It was nearly three years ago that I wrote a post expressing concern about the failure of the federal government to address the growing problem of student loan debt. At the time nearly 44 million former college students in America owed approximately $1.5 trillion. It’s gotten worse. According to the Federal Reserve, it is now $1.75 trillion, and there is still no solution in sight.
I included in my first post Joe Biden’s quote made during a town hall in Miami, “I’m going to eliminate your student debt if you come from a family making less than $125,000 and went to a public university.”
Once in office, however, the new president realized that while his authority is vast, the reality is wiping out the debt, 92 percent of which is owned the federal government, without the support of Congress would not be feasible. Biden has asked Congress to pass legislation cancelling up to $10,000 of debt per student, but there has been no action.
Some bills have been introduced, but nothing passed. Instead, a number of Congressional Democrats have urged him to reduce the debt by $50,000 per student via executive order. Apparently, Biden believes his authority has some limits and is not interested in political suicide.
Biden has extended the moratorium on federal student loan payments, interest and collections until August 31. This has saved borrowers roughfully $5 billion per month, but much of this is simply deferred.
His administration has also attempted to eliminate the glitches that have frustrated responsible borrowers seeking loan forgiveness through existing programs, such as the Public Service Loan Forgiveness Program. Under Trump’s Secretary of Education Betsy DeVos, requests for debt relief under PSLF and income-driven repayment plans were rejected 98 percent of the time. Also under DeVos, efforts to hold for-profit colleges accountable for misleading claims about their job placement rates were essentially abandon despite evidence of significant fraud. While Biden’s Secretary of Education Miguel Cardona has initiated some action against offending for-profit institutions, success has been limited. In February four institutions, including DeVry University were found to have misled students about potential job placement. Penalties against these institutions will provide relief to approximately 16,000 students.
Higher education is essentially a state responsibility in the United States, but the individual states do not appear too concerned about the fact that increases in tuition and fees over the past few decades have been a serious driver of the student debt problem. According to a study reported in Forbes Magazine, the average cost of attending a four-year college or university in this country increased nearly 500 percent between 1985-86 and 2017-18. At the same time, the Center for Budget and Policy Priorities revealed 44 states cut appropriations for higher education. In eight states, including South Carolina, per student funding was cut more than 30 percent. Annual increases in tuition and fees have been moderated and some of the budget cuts have been restored, but the damage has been done.
What are the likely results if the student loan debt problem is not successfully addressed? Trying to muddle through, “kicking the can down the road,” is not a feasible solution.
Leaving roughly 14 percent of the country’s population in financial limbo, especially when they are mostly in the 25-49 cohort of prime-aged workers, will not enhance economic growth. Younger elements in the population are already receiving mixed signals about whether or not they should pursue postsecondary education. Ignoring the plight of current borrowers could provide the wrong kind of clarity. Allowing the $1.75 billion albatross to continue to hang around the neck of 44 million Americans will also continue to weigh down on the housing market and our consumer-based economy in general.
When I published my first post about student loan debt, some readers reacted negatively, referring to their own experience, paying back student loans at an earlier time, just as I did. But circumstances were different forty-fifty years ago.
Tuition and fees between $200 and $1000 were easier to manage then rather than the $12,000 plus that South Carolina public colleges have been charging for the past four or five years. And the few for-profit educational institutions that existed, they were more modest in their charges and far less prone to making exaggerated claims about potential job opportunities. Allowing unfettered access to federal student loan guarantees was folly given the lax accreditation oversight of such operations. Administration under both parties should have been more forceful in insisting on stronger requirements.
Maybe some borrowers are undeserving of our concern, but most are honest people trying to better than lives. Removing the bulk of this $1.75 billion impediment will restore opportunities for them and enhance the economic future for all of us.