President Biden’s student loan relief plan would cancel up to $20,000 in federal student loans for borrowers. Individuals making less than $125,000 per year, and married couples making less than $250,000 can have up to $10,000 in relief. If the individual received a Pell Grant, they can have an additional $10,000 in relief.
Biden’s plan has been met, predictably, with support and opposition.
Supporters are in agreement with the primary narrative used by the administration – many borrowers are struggling with either debt or default, and forgiveness would provide relief. They point out the hypocrisy of people who are opposing forgiveness but nonetheless received Paycheck Protection Program (PPP) loan forgiveness.
In a surprising and funny move, the White House communications office tweeted the loan amounts several detractors had forgiven.
Meanwhile, of many critiques, two are the strongest.
One is about fairness, exemplified by Mitch McConnell’s commenting that forgiveness is a “slap in the face to every family who sacrificed to save for college, every graduate who paid their debt and every American who chose a certain career path or volunteered to serve in our Armed Forces in order to avoid taking on debt.”
Still others argue that it will exacerbate current levels of inflation. Conservative economists have argued this. But so have other prominent centrist Democrats such as Larry Summers and Jason Furman. Furman, former chairman of President Obama's Council of Economic Advisors, tweeted: “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.”
Helping people who need help
I was at first tepid about the plan. Then I opposed it. I thought the arguments about fairness were right. This is, I think, a normal human reaction when other people seem to be playing by other rules.
Even so, I think it’s the right thing to do. Why?
Because of who is getting the relief.
The typical student loan borrower is not a medical or law school graduate who owes six figures but stands to make millions.
Instead, according to the Center for American Progress, most borrowers owe less than $10,000 and they did not graduate.
An analysis from the Wharton School of Businesses estimates that about three-quarters of the households benefiting from Biden’s plan make $88,000 or less. The US Department of Education, as quoted from a White House fact sheet, estimates that about 90 percent of relief will go to individuals making less than $75,000 a year.
This understanding was fundamental to changing my view.
You see, for wealthier Americans, paying a student loan debt is beneficial. It frees up money for them to invest in other endeavors.
But for moderate and low-income people – the vast majority of student loan borrowers – being relieved of their debt allows them to participate more fully in American society.
And there is research to back up this claim.
In a study from 2016, scholars found that student loan borrowers have difficulty meeting basic needs and managing finances. Of the 3,318 people sampled for their research, “Over half … experienced one or more [financial] hardships in the six months after filing their taxes, such as skipping a rent payment.”
A more recent study looked at borrowers during the Great Recession of 2007-2009. Researchers found that people with student loan debt had elevated amounts of financial stress during that time.
Measures of financial stress include being unable to pay mortgages, pay their credit card balances or having to take out a payday loan.
The researchers also found, in what is a common theme in these studies, that financial stress was more likely for nonwhite people.
The above studies used survey data to arrive at their conclusions. But nothing replaces hearing people in their own words.
A study published this year interviewed 105 young people carrying loan debt. They talked about their difficulty finding employment, paying their student loans and getting their lives started.
One college graduate, with $100,000 in debt, said: “I’ve cried … I try to be a man and not cry, but I’ve broken down some and uh, yeah, I’m pretty worried about defaulting on some of the payments.”
Another young person said she was “frustrate[d] because now I’m $50,000 in student loans and now, I wanna get married and it’s like, do I want to transfer $50,000 in debt into my marriage?”
How to restart a life
These studies resonate with me.
I hold student loans, although I can pay them and they don’t impose a heavy financial burden on me. But at one time, they did.
Like many Black people, I grew up in a low-income, low-wealth environment. Loans were a necessity. After graduating, I took a job teaching high school, and the student loan repayments began.
Those loans made it difficult to start my life.
Paying those loans, along with my rent and car payments, meant that I was barely making ends meet. There was no leftover money. Saving for a down payment on a home or investing in a business was out of the question. Had I not gone back to graduate school (and borrowed more money), I would have been stuck in that life limbo for years.
I can only imagine what it’s like today.
College costs are rising. Real estate costs are rising. People borrow more and cannot afford the one investment that traditionally builds wealth. There is rising income inequality. A few professions – finance, medicine and law – have seen wages rise. But for most other professions, they have stagnated or declined. It’s hard out there.
So while I am sympathetic with critics who argue that student loan forgiveness is unfair, this is bigger than one’s personal feelings.
Loan forgiveness is the moral thing to do.
Removing that burden off the backs of low- and moderate-income people will allow them to lead fuller and more meaningful lives.