According to a dashboard created by Axios to show the most frequently searched topics ahead of this month’s midterm elections, student loan debt was the 10th most popular point of interest behind questions such as jobs, taxes, guns and wages. Considering President Biden introduced a student loan forgiveness program that applies to some (but not all) borrowers this year, and the student debt issue is still a major crisis, the fact that Americans are concerned about student debt is not at all surprising. .
While Biden’s student loan forgiveness plan will erase between $10,000 and $20,000 in federal student debt per eligible borrower, data from the Brookings Institution shows the plan still only erases about $500 billion of student debt. This means that even after the plan is fully implemented, Americans will still have over $1 trillion in student loans to repay.
And since Biden’s student loan plan does nothing against rising college costs, it’s reasonable to think student borrowers will have the same problems as their peers who came before them. Americans are right to wonder if there are practical solutions that could help young people pursue higher education without burdening themselves with debts that take decades to pay off.
Democrats want more reform
National education expert Cindy Chanin of Rainbow EDU Consulting & Tutoring says a confluence of events has made 2023 a pivotal election year for student debt. This is partly due to the interest-free pause on student debt repayment which is scheduled to end at the end of 2022, as well as the $10,000-20,000 student loan debt forgiven through the action of President Biden’s executive.
That said, Chanin points out that another reform is the more robust income-based reimbursement plan suggested by the Biden administration. This plan would allow eligible borrowers with undergraduate loans to pay only 5% of their “discretionary income” for their student loans, half of what current income-driven repayment plans require. The proposed new plan would also require the government to waive any interest charged when a borrower’s monthly payment is not enough to cover the monthly interest that accrues. Any loan balance remaining beyond 20 years on this program would also be forgiven, as would any existing loan balance after 10 years for borrowers who owe $12,000 or less.
Not only that, but borrowers of this plan who earn less than 225% of the Federal Poverty Level (FPL) will not have to make monthly payments under this plan.
Chanin says it’s a far cry from the free college and complete cancellation of student debt that some left-leaning politicians really want. However, income-driven repayment plans ultimately reduce the amount of money borrowers repay for their loans.
“This is one of the few executive actions the White House has the authority to take at this point,” Chanin said.
Canceling a student loan has its problems
Several conservative groups have filed lawsuits in an attempt to prevent student debt cancellation. This despite the fact that millions of people have already applied since the announcement of the launch of the application for debt cancellation.
For example, a small business group called the Job Creators Network Foundation is suing based on the claim that the Biden administration violated federal procedures by not asking the public for input on the program before its launch. Implementation. Other lawsuits claim that the program will hurt some consumers financially or that the plan will raise income taxes for consumers who don’t even benefit from it.
Howard Yaruss, who teaches at New York University and is the author of Understandable economy: because understanding our economy is easier than you think and more important than you think says student loan debt is a critical issue for the midterm elections because “it involves a transfer of $400 billion from general taxpayers to people who went to college.”
He adds that the transfer reinforces the claim that Democrats support “elites” at the expense of “average people.” It also increases purchasing power and has the potential to further fuel inflation, which is the last thing Americans need right now.
Other reasons student loan debt forgiveness is so often pushed back include the fact that “it encourages wasteful behavior,” he says.
And as we’ve already mentioned, President Biden’s proposed debt cancellation program actually does nothing to reduce the costs of higher education. This means that, in a few years, student borrowers will likely be in the exact situation they are in now.
Student loan debt could remain a problem for years to come
Finally, Brandon Davis Ph.D., who is an assistant professor of political science at Tulane University, says student loan debt remains a critical issue because there is so much of it.
“There is nearly $2 trillion in student loan debt that prevents individuals and families from engaging in alternative economic activities,” he says. Since there’s no reason to expect that to change over the next decade, student debt is likely to remain a top concern for voters.
Davis adds that the average amount of student debt per borrower of about $29,000 is just above the target amount set by the White House. As such, canceling this debt would ease significant financial burdens for many families, and it could also be a huge motivator for young voters to participate.
Davis points out that people aged 34 and under have more than $600 billion in student debt, while middle-aged voters “also have a significant amount of debt and hold a higher proportion of debt above $100,000”. America even has an entire population of retirees with student debt, he says.
For any kind of solution to work, Davis argues that politicians on both sides of the aisle should push for more transparency in loan officer lending and forgiveness practices and “more scrutiny applied to universities and colleges at profit-making”.
Until big changes happen in higher education, our student debt crisis will only get worse.