A couple years ago, when the topic of forgiving student loans began to be a major talking point among prominent Democrats, I asked my students what they thought. I assumed they would be overwhelmingly in favor of it. I was wrong.
I talked to faculty at other universities — both private and public — and heard similar stories from them. They also were surprised by what they heard.
My students come largely from the upper Midwest, many from rural communities, and most work at least part-time jobs while earning their degrees. Like most young, college-educated Americans, they tend to be fairly progressive when it comes to social issues. I expected that nearly all of them would like the prospect of getting some of their loans repaid by the federal government.
What I did not expect was that so many students would regard it as unfair.
They gave many reasons for their objection. Several pointed out that they had been working through high school and during college to keep their loan burden to a minimum. They knew other students who were not working and were accumulating massive debt. Why should those who were partying their way through college get the same benefit as those who had been working?
Other students noted that they had younger brothers and sisters who would be going to college in a few years. Who was going to help them with their loans?
Finally, many students had family members who were struggling to make ends meet because of stagnant wages, high mortgages, car payments or medical bills. Why should students get a government handout when others who were struggling financially did not?
What they said, in short, was: “I would like to get my loans forgiven, but it would not be fair.”
The idea of fairness is an underappreciated concept in our current political debates. The term is used frequently, of course, but rarely with the thoughtful attention it deserves. People generally talk about fairness only to complain about something they don’t like.
One way to think about fairness is to consider whether a certain law or policy gives an undue advantage or preference. And that’s a good question to ask regarding student debt relief because, after all, it represents a huge wealth transfer. In general, wealth transfer programs are justified because they take from those with the most money and give to those with the least.
But student debt relief is not like other wealth transfer programs. The median household income of those holding student debt is $76,000 per year compared to $44,000 for the average household. Even with the proposed income caps on eligibility, much of the wealth transfer will go up, not down.
In addition, 56% of student debt today is held by the 17% of adults who have graduate or professional degrees. And they have even higher earnings — about $106,000 in median household income. In general, those who hold the most student debt have the greatest ability to pay it back.
Debt relief will of course be good for college graduates who are struggling financially. As supporters of the measure note, it will help many young people get off to a better start. It will increase geographic mobility, improve credit scores and may make it easier to start a family. Moreover, the benefit to those at the lower end of the income spectrum could be transformative. These are undoubtedly good things.
But there is a major problem. By adding an estimated $500 billion to the federal debt while doing nothing to address structural problems in higher education funding, the overall effect will be to bolster a flawed system that is largely responsible for economic and racial inequities in this country.
Since 1980, the cost of college has risen 1,200%, while inflation has gone up 236%. If anything, the debt-relief program might make the problem worse by incentivizing higher tuition rates and a greater willingness among future students to accumulate debt.
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Student loan forgiveness could help more than 40 million Americans
AP file
President Joe Biden said Wednesday that his administration plans to forgive up to $10,000 in federal student loan debt for anyone who makes less than $125,000 a year. People who went to college on Pell grants, which are reserved for undergraduates with the most significant financial need, can have up to $20,000 forgiven.
AP file
President Joe Biden said Wednesday that his administration plans to forgive up to $10,000 in federal student loan debt for anyone who makes less than $125,000 a year. People who went to college on Pell grants, which are reserved for undergraduates with the most significant financial need, can have up to $20,000 forgiven.
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Student loan forgiveness could help more than 40 million Americans
AP file
Biden's tweet said the payment freeze will be extended one last time, until Dec. 31. The freeze started in 2020 as a way to help people struggling financially during the COVID-19 pandemic and it's been extended several times since. It was set to expire on Aug. 31.
Interest rates will remain at 0% until repayments start. Under an earlier extension announced in April, people who were behind on payments before the pandemic will automatically be put in good standing.
AP file
Biden's tweet said the payment freeze will be extended one last time, until Dec. 31. The freeze started in 2020 as a way to help people struggling financially during the COVID-19 pandemic and it's been extended several times since. It was set to expire on Aug. 31.
Interest rates will remain at 0% until repayments start. Under an earlier extension announced in April, people who were behind on payments before the pandemic will automatically be put in good standing.
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Student loan forgiveness could help more than 40 million Americans
AP file
Only people making less than $125,000 a year are expected to qualify. People who borrowed through most federal student loan programs are likely to be eligible, while those who have private loans issued by banks or schools probably won't be.
AP file
Only people making less than $125,000 a year are expected to qualify. People who borrowed through most federal student loan programs are likely to be eligible, while those who have private loans issued by banks or schools probably won't be.
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Student loan forgiveness could help more than 40 million Americans
AP file
Details of that have not yet been announced, but keep an eye on the federal student aid website for more details in coming days.
AP file
Details of that have not yet been announced, but keep an eye on the federal student aid website for more details in coming days.
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Student loan forgiveness could help more than 40 million Americans
AP file
About 43 million Americans have federal student debt, and a third of those owe less than $10,000. Half owe less than $20,000. The total amount of federal student debt is more than $1.6 trillion. Nearly one third of all American students take out loans to pay for college, with an average balance of $37,667, according to federal data.
AP file
About 43 million Americans have federal student debt, and a third of those owe less than $10,000. Half owe less than $20,000. The total amount of federal student debt is more than $1.6 trillion. Nearly one third of all American students take out loans to pay for college, with an average balance of $37,667, according to federal data.
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Student loan forgiveness could help more than 40 million Americans
AP file
The debt forgiveness is expected to apply only to those currently holding student debt. But if you’ve voluntarily made payments since March 2020, when payments were paused, you can request a refund for those payments, according to the Federal Office of Student Aid. Contact your loan servicer to request a refund.
AP file
The debt forgiveness is expected to apply only to those currently holding student debt. But if you’ve voluntarily made payments since March 2020, when payments were paused, you can request a refund for those payments, according to the Federal Office of Student Aid. Contact your loan servicer to request a refund.
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Student loan forgiveness could help more than 40 million Americans
AP file
Critics believe the White House will face lawsuits over the plan, because Congress has never given the president the explicit authority to cancel debt. We don't know yet how that might impact the timetable for student loan forgiveness.
AP file
Critics believe the White House will face lawsuits over the plan, because Congress has never given the president the explicit authority to cancel debt. We don't know yet how that might impact the timetable for student loan forgiveness.
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Student loan forgiveness could help more than 40 million Americans
AP file
Once payments resume, borrowers who can’t pay risk delinquency and eventually default.
Once a loan hasn’t been paid for 90 days or more, it’s labeled delinquent and will be reported to national credit reporting agencies, which could hurt your credit rating.
After 270 days, the loan will be considered in default. Consequences vary depending on the type of loan, but can include losing eligibility for additional federal student aid.
If you’re struggling to pay, check if you qualify for an income-driven repayment plan. You can find out more here.
The plan Biden announced Wednesday also includes a provision that allows people with undergraduate loans to cap repayment at 5% of their monthly income.
If you have worked for a government agency or a non-profit organization, you could also be eligible for the Public Service Loan Forgiveness Program, which you can read more about here.
AP file
Once payments resume, borrowers who can’t pay risk delinquency and eventually default.
Once a loan hasn’t been paid for 90 days or more, it’s labeled delinquent and will be reported to national credit reporting agencies, which could hurt your credit rating.
After 270 days, the loan will be considered in default. Consequences vary depending on the type of loan, but can include losing eligibility for additional federal student aid.
If you’re struggling to pay, check if you qualify for an income-driven repayment plan. You can find out more here.
The plan Biden announced Wednesday also includes a provision that allows people with undergraduate loans to cap repayment at 5% of their monthly income.
If you have worked for a government agency or a non-profit organization, you could also be eligible for the Public Service Loan Forgiveness Program, which you can read more about here.
Every student I talk to is angry about the high cost of college education. They are angry at university administrators, angry at government officials, angry at society in general. They resent the fact that the cost of access to many of the better paying jobs in our society is so high. When they learn that the Biden administration’s student debt relief program is a one-time deal, that it won’t do anything to reduce education costs for future students, they are angry about that as well. They will take loan forgiveness if that’s what’s being offered, but they want a better solution.
Democrats are hoping this issue will help them win over more college-educated voters during the elections this fall. Republicans are betting their opposition to it will boost support among working-class voters.
I think both parties are wrong. We have a real problem with how the rising cost of college education is contributing to economic inequality in this country. Neither party is even talking about meaningful reforms.
I predict that after the controversy over the current program dies down, the high cost of college education will become yet one more issue about which politicians of both parties are seen to lack moral seriousness.
