Loan Forgiveness is a Mixed Bag
The message from my daughter was exciting.
“This is a life changer,” she said.
She had just read of President Biden’s executive order providing relief to millions of Americans drowning in school-loan debt.
My daughter, Liss, is 32 years old. She is a University of Montana graduate who left school with a degree and tens of thousands in loan debt.
The president’s program apparently will reduce her total remaining debt to about $5,000 and reduce her monthly payments to a fraction of the previous amount. Her wife will experience similar relief.
A life changer.
But the loan forgiveness that will change my daughter’s life comes at a cost. And when I look at the president’s program through a lens other than that of father, I must acknowledge that cost.
There is nothing particularly unusual in my daughter’s situation.
She graduated from high school in Colorado Springs and could have attended school in that state. She considered Colorado State University where she would have paid in-state tuition. But eventually she decided to attend the University of Montana, a great choice but one costing considerably more. She had some great scholarships but not nearly enough to cover tuition, books, and housing. She carried her weight, working at any number of part-time jobs all through school.
But in modern America it is impossible for most students to attend college without loans. That was my experience at the University of Idaho, where nearly all my students – with the exception of a few athletes and the occasional silver spoon student – were struggling to pay their way.
That also has been true nationally. More significantly, the amount of debt carried by students has ballooned in recent years. In large part, that is because taxpayer support for higher education has declined, forcing state schools to shift the cost burden to students through regular, sometimes outrageous tuition and fee increases.
That has certainly been the case in Idaho where some years back the Legislature decided higher education was not worthy of support, that it is a tool for leftist indoctrination and not education.
So, students carry a disproportionate share of the costs. And the debt burden is often so great a graduate must continue to live like a student even after earning their degree and finding a job. That means roommates, ramen meals, and continued help from parents. Married students are often so in debt they cannot buy a decent car or afford to buy a house.
It is a national shame and progressives have been asking for some form of relief for years. It was a key issue in the 2020 presidential campaign. But even with the president’s support and Democrats controlling both houses of Congress, there has been no legislative action.
That is why the president last week took executive action.
The relief package has several provisions. But fundamentally, students who received federal Pell grants can receive up to $20,000 in forgiveness. Those with other federally funded student loans can get up to $10,000 in relief. Students like my daughter, with both kinds of loans, can take advantage of both provisions.
Forgiveness will apply only to graduates making less than $125,000 per year or families making $250,000. Applications for relief will be taken through the end of the year and relief will take effect in 2023.
Not all progressives are happy with the relief package Some believe it does not go far enough. Students of color typically accrue more debt and this program offers them little relief. Others believe the income limits are too high, that only the poorest of students should qualify.
And of course, it does not apply to loans taken through private lenders who often shackle graduates with onerous interest and unforgiving payment schedules.
But too many conservatives are attacking the plan as if it were some sort of Communist plot, arguing, in part, that too many students do not belong in college in the first place, and we should discourage them from seeking higher education.
Of course, conservatives typically forget the government subsidizes all sorts of favored programs such as farm relief, subsidized housing through FHA and veterans’ loans, and enormous tax subsidies and forgiveness for corporations and the super-rich. Try to help a few financially strapped graduates and that is blatant socialism, by gawd!
But there is also legitimate and worrisome criticism. The Washington Post, in a thoughtful editorial, criticizes the program on fiscal grounds.
The relief program places an unfair burden on taxpayers, will contribute to inflation, will setback deficit reduction efforts, and will fail to help the neediest students, according to The Post, generally a supporter of the president’s initiatives.
And the plan is not fair to those who already repaid their debts, working their tails off to do so.
I appreciate all those arguments. And like The Post’s editorial writers, I am concerned about the overall fiscal impact.
But then my daughter called. This is a life changer, she said. And as her father, I cannot argue with that.
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