been in charge of federal student loan debt came to the conclusion that it shouldn't exist. But there's another reason behind the fascination with Johnson.

He's not a Democrat.

Before Johnson's announcement, only the most progressive Democrats — presidential candidates Bernie Sanders and Elizabeth Warren — were calling for the cancellation of student debt.

"It's the first Republican support for widespread student loan forgiveness," said Mark Kantrowitz, a higher education expert. "That makes it a bipartisan issue."

Conversations around student debt cancellation usually grab a lot of attention, said Julie Margetta Morgan, a fellow at the liberal Roosevelt Institute. "To have a Republican talking about it pushed it over the top," she said.

Republicans mostly have slammed the idea of a debt jubilee, saying it will punish taxpayers and promote fiscal irresponsibility. While 80% of Democrats are in support of the government forgiving $50,000 in student debt for people who earn less than $250,000 a year, just 30% of Republicans support such an idea, according to a Quinnipiac University poll in April.

A few days before Johnson resigned as chief strategy and transformation officer for the Education Department's Office of Federal Student Aid, DeVos described Warren and Sanders' proposals as "crazy."

"Let's look at this for what it really is: A federal takeover of higher education," DeVos told Fox News on Oct. 18.

US Secretary of Education Betsy DeVos
Saul Loeb | AFP | Getty Images

When Johnson heard those comments, he winced. "I was fully expecting that somebody was going to say, 'This is what she said. This is what he said.'"

Still, Johnson insists his vision for higher education is shaped by Republican values and is a far cry from the progressive Democrats' plans to make public colleges tuition- and debt-free. He called those ideas, "basically socialism."

"What I bring to it is more of a sound, conservative, Georgian business-mind approach," Johnson said. Before DeVos hired Johnson in 2017, he had worked for decades in the consumer financial services industry, including stints as an executive at Visa and CEO of a student loan refinancing company. In his 60s, he received his Ph.D. at Mercer University, where he wrote his dissertation on private student debt.

The student loan crisis, in Johnson's view, is evidence that the Education Department has failed as a lender. "We made the mess, we need to fix it," he said, explaining his call for the debt cancellation.

Outstanding education debt has outpaced credit card and auto debt. The average college graduate leaves school $30,000 in the red today, up from $10,000 in the 1990s. Every day, 3,000 borrowers go into default. Johnson calls the current system, "absolutely unsustainable."

"If you're in an insane situation, it's only going to become more insane," he said.

Johnson proposes to forgive $50,000 in student debt for all borrowers. The plan would be paid for with a 1% tax on revenue generated from corporations and nonprofit organizations, Johnson said.

Johnson also hopes to widen the appeal of his proposal by offering a $50,000 tax credit to any college graduate who didn't borrow or had already paid off their debt.

It's Johnson's vision for what will happen after the debt forgiveness where he most aligns with his party. He wants to do away with federal loans altogether. "That's where the Republican in me comes to light," Johnson said.

In a 2016 report outlining the Republican agenda, it reads: "The federal government should not be in the business of originating student loans." It also says the "private sector participation in student financing should be restored."

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Former Trump official who called student loan system broken proposes forgiveness program

To fill the void of federal student loans, Johnson proposes to give every high school graduate a $50,000 education "voucher" that they can apply to a college or a vocational program. He would maintain Pell Grants, which typically go to students from families with an income below $20,000, and add other grants, too.

Other funding sources for students, he said, could include private lenders and income-sharing agreements, in which investors provide students money to pay for college in return for a share of their future income.

The Roosevelt Institute's Margetta Morgan said she was concerned Johnson was using the problems of the federal government to try to enrich private companies. "He got it right on student debt cancellation, but wrong on everything else," she said.

Critics of Johnson's plan also point out that many of the challenges to the federal student loan system actually stem from private companies, including for-profit colleges and the student loan servicers like Navient, which is currently being sued by several states for misleading borrowers.

And while the student loan forgiveness proposals from Democrats aim to make the country's higher education system less reliant on debt, Johnson's plan seems to just exchange one kind of debt for another, Margetta Morgan said.

"Private sector lending has been far worse and far more expensive for borrowers," she said.

However, with Johnson's proposed grants, most students should be able to cover their college costs without borrowing, Kantrowitz said. Although, he admitted: "If you want a higher-cost college education, you'll have to pay for it yourself."

Despite the different visions for student debt forgiveness by Johnson and Democrats, the fact that members of both parties are behind the platform will help it gain traction, experts say.

"I don't endorse his ideas for the future," Morgetta Morgan said. "But we should not discount that this is an official who was intimately involved in the student loan system and is saying, 'It's not working.'"

Asked how he's going to make his case for debt cancellation to those on the right, Johnson said it was simple.

"You say, 'I'm a Republican," he said, clenching his fist, as if it were a gavel, and striking the table, "'and I'd like to tell you some truth.'"

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