Holiday Table Positives: Student Loans Edition

Holiday celebrations are approaching, and with them comes opportunities for conversations.  From Uber drivers to that relative, you may have a chance to talk about Biden’s accomplishments or other good news that the media ignores.  Remember, most people do not pay for a newspaper or even watch the news – whatever the reason, they just don’t pay attention. Here are some conversation starters!

Biden shouldn’t do anything v. Biden isn’t doing enough!

Perhaps you’ve just listened to someone voice their opinion – or perhaps you know that person who is very concerned about student loans. If you haven’t been close to someone struggling with these loans, it could be hard to have sympathy.  But the student loan burden is causing people to defer marriage, home purchases, and children.  The loans that Biden can help with are federal loans – not private loans.  To receive a federal loan, the student had to be already considered low-income.

Helpful Hint:

Whether you are responding to or starting a conversation, remember to start by framing your values.  For example, student loan forgiveness is an issue of fairness and helping those in need.  Facts alone do not usually convince people, but talking about values and personal stories does.

General talking points about the causes of our student loan burden:

  • College Costs:  In the last three decades, college costs began to rise at a faster rate than other costs.  Tuition for state schools used to be subsidized by state taxes – I remember paying $125 for a quarter at the University of Washington in 1982.  But tax subsidies have steadily decreased, leaving students to shoulder the costs directly.  My takeaway- we used to pay taxes to support students, and now it is time to start again!
  • Confusing or Misleading Loan Terms:  Remember that the loans being forgiven are Federal loans, and those eligible were less financially educated.  Students were widely advised to take these loans without any evaluation or support for future ability to graduate or pay.
  • Costly:  These student loan interest rates followed car loan rates more closely than mortgage rates – ranging from 5% – 10%
  • Compounding Interest: Students were told not to worry about the amount borrowed because payments were deferred until 6 months after graduation.  But interest started compounding immediately!  That’s why you hear so many stories of people owing more than they borrowed after paying for years….

Who benefits from loan forgiveness?

  • Private School Graduates? No, it’s not high-income students who took out private loans to go to expensive schools! Remember, these are Federal loans to low-income applicants.
  • People with cushy jobs?  No, 35% of students holding student loan debt did not graduate with a college degree.  Others are teachers or in professions that are low-paying.
  • Young People?  No, people of all ages, from teenagers to senior citizens, took student loans.  So, these loans affect young people’s ability to invest in families and housing, and older people are also trying to repay these loans out of their social security. 

What is Biden doing to solve this crisis?

A NY Times article (no paywall) lays it out beautifully.  Biden has been approaching student debt forgiveness through the lens of fairness.  Many of these programs already existed, but they were bureaucratic failures – tripping up applicants with complicated applications and deadlines.  Other students were failed by the corporations administering these loans, who didn’t even tell them about programs that could reduce their costs.  Here are the groups Biden has helped so far:

Public service loan forgiveness debts canceled: $51 billion for 715,000 borrowers.

Since 2007, those who worked for government agencies or nonprofit organizations would, after 10 years of monthly loan payments, have their remaining federal student loan balance eliminated.  A quagmire of bureaucracy failed to implement this relief in 99% of eligible loans.  Biden has retroactively fixed this.

Income-driven repayment adjustment debts canceled: $42 billion for 855,000 borrowers.

For decades, loan servicers lazily put loans into “forbearance,” where the interest continues to compound, instead guiding people into income-driven options. Income-driven payment plans are designed to eliminate any remaining balance after a set period of repayment, typically 20 years. Even for borrowers who never enrolled in those plans, the Education Department decided to count virtually any payment, for any amount, as a qualifying one — and it added to its tally many months in which borrowers made no payments at all because they had a long-term deferment or forbearance. The department chose to apply those adjustments automatically for all borrowers; no application needed.  Learn More.

Borrower defense to repayment and closed-school discharge debts canceled: $22.5 billion for 1.3 million borrowers.

Students whose schools defrauded them, typically by breaking consumer protection laws, could seek to have their loans forgiven.  The Obama administration started dealing with this, but relief ground to a halt during the Trump administration. When Biden was elected president, tens of thousands of claims — some that had been languishing for as long as six years — were pending, and over 130,000 others had been summarily rejected. In 2022, the Biden administration agreed to settle a class-action claim that covered 200,000 borrowers who had attended more than 150 schools.

Total and permanent disability debts canceled: $11.7 billion for 513,000 borrowers.

The proof required for this relief was so onerous most didn’t even try to apply.  But two government agencies already had data on people who were fully disabled: the Social Security Administration and the Department of Veterans Affairs. By creating automatic data-matching programs with both agencies and eliminating some income documentation requirements, the Education Department was able to streamline the process and grant relief to many more disabled borrowers.