Ask Students, Is Debt Certain?

Update 506: Ask Students, Is Debt Certain?  
Now for Something Completely Academic…

Amid the impeachment trial in the Senate — with the defense just having rested its case — and unrelenting and unaddressed pandemic needs unabated in the country, we stop to look at a now-endemic economic crisis: the student debt burden. A $1.7 trillion problem, student debt plagues most millennials and those old enough to wonder what college costs. The inequity has yielded the worst generational wealth gap in the last 100 years. 

Below we evaluate the impact of the current pandemic on the student debt crisis, examine possible solutions, and explore the impact of taking action, or not.

Good Presidents’ long weekends all,

Dana

—————

Last week, the Senate Health, Education, Labor, and Pensions Committee advanced by a 17-5 vote the nomination of Miguel Cardona, President Biden’s pick for Secretary of Education. The Senate will likely confirm Cardona with bipartisan support, and one of his primary responsibilities will be overseeing federal student loans, which now comprise over $1.5 trillion in debt. 

Pandemic Relief 

Student loan debt is the second-largest source of consumer debt in the US, exceeding accumulated car loans and credit card debt; its growth rate is nearly seven percent annually and is expected to reach $3 trillion by 2038. From 2008 to 2020, student debt increased by 102 percent, and the cost of a four-year public degree grew by 15.5 percent.

Source: Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit, 2019:Q4, February 2020 (Peter G. Peterson Foundation) 

This debt crisis compounded with the pandemic’s shock to the economy demanded swift action. Last March, Congress suspended payments and interest accrual on federally-held student loans. The benefit was originally set to expire in September 2020 but was extended through January, and again through September of this year.

This temporary reprieve excludes privately-owned or held student debt. But the benefit affects about 85 percent of all federal student loans and around 41 million people — the vast majority of student loan borrowers. 

An estimated 90 percent of those eligible have taken advantage of the suspension during the pandemic, but this break from collection is not enough for many borrowers. A November Pew survey found that six in 10 borrowers would have difficulty repaying student loans again if the suspension had ended in December. Many are likely still struggling due to the pandemic’s continued effect on the economy. 

Biden’s Student Debt Plan

With control of Congress and the White House, Democrats have an opportunity to relieve student debt. Over 42 million people, or about 92 percent of all student loan borrowers, have loans backed by the federal government. Recent discussions are focused on how much student debt should be forgiven and how to target relief. On the campaign trail, Biden proposed numerous policies to address student debt:

  • Direct Forgiveness: President Biden has called on Congress to pass legislation forgiving $10,000 in student debt for individual borrowers. Other congressional Democrats, including Majority Leader Schumer, have called on Biden to forgive up to $50,000 via executive order. About one-third of borrowers have debt less than $10,000, while forgiving up to $50,000 would eliminate the debt of about 80 percent of borrowers. Under either plan, only student debt holders earning less than $125,000 a year would qualify for forgiveness. Whether the president has the legal authority to unilaterally eliminate student debt remains debatable.
  • Tuition-Related Debt: Biden has also proposed eliminating undergraduate tuition-related debt for federal student debt borrowers who attended either public schools, Historically Black Colleges and Universities, or Minority Serving Institutions. This could be challenging to implement because it would be difficult to discern whether loans were meant for tuition or housing.
  • Public Service Forgiveness: The Public Service Loan Forgiveness (PSLF) program currently offers forgiveness to public and nonprofit employees, but intake rates are low. Biden has proposed changing the program for new borrowers to offer up-front payments of up to $10,000 per year for up to five years.
  • Income-Based Repayments: Income-driven repayment plans tie loan payments to a percentage of income. Biden proposes the following reforms: automatic enrollment for all borrowers (with an opt-out option), payments at five percent of discretionary income (current plans are at 10 percent and 20 percent), raising the threshold of what is considered discretionary income, and making monthly payments $0 if income is below $25,000. This proposal would make repayment more manageable and decrease the likelihood of default for low-income individuals. 
  • Bankruptcy Discharge: Biden has called for allowing both federal and private student loans to be discharged in bankruptcy, which was previously allowed until 1976. In order to qualify for bankruptcy today, borrowers must prove that their debt imposes an undue hardship — a high standard that effectively blocks most borrowers from discharging loans. Restoring this option would have a minimal cost and provide an option for the small percentage of borrowers who need it the most.
  • Defense to Repayment: The Trump administration made it harder for borrowers whose schools made false claims and defrauded them to get loan forgiveness under an existing rule, only approving a small percentage of applicants for forgiveness. Biden said he would reverse the rule change and restore assistance to students who were financially harmed due to misrepresentations by their colleges. 

Impact of Student Debt Forgiveness

Fair-minded progressives raise the question of whether student debt forgiveness is fair or an effective economic stimulant. We’ve examined student debt relief’s distributional and stimulus effects: 

  • Stimulus Effects: Proponents of student debt forgiveness claim that it would help pull the economy out of the pandemic-induced recession. But student debt forgiveness is ineffective on a dollar-for-dollar basis. The Levy Institute estimates that total student debt cancellation would increase cash flow by as much as $108 billion per year. While Biden’s $10,000 proposal would cost less, it would also have a smaller impact on the economy. Still, forgiving student debt may impact a borrower’s ability to pay down costly debt or their willingness to make larger purchases such as buying a house or a car. 
  • Distributional Effects: Student loan forgiveness can close the widening racial wealth gap. Due to a lack of intergenerational wealth, a higher share of black students take out loans than white students — and take out larger loans. Two decades after entering school, the median white borrower has paid off 94 percent of debt, whereas the median black borrower has paid off just five percent.

Notwithstanding, student debt cancellation rewards mostly middle-income households. Those with college degrees earn more income than those without. The highest-income households owe about 60 percent of outstanding student debt, while the lowest-income households owe less than 20 percent of the debt. However, this reflects that those with college degrees earn more income than those without, and those with the largest debts are graduate school borrowers who earn even more on average. The $50,000 cancellations would begin to phase-out for higher-income households. Though higher-income households may still benefit disproportionately, lower-income households would get the largest relief relative to their incomes.

Two other important distributional concerns have been raised. First, student debt forgiveness rewards individuals who have invested surplus income in 401ks or home equity rather than pay down debt. Second, only those with student debt are helped by the proposal — only a fifth of the adult population—and thus excludes those who did not attend college (roughly 55 percent of the population). Student debt relief will not be a panacea for the country’s economic woes, and other policies must address struggles unrelated to the high cost of secondary education.

While better solutions than forgiveness exist, all major reforms except student loan forgiveness would require legislation. Student loan cancellation is not a maximally progressive solution, but it’s a first step that can likely be accomplished through executive action under the Higher Education Act. Further reforms are certainly needed to fix higher education financing. Still, student loan debt can further the cause of racial justice and ease a growing debt burden on younger generations. 

214 thoughts on “Ask Students, Is Debt Certain?”

  1. Very nice post. I just stumbled upoin your blog and wanted to say that I’ve
    truly enjoyed surfing around your blog posts. In anny case I will be subscribing
    tto your feed and I hope you write again very soon!

  2. I blog quite often and I genuinely thank you
    for your content. Your article has really peaked my interest.
    I’m going to book mark your blog and keep checking for new details
    about once per week. I subscribed to your RSS feed as well.

    my webpage: buy delta 8 thc

  3. Excellent article. Keep posting such kind of info on your page.
    Im really impressed by it.
    Hi there, You’ve performed a great job. I’ll definitely digg
    it and personally recommend to my friends. I’m confident they will be benefited
    from this web site.

    Feel free to surf to my site – delta 8 thc store

  4. Hi! Do you use Twitter? I’d like to follow you if that would be ok.

    I’m absolutely enjoying your blog and look forward to new posts.
    0mniartist asmr

  5. It’s a shame you don’t have a donate button! I’d most certainly donate to this brilliant blog!

    I suppose for now i’ll settle for book-marking and adding your RSS feed to my Google account.
    I look forward to new updates and will talk about
    this blog with my Facebook group. Talk soon!

    Here is my website … gold bee

  6. I do not even understand how I stopped up right here, but I thought
    this post was once great. I don’t recognise who you’re
    but definitely you are going to a well-known blogger if you happen to aren’t already.
    Cheers! 0mniartist asmr

  7. Thanks for your personal marvelous posting! I definitely enjoyed reading it, you can be a great author.I will make
    sure to bookmark your blog and definitely will come back in the foreseeable future.
    I want to encourage you to ultimately continue your great work, have a nice
    morning!

    My webpage delta 8 carts

  8. Hello great luck~I don’t even know how I wound up right here, but I assumed this put up was superior. I don’t know who you happen to be but definitely you’re going to a renowned blogger when you aren’t already

  9. Hello excellent luck~Fairly pleasant post. I just stumbled upon your site and wished to mention that I’ve seriously loved browsing your site posts. In any scenario I’ll be subscribing for your rss feed and I hope you generate yet again pretty shortly!

  10. I blog often and I genuinely thank you for your information.
    This article has truly peaked my interest. I’m going to bookmark
    your blog and keep checking for new information about once a week.
    I subscribed to your RSS feed too.

  11. I used to be suggested this web site by means of my cousin. I am now not sure
    whether this submit is written by way of him as nobody else
    realize such distinctive about my problem. You are incredible!
    Thank you!

  12. Hi my friend! I wish to say that this post is awesome, nice written and
    come with approximately all vital infos. I’d
    like to peer more posts like this .

  13. My brother recommended I might like this blog. He was totally right.
    This post truly made my day. You cann’t imagine just how
    much time I had spent for this information! Thanks!

  14. hi superior luck~I don’t even know how I ended up below, but I believed this write-up was excellent. I don’t know who that you are but definitely you’re going to a popular blogger if you aren’t presently

  15. hellow~ you good post~Thank you, I’ve recently been looking for info about this subject for ages and yours is the best I have discovered so far. But, what in regards to the conclusion? Are you positive in regards to the supply?

  16. Its like you read my mind! You seem to know so much about this, like you wrote the book in it or something.
    I think that you could do with some pics to drive the message
    home a bit, but other than that, this is great blog.

    A fantastic read. I will definitely be back.

  17. scoliosis
    That is a very good tip particularly to those fresh to the
    blogosphere. Short but very precise information… Many
    thanks for sharing this one. A must read post! scoliosis

  18. scoliosis
    I blog frequently and I truly appreciate your information. This great article has truly peaked my interest.
    I’m going to take a note of your website and keep checking for new
    details about once a week. I subscribed to your RSS
    feed too. scoliosis

  19. Right here is the perfect website for anyone who would like to find out about this topic. You realize a whole lot its almost hard to arg
    스포츠사이트
    ue with you (not that
    I actually would want to…HaHa). You definitely put a brand new spin on a subject which has been discussed for years. Great stuff, just wonderful.

  20. scoliosis
    I have to thank you for the efforts you’ve put
    in writing this blog. I’m hoping to check out the same high-grade content from you in the future as well.

    In fact, your creative writing abilities has encouraged me to get my very own website
    now 😉 scoliosis

  21. free dating sites
    Wonderful blog! Do you have any hints for aspiring writers?
    I’m planning to start my own website soon but I’m a little lost on everything.

    Would you propose starting with a free platform like WordPress or go for a paid
    option? There are so many choices out there that I’m totally confused ..
    Any tips? Thanks a lot! free dating sites https://785days.tumblr.com/

  22. dating sites
    Do you have a spam issue on this website; I also am a blogger, and I was curious about your situation; we have
    created some nice procedures and we are looking to exchange techniques with others,
    please shoot me an e-mail if interested. dating sites

  23. An outstanding share! I’ve just forw

    바카라arded this onto a co-worker who had been conducting a little research on this. And he actually ordered me lunch simply because I discovered it for him… lol. So allow me to reword this…. Thanks for the meal!! But yeah, thanx for spending some time to talk about this topic here on your web page.

  24. Greetings, I think your blog could be having browser compatibility issues. Whenever I look at your site in Safari, it looks fine however when opening in Internet Exp아바타바카라orer, it has some overlapping issues. I merely wanted to provide you with a quick heads up! Other than that, great blog.

  25. Greetings, I think your blog could be having browser compatibility issues. Whenever I look at your site in Safari, it looks fine however when opening i바카라

    n Internet Explorer, it has some overlapping issues. I merely wanted to provide you with a quick heads up! Other than that, great blog.

  26. Hello, i read your blog occasionally and i own a similar one and i was just curious if you get a lot of spam remarks? If so how do you stop it, any plugin or anything you can recommend? I get so much lately it’s driving me crazy so any assistance is very much appreciated.|

  27. Somebody necessarily lend a hand to make critically
    articles I’d state. This is the first time I frequented your website page and up to now?
    I amazed with the research you made to make this particular
    post incredible. Magnificent activity!

  28. I do not even know how I ended up here, but I thought this post was good.

    I don’t know who you are but certainly you are going to a famous blogger if you are
    not already 😉 Cheers!

  29. I’m truly enjoying the design and layout of your website. It’s a very easy on the eyes which makes it much more pleasant for me to come here and visit more often. Did you hire out a developer to create your theme? Superb work!|

  30. I just could not go away your web site prior to suggesting
    that I actually loved the usual info an individual provide in your visitors?
    Is gonna be back ceaselessly to check out new posts

  31. Pretty nice post. I just stumbled upon your blog and wanted to say that I’ve truly enjoyed surfing around your blog posts.
    In any case I will be subscribing to your feed and I hope you write again very soon!

    My homepage slot

  32. Hi would you mind stating which blog platform you’re working with?
    I’m looking to start my own blog soon but I’m having a difficult time deciding between BlogEngine/Wordpress/B2evolution and Drupal.
    The reason I ask is because your layout seems different then most blogs and I’m looking for
    something completely unique. P.S My apologies for being off-topic but I had
    to ask!

    Also visit my web blog delta 8 gummies

  33. I was suggested this website by way of my cousin. I’m now not positive whether or not this publish is written by means of him as nobody else recognize such specific about my trouble. You’re amazing! Thanks!|

  34. Hello there! I know this is kinda off topic however I’d figured I’d ask.
    Would you be interested in exchanging links
    or maybe guest writing a blog post or vice-versa? My website addresses a lot of the same topics
    as yours and I feel we could greatly benefit from each other.
    If you happen to be interested feel free to send me an e-mail.
    I look forward to hearing from you! Superb blog by the way!

  35. Hello there, I found your website by the use of Google even as searching for a comparable topic, your website came up,
    it seems to be good. I have bookmarked it in my
    google bookmarks.
    Hi there, just become alert to your blog through Google, and
    located that it is truly informative. I’m gonna be careful for brussels.
    I’ll be grateful when you proceed this in future. Lots of other folks will probably be benefited from your writing.
    Cheers!

    Feel free to surf to my blog post – delta 8 gummies

  36. Do you mind if I quote a couple of your articles as long as I provide credit and sources back to
    your webpage? My blog is in the exact same niche as yours and my visitors would genuinely benefit from some of the information you provide here.

    Please let me know if this okay with you. Thanks a lot!

    Feel free to visit my web site best cannabis vapes

  37. Hey! I realize this is sort of off-topic but I needed to ask.
    Does running a well-established blog such as yours take a large amount of work?
    I am brand new to running a blog but I do write in my journal
    daily. I’d like to start a blog so I can easily share my personal experience and views online.
    Please let me know if you have any kind of suggestions or tips for brand new aspiring bloggers.
    Appreciate it!

    My site :: Best THC Gummies

  38. An impressive share! I have just forwarded this onto a coworker
    토토

    who was conducting a little homework on this. And he actually bought me dinner because I found it for him… lol. So let me reword this…. Thanks for the meal!! But yeah, thanks for spending time to discuss this subject here on your web site.|

  39. I’m really inspired along with your writing abilities and also with the layout to your weblog.
    Is this a paid theme or did you customize it your self?
    Either way stay up the nice high quality writing, it is uncommon to look a nice weblog like this one today..

  40. Greetings, I think your web site may be having browser compatibility issues. Whenever I take a look at your website in Safari, it looks fine however, if op
    바카라

    ening in I.E., it’s got some overlapping issues. I just wanted to give you a quick heads up! Besides that, excellent blog!

  41. Pretty component to content. I just stumbled upon your weblog and in accession capital to claim that I acquire actually enjoyed account your weblog posts.

    Any way I’ll be subscribing to your augment or even I fulfillment you get
    admission to persistently fast.

    Feel free to surf to my site: where to find weed

  42. Hi there, i read your blog occasionally and i own a similar one and i was just
    wondering if you get a lot of spam remarks? If so how do you prevent it, any
    plugin or anything you can suggest? I get so much
    lately it’s driving me insane so any help is very much appreciated.

    Review my page … buy weed online; https://www.juneauempire.com/marketplace/marijuana-dispensaries-near-me-where-to-buy-recreational-weed-online,

  43. It’s in point of fact a nice and useful piece of info.
    I am glad that you simply shared this helpful information with us.
    Please stay us up to date like this. Thank you for sharing.

    my blog: buy weed

  44. Greetings! This is my first comment here so I just wanted to give
    a quick shout out and tell you I really enjoy reading through your blog posts.
    안전놀이터

    Can you suggest any other blogs/websites/forums that go over the same topics?

    Many thanks!

  45. Hmm it seems like your site ate my first comment (it
    was super long) so I guess I’ll just sum it up what I submitted and say, I’m thoroughly enjoying your blog.
    I too am an aspiring blog blogger but I’m still new to the whole thing.
    Do you have any tips for first-time blog writers?
    I’d genuinely appreciate it.

    Also visit my website … buy Instagram followers

  46. Fantastic goods from you, man. I have understand your stuff previous to and you are just extremely great.
    I really like what you have acquired here, really like
    what you are saying and the way in which you say
    it. You make it entertaining and you still care for to keep it
    wise. I can not wait to read much more from you.

    This is actually a wonderful site.

    Feel free to surf to my website – best kratom

  47. Appreciating the hard work you put into your website and detailed information you present.
    It’s good to come across a blog every once in a while that isn’t the same unwanted
    rehashed material. Fantastic read! I’ve saved your site and I’m including your RSS feeds to my Google
    account.

  48. Greetings! This is my first comment here so I just wanted to give
    a quick shout out and tell you I really enjoy reading through your blog posts.

    바카라

    Can you suggest any other blogs/websites/forums that go over the same topics?

    Many thanks!

  49. Just want to say your article is as astounding. The clearness in your post is simply nice and i can assume
    you are an expert on this subject. Fine with your permission let
    me to grab your RSS feed to keep updated with forthcoming post.
    Thanks a million and please keep up the rewarding work.

  50. After I originally left a comment I seem to have clicked the -Notify
    me when new comments are added- checkbox and now every time a comment is added I
    recieve 4 emails with the exact same comment. There has
    to be a means you can remove me from that service? Thank you!

  51. Hands down, Apple’s app store wins by a mile. It’s a huge selection of all sorts of apps vs a rather sad selection of a handful for Zune. Microsoft has plans, especially in the realm of games, but I’m not sure I’d want to bet on the future if this kalibrasyon firmaları aspect is important to you. The iPod is a much better choice in that case.

  52. Having read this I believed it was rather informative. I appreciate you finding the time and effort to put this informative article together. I once again find 안전토토myself spending a lot of time both reading and leaving comments. But so what, it was still worth it!

Leave a Comment

Your email address will not be published. Required fields are marked *