Student Loan Debt Relief — an Idea Whose Time Has Come
The Biden administration is currently considering using executive authority to reduce, or cancel outright, student loan debt. During the pandemic, the federal government declared a moratorium on student loan repayment, as a form of economic relief to borrowers. That moratorium is set to expire on August 31, 2022. Biden is faced with a number of options: he could just let it expire, he could extend it, or he can take what is being described as “bold” action to put in place a permanent reduction or even cancellation of this debt. As would be expected, there is significant debate about which action he should take.
In my experience, student loan debt is misunderstood and often mischaracterized. As quoted in a recent Washington Post article, “Biden and centrist Democrats have expressed skepticism, however, about the wisdom of burdening taxpayers with the debt of students who voluntarily took out loans to attend pricey private universities.” This line of thinking is misguided on many fronts. It indicates a deep lack of awareness of who takes out loans and why. Further, there is an inherent contradiction to claiming that debt relief will burden taxpayers — student loan borrowers are, themselves, burdened taxpayers! Finally, to say that borrowers get in debt in order to attend “pricey private universities” belies a fundamental misunderstanding of the cost of attendance at a wide range of colleges and universities as well as what it takes to operate an institution of higher ed in the US in the twenty-first century.
The distinction between public and private universities, in terms of cost of attendance, is much more blurry than most people think. Federal and state governments have slowly disinvested in public universities to the point where currently, for many public universities, only a minority of their operating costs are supported by governmental funding, estimated by a recent Pew study to be at about 34%. This leaves public institutions in the same boat as the privates, whereby colleges and universities must rely on tuition revenue and philanthropy to meet operating costs.
The variable that most affects cost of attendance for a student is less their choice of a public or private university, but more so their family income. It’s a well-known fact that students from middle class families might very well receive a better financial aid package from a private university than from their local state university. Take the example of a friend of mine, residing in the state of California, whose child is college-bound. This student was offered admission at a range of institutions. Once their acceptance and aid packages have come in, they have learned that it will cost them less to send their student to an excellent small liberal arts college (SLAC) in the midwest, than it would to attend one of the University of California campuses to which they had applied. And, of the aid that was offered by each of these institutions, the SLAC offered significantly more grant funding, whereas that offered by the U of C was entirely in the form of loans.
Private institutions are, indeed, pricey. But the fact is, all institutions of higher ed in the US are expensive, for the simple reason that our government has systematically disinvested in higher education, from the 1970s onward. Meanwhile, shifting demographics in the US (meaning, the reduction of college-bound 18 year-olds) have meant that colleges and universities are competing for smaller numbers of overall domestic applicants, which has led to an “arms race” mentality. Services to students have increased year over year in this effort to compete for applicants, resulting in significant increases in operational costs. It is true that tuition has increased exponentially, to numbers that are indeed unconscionable. But these increases have come alongside a shift in US policy from outright grants to students, to lending to students. But most disturbingly, as our society swallowed this reality of students needing to borrow to go to college, the US government then systematically removed consumer protections from student borrowing, which became highly privatized and pernicious — and not just those loans at for-profit colleges, but all student loans. This history is well documented in Alan Collinge’s excellent book, The Student Loan Scam: The Most Oppressive Debt in U.S. History and How We Can Fight Back.
Personally, I took significant loans to complete my bachelor’s and master’s degrees. At that time, student loan debt was relatively “good” debt. Interest rates were low, various repayment plans were available, and I could petition for breaks in payments for various reasons. Current students face a very different landscape, with student loans now offering less consumer protections than auto loans. This fact is a sad reflection on our society’s values.
The notion that students “voluntarily” took loans to study at “pricey” universities, and therefore do not deserve debt relief, is entirely misguided. We must value education — not only for earning potential, but for our fundamental belief in the need for an educated populace of citizens. We therefore must do all we can to support all students in their pursuit of higher education. Contrary to the claims that are circulating that student loan debt relief would only benefit wealthy white graduates, borrowers come from all income brackets and are disproportionately Black and Latinx.
The Biden administration has the opportunity to make meaningful change that will positively support college graduates and their families, increasing these graduates opportunities for financial security. Because he can enact relief by executive order rather than trying to pass legislation in a deeply divided Congress, he can and should act now. As Senator Elizabeth Warren’s press release states:
“The COVID-19 crisis is worsening the massive inequities in our economy and society, but even before the pandemic the student loan debt crisis was already crushing millions of Americans,” said Senator Warren. “By cancelling up to $50,000 in federal student loan debt for borrowers, President Biden can take the single most effective executive action available to provide a massive stimulus to our economy, help narrow the racial wealth gap, and lift this impossible burden off of tens of millions of families.”
Warren and other senators are advocating the cancellation of up to $50k in debt per borrower. Even more impactful would be to forgive student debt altogether. While this is an important measure in response to the economic challenges of the past few years, we should also look ahead to student loan reform, for future borrowers. We must, as a society, invest in higher education and support the ability of all students to obtain a college degree, without thrusting those students into years of debt repayment.