Should Joe Biden Forgive Student Loan Debt?
As President-elect Joe Biden continues his transition to the West Wing, the poorly understood issue of student loan forgiveness has appeared again. I still think that the idea of complete student loan forgiveness is disastrous idea that has many flaws. But a “lite” version of student loan assistance should be considered by the Biden administration to truly help those in need.
Last year, I wrote about the race to introduce student loan forgiveness among 2020 presidential hopefuls. The progressive New England duumvirate of senators Bernie Sanders and Elizabeth Warren were quick to add complete student loan forgiveness to their policy platform, paid for with the ever-dependable new taxes on the wealthy and Wall Street.
Despite the failure of these progressive hopefuls in the presidential primaries, student loans popped up again this week when Senate Minority Leader Chuck Schumer stated in an interview that he and Warren are doubling-down on their commitment to canceling more than $1.5 trillion in student loan debt with a U.S. Senate resolution calling for the Biden administration to forgive up to $50,000 for federal student loan borrowers.
Through a presidential executive order, of course! More specifically, they are urging Biden to invoke the Higher Education Act of 1965, which governs student-aid programs and federal aid to colleges.
According to the legal minds at Harvard Law School, the U.S. Secretary of Education has the power to “enforce, pay, compromise, waive, or release any right, title, claim, lien or demand. . .” under the Higher Education Act. More importantly, Schumer and Warren argue that the secretary has the power to “modify” a student loan to “zero.”
In other words, the Biden administration could snap their fingers and cancel a substantial portion of student loan debt.
According to NPR, the costs for this proposal range somewhere between the accepted $1.6 trillion and as high as $2.2 trillion if you add in free college proposals.
Though this legal interpretation will surely be settled through a journey to the U.S. Supreme Court, this proposal is troubling for a number of reasons. The headline of a 2019 Slate article says it best: “Nobody Actually Knows What Forgiving Everyone’s Student Debt Would Cost.”
The federal government paying for something isn’t like getting a check from your uncle. If more than $1.5 trillion in student loan debt is cancelled, the bill still needs to be paid somehow. , Ultimately, taxpayers will be paying for it one way or another.
Mary Clare Amselem, a policy analyst with the Heritage Foundation, writes that a tax to pay for student loan forgiveness “. . .is regressive, or taking a larger percentage from low-income earners, to ask Americans who purposely avoided the high cost of college to pay for students who chose to take on mountains of debt.”
NPR also points out that mass debt forgiveness may not benefit the Americans lawmakers are targeting since “. . .people who take out the largest loans do so to pay for costly graduate degrees.” Complete student loan forgiveness would really benefit master’s and Ph.D. students get a jump start on their six-figure salaries.
A 2015 Brookings research paper highlights another wrinkle – a large share of increasing loan defaults are from for-profit, two-year institutions.
Adam Looney and Constantine Yannelis write, “However, during and soon after the recession, the number of nontraditional borrowers grew to represent almost half of all new borrowers. They experienced poor labor market outcomes, had few family resources, and owed high debt burdens relative to their earnings. Their default rates skyrocketed.” The authors point out that “traditional borrowers,” or those that attend four-year instructions, remained low and that the “labor marker outcomes of many traditional borrowers have remained stable or improved in recent years.”
I personally wouldn’t mind if some of those struggling got relief from their student loans.
Countless college students and families have been short-changed by COVID-19. According to the New York Times, petitions and Facebook groups have been formed at universities and colleges throughout the country demanding some type of discount now that most higher education learning is virtual, and certainly not the college experience they borrowed tens of thousands of dollars to experience.
But instead of hitting the reset button on student loans, Biden should continue where President Trump left off. Earlier this year, President Trump issued an executive order to defer all payments and interest for all federal student loan borrowers. Perhaps a wise course would be to extend this policy until the shutdowns end.
Or let’s tackle the real issue of the overpriced college education. Students and families should be better educated about what a student loan really means two, five, or ten years after graduation. There should be more encouragement of alternate educational opportunities in trade and vocational schools outside a traditional four-year college environment that actually train people to meet the demands of the workforce.
Reducing the burden of student loan debt can be hugely beneficial to the economy. But a blank check won’t stop college students in the near and short-term from running into the same problems.
Evan Harris is the media relations and outreach manager at PRI.