Now what?: The question that follows Biden’s student loan forgiveness plan
William Alexander was ecstatic when he read President Joe Biden’s tweet on Wednesday, announcing the administration’s student loan cancellation plan.
“It is literally life changing,” he says.
The news means his wife will have her $20,000 debt erased, as she received Pell grants at school and the couple earn less than $250,000 a year. Alexander, who lives in Jacksonville, Florida, also had his own loans canceled earlier this year under the borrower defense rule – which allows borrowers to ask the Department of Education to erase their student debt if a school has lied to them about things like job prospects or potential salaries.
“The admissions counselor told me there was a guaranteed career waiting for me,” Alexander says of the for-profit college he applied to in 2015. It was close to $50,000.
He had trouble making his payments, so he filed a Borrower Defense Claim. This year, he was notified that his entire loan balance was forfeited.
“I was blown away,” he laughs. “I didn’t expect it at all. It made me smile, of course, when I got it. And, you know, I ran around the house saying to everyone, ‘Hey, my student loans are going to be forgiven, my student loans are being forgiven. So yeah, I’m happy as a pig in the mud.”
Alexander says that after years of renting, he and his wife are now looking at homes. And he feels like he will have more time to volunteer in his community.
But while families like the Alexanders rejoice in newfound financial freedom, the move has critics on both sides of the issue. Some say it’s not enough, while others say it shouldn’t have happened at all.
Not everyone is partying
Wednesday’s announcement joins the Biden administration’s portfolio of policies aimed at easing the burden of student debt. He also said monthly loan payments would be suspended one last time, until the end of 2022.
But many borrowers are still hoping for more relief. Jayson Douglas, a 29-year-old from Commerce, TX, owes nearly $90,000 in student loans. He already works several jobs to offset the rising cost of living. He therefore fears the end of the payment break.
“My monthly payments are $835 a month,” he says. “I really think our government needs to write off student loans completely. Or at least write off the interest and go back to the original loan principal.”
He says that while he understands how many families will be thrilled with the latest announcement, it wasn’t what he was hoping for.
And he is not alone in his disappointment. Pari, a 51-year-old paralegal who did not give her last name for privacy reasons, also wants all student debt forgiven. And she feels angry when she sees it compared to other government debt forgiveness.
“The PPP loans, plus interest, were canceled without question or explanation,” she says. “Millionaires and big corporations got another blank check.”
Pari has student loans for over 20 years. As a single mother with only one source of income, she had to suspend payments several times. Interest has accrued and she now owes more than she originally borrowed. Two of her children are now in college, so she also took out two PLUS loans to pay for their tuition and expenses. She says she never had the chance to build up savings, so she had no other choice.
His debt currently stands at over $200,000.
“The weight of student loans weighs on every other decision I’ve tried to make,” she says. “Home ownership and all that. Compound interest is just crippling. It really feels like theft. And I hope this nightmare ends.”
At the origin of a crisis
Pari’s PLUS Loans underscore the need for a longer-term view of higher education costs. What about the generation planning, applying and packing for college, signing promissory notes as a new school year looms? How to tackle the root causes of the student debt crisis?
“I think debt cancellation is the first step,” says Jared Bass, senior director of higher education at the Center for American Progress. He says increasing access to grants and reducing over-reliance on loans is essential. “Loans are the #1 form of support we offer to students. No wonder we have a student debt crisis.
He also wants the cost of university education to be dealt with immediately. And says there must be a way to hold colleges accountable when students aren’t getting the promised education that helps them compete in the job market and become economically secure.
And speaking of promises, Bass also points out that debt forgiveness as a concept is not new.
“We have civil service loan forgiveness. We have income-based repayment, which are both repayment options that promise forgiveness or forgiveness of debt already in the education system. higher,” he said.
But, he said, the Government Accountability Office and other government watchdogs have found that these programs have not worked.
“There is a question of fairness for borrowers who were hoping to rely on these programs to see debt relief,” Bass said. “These programs didn’t work. So debt cancellation, especially large-scale debt cancellation, could be seen as, you know, fulfilling the government’s promise to these borrowers.”
The concept of fairness also came up repeatedly among critics of student debt forgiveness. A common feeling was: what about those who have already repaid their loans? Or did he not take out a loan at all? How is it fair to them?
Pari thinks that many people who think so have no idea how much higher education really costs these days. She says avoiding loans is a privilege and likely means someone had other financial aid or “went to school at a time when a college loan was $30.”
“The days of going to college and working part-time to pay for it? It’s non-existent now. And has been for 20 years,” she says.
Pari also wants to remind people of “the extra layer” of her experience as a black woman.
“America has made it clear that it really doesn’t resent black people that much,” she says.
Black college graduates owe an average of $7,400 more than their white peersaccording to a 2016 Brookings analysis. Due to higher interest rates and average accumulation, black graduates hold almost $53,000 in student loan debt four years after graduation, almost twice as much as their counterparts whites.
Education Secretary Miguel Cardona says NPR after the announcement that the Pell Grant rule in the last announcement took these numbers into account.
“Black Americans are twice as likely to be Pell recipients,” he says. “So, you know, they’re more eligible now for the $20,000 than the $10,000. And we know that 1 in 4 Black Americans will receive full debt forgiveness after today’s announcement. ”
Jayson Douglas, who is also black, says it is ultimately a question of access and wants the government to respond to it with more of a one-time solution.
“Not everyone has had the same opportunities. And we really need to move the conversation forward on equity, predatory lending and education,” he says. “However, today is still a day to celebrate and reflect on the impact this decision has had on millions of families across our country.”
As for when borrowers can expect the promised relief on their loans, Secretary Cardona called it “the million-dollar question.”
“It’s really important for people to know that we’re also improving a system that was broken and outdated,” he said. “The Federal Service Loan Administration has really gone through some tweaks to make the process smoother. So what we’re asking people to do is visit studentaid.gov/debtrelief and sign up to receive automated emails so more information can arrive.”