Reviews | Canceling student loans is worth it, but what we need is major reform

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The reaction to the news that the White House is about to write off $10,000 in federal debt for the vast majority of student borrowers is a reminder that the problem is a problem from hell. Many activists, demanding debt forgiveness of $50,000 or more, with no income limit, are unlikely to be entirely satisfied. Others are outraged by what they see as a gross misuse of public funds, a gift to people who don’t need help.

They are both wrong. It’s an extraordinary move, and one that will almost certainly benefit Democrats in the short term. But forgiveness is not enough, and the amount in question is not the issue. This is a bigger problem: if the cancellation is not accompanied by greater systemic reforms, we will almost certainly come to this pass again.

Make no mistake: the country’s $1.7 trillion student loan debt is an economic albatross.

Seven out of 10 recent university graduates have borrowed money to help them continue their college education, against half 30 years ago. People who attend higher education will incur even more debt, sometimes in the six figures. Nor are they all high-flying business lawyers. Coming veterinarians graduate owes an average of more than $180,000.

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The reason for this growing mountain of debt is not mysterious. Both federally and State support for students wishing to pursue higher education has declined in recent decades, even as the cost of attendance has soared. (It fell during the pandemic.) People have repeatedly been told that their best chance for advancement is to seek higher education, whether through academia or by upgrading or retraining their job skills. As a result, teenagers who are not even old enough to legally buy alcoholic beverages are now incurring life-changing debts.

Decades of policy and regulatory failures have deepened the crisis. Dodgy for-profit colleges viewed desperate Americans as easy financial choices — leaving their debt-ridden former students with few improved career prospects. Income-based repayment plans have proven to be both difficult to manage and useless in truly eliminating debt. After 12 years, many student loan debtors using them will need more than what they originally borrowed. At the same time, we made student debt more onerous with legislation that made it virtually impossible to excise it in bankruptcy court — thanks to President Biden, among others.

All of this is why, contrary to the assertions of the assholes in Washington, polls repeatedly find at least some forgiveness enjoys majority supportabove all when combined with income caps. Research published Friday by Data for progress and the Student Borrower Protection Center found that people who have attended college are less likely to support forgiveness than those who have not. This does not surprise me. Many of the borrowers and their families I’ve spoken to over the years were first-generation college students and couldn’t afford to go to college unless they borrowed money.

And $10,000 in debt forgiveness can make a substantial, life-changing difference. A third of all borrowers owe less than $10,000 and half owe less than $20,000. Many borrowers who default on their loans owe even less, under $10,000 — and in some cases, these are people who never graduated, leaving them worse off than if they had never gone to college.

All of this also explains why debt cancellation is a likely political winner for Democrats in 2022. But forgiveness just throws the bucket down the road. It doesn’t solve the bigger issues: why college has become so expensive and how we as a nation should help people pay the bills.

This is where we need Congress to step in. Lower the interest rate on student loans, which Sen. Elizabeth Warren (D-Mass.) has proposed in the past, would reduce the number of people making their monthly payments, only to find themselves further and further behind. Allowing financially overwhelmed borrowers to seek relief from bankruptcy court unless in “extreme hardship” would also help. (There is currently bipartisan legislation in the Senate that would allow this after 10 years.)

It is Congress that should vote to increase the funds that low-income students can receive if they are eligible for Pell Grants. And, of course, it’s Congress that should authorize the funds to, as Biden promised in his campaign, make community college free.

Instead of criticizing – or, like the Republicans, proposing legislation to stop forgiveness in its tracks – Congress might want to get on it. Our economy would almost certainly benefit. Student debt is the responsibility of the individual borrower, but that makes us all poorer. It impacts career choicesdecisions about the quality of school attendedwhether to start a small businessEven the decision of when to have a child and, therefore, people’s contributions to the global economy. But a single debt jubilee is not enough. We need to put this problem behind us once and for all.

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