Americans support student loan relief.
In a recent survey from Vox and Data For Progress, more than half of respondents supported cancelling up to $50,000 in federal student debt per borrower, and a plan to forgive debtors earning less than $125,000 in annual salary received even more support.
This high-profile issue affects approximately 45 million borrowers in the United States, where students leave college with an average debt of nearly $30,000. Collective student loan debt in 2020 reached $1.45 trillion.
However, student debt relief is not at the forefront of the Democratic Party's policy agenda. Instead, the Biden administration is focusing on four other priorities: COVID-19 relief, the economy, racial equity, and climate change.
Debate Among Policy Experts
For some policy analysts, including higher education expert Mark Kantrowitz, loan relief is an important issue to tackle immediately.
"With more than a third of American workers losing their jobs, many borrowers of student loans have been affected financially by the pandemic," said Kantrowitz. "And if you don't have a job, you find it very difficult to repay your student loans. Now, people with college degrees are more likely to have remained employed, but still, people who dropped out of college are much more likely to default on their student loans and need this kind of financial relief."
Other experts are less sure. Sandy Baum, a policy analyst at the left-leaning Urban Institute think tank, argues that student debt is not an urgent priority at the moment. She points to the freeze on federal student loans and the availability of income-driven repayment plans as reasons why.
"Nobody's struggling with their federal student debt right now," said Baum. "Nobody has to make payments."
For now, that's true. In January, Biden extended the interest-free pause on federal student loans until September 2021. The pause was intended to help borrowers use their finances for more immediate needs, like rent and food.
"We do have an income-based repayment program that says people don't have to make payments that they can't afford," said Baum, who supports more targeted student loan reform policies. "So, in the scheme of problems that we face, it's certainly something they need to address, but it's not the most urgent problem."
Temporary Fix for a Future Problem?
According to Kantrowitz's data analysis, less than 11% of people with federal student loans — roughly 4.6 million out of 42 million borrowers — are making payments during the pandemic. Kantrowitz said this payment freeze makes the student debt crisis less of an issue, so long as it keeps going as needed.
"The payment pause and interest waiver provided temporary financial relief for a temporary problem," Kantrowitz said. "It's important to continue that while borrowers are still affected by the high unemployment rate and other financial aftershocks of the pandemic."
Why Student Loan Debt Matters
Most college graduates start their professional careers in the red: Each year, 70% of graduates are in debt before their first day on the job.
It takes the average college graduate 20 years to pay off their student loans.
The average student debt has risen from around $10,000 in the early 1990s to $30,000 today. Student debt has also contributed to racial wealth inequality: Black graduates with a bachelor's degree, for example, are five times more likely to default on their loans than white graduates.
According to EducationData, it takes 20 years to pay off student loans. A 2019 Bankrate survey found that 73% of Millenials have delayed major life milestones due to their student loan debts: Life milestones include saving for emergencies, home buying, paying off auto loans, saving for retirement, having children, and getting married.
Student Loan Forgiveness in 2021
There are two major student loan forgiveness proposals under consideration: Biden's plan to cancel $10,000 per borrower in federal student loan debt and a progressive-backed plan to forgive up to $50,000.
The $50,000 proposal would cancel all of the debt for 80% of federal student loan borrowers. Advocates contend that canceling high levels of outstanding debt will kickstart the economy and reduce the burden on these borrowers.
Opponents of the $50,000 plan, including both Kantrowitz and Baum, argue that forgiving too much student loan debt doesn't help those who need it the most. According to Kantrowitz, more than a third of the borrowers who would receive loan forgiveness under Senator Warren's $50,000 proposal earn six-figure salaries.
"You don't want to give welfare for the wealthy," he said. "If you target the financial relief at lower-income borrowers, you can give more relief to those borrowers."
In contrast, Kantrowitz said $10,000 in loan forgiveness would completely forgive a third of borrowers' student loan debt while eliminating most of the debt owed by the 1 in 4 borrowers who are in default on their loans.
He also said it would benefit borrowers in three main groups who are most likely to be experiencing financial distress and unable to repay their student loans:
- Borrowers who dropped out of college with debt but not a degree, preventing them from accessing career benefits to help repay the debt;
- Borrowers who attended community colleges or low-cost institutions offering a certificate or an associate degree; and
- Borrowers who attended four-year colleges, earned degrees, and have been repaying their loans for a while, and now have less than $10,000 remaining.
Ultimately, student loan debt is a hot button issue — one the Biden administration eventually must tackle. For now, when and how they will do so remains to be seen.
Evan Thompson is a Washington-based writer for TBS covering higher education. He has bylines in the Seattle Times, Tacoma News Tribune, Everett Herald, and others from his past life as a newspaper reporter.
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