Forgiving student loans

MARY REICHARD, HOST: It’s Thursday, the 11th of February, 2021.

You’re listening to The World and Everything in It and we’re so glad you are!  Good morning, I’m Mary Reichard.

MEGAN BASHAM, HOST: And I’m Megan Basham. First up: student debt.

Last year, in response to the pandemic and the resulting economic downturn, the government froze federal student loans. Borrowers weren’t required to make payments, and interest accumulation stopped.

REICHARD: This year President Joe Biden extended the freeze through September, and he wants Congress to forgive $10,000 dollars of federal debt per student. But some Democrats are pushing for more drastic action.

WORLD’s Esther Eaton reports.

ESTHER EATON, REPORTER: Hope Campbell graduated from Union University in May 2020 with a degree in political science and about $9,000 dollars in debt. Thanks to the freeze, she hasn’t had to make monthly payments yet.

CAMPBELL: Which was nice because that’s really the only COVID relief that I’ve felt, because my parents still claim me as a dependent. And, yeah, so I haven’t gotten any stimulus money, so that was, that has been a good plus.

Campbell is one of about 43 million people in the United States with student loan debt. Altogether, they owe about $1.5 trillion. By paying a hundred dollars here and there, Campbell has whittled her debt down to about $7,000.

Prominent Democrats want President Biden to wipe out the rest of Campbell’s debt with a stroke of his pen. Senate Majority Leader Chuck Schumer of New York unveiled the proposal last week.

SCHUMER: We are here today to introduce our proposal to cancel $50,000 in student debt and take a huge burden off so many people in America.

Schumer, Senator Elizabeth Warren, and others are pushing Biden to do that by executive order. So far, Biden has resisted, preferring to let Congress do the cancelling. His press secretary, Jen Psaki, reiterated his stance at a briefing last week:

PSAKI: The President has and continues to support canceling $10,000 of federal student loan debt per person, as a response to the COVID crisis. He’s calling on Congress to draft the proposal. And if it is – if it is passed and sent to his desk, he will look forward to signing it.

Biden’s smaller forgiveness package is intended to target borrowers who never graduated college. Without a degree, they don’t reap the reward of higher earnings and so struggle to pay off even small amounts of debt.

But critics say canceling debts places an unfair burden on taxpayers, especially those who didn’t attend college or who worked to cover costs as they went. Lindsey Burke, director of education policy at The Heritage Foundation, explained the problem to Sinclair Broadcast Group last week.

BURKE: Many individuals made a conscious decision not to attend college to avoid debt. So forgiveness proposals at any amount would foist someone else’s debt onto them.

Biden’s $10,000 forgiveness proposal will cost about $370 billion, according to higher education researcher Preston Cooper. And Senator Warren estimated forgiving $50,000 per borrower would cost almost twice that.

And canceling current debts won’t prevent future students from racking up new debt loads. To help with that problem, the president has proposed eliminating community college tuition for low-income students. But that wouldn’t make much of a dent in future loans. Analysts at the American Enterprise Institute estimate it would only take 14 years for federal student loans to climb back to today’s level.

Campbell used academic scholarships, a job as a residential assistant, and help from her parents to reduce her undergraduate debt. But now she’s considering taking out more loans to pay for a master’s degree in social work.

CAMPBELL: I have definitely looked at how much tuition costs. I’m waiting on my like financial aid package, which apparently will show up in March. So, yeah, I’m a little nervous about that, of how much it’s going to add.

Only a quarter of student borrowers have graduate degrees, but a Brookings Institution analysis last year found that they account for half of all U.S. student debt.

Campbell won’t have to worry about her current loans until later this year. And until she finds out whether Congress will write them off, she doesn’t plan to make any regular payments.

Reporting for WORLD, I’m Esther Eaton.

(AP Photo/Andrew Harnik) Senate Majority Leader Sen. Chuck Schumer of N.Y., center, speaks at a news conference on Capitol Hill in Washington, Thursday, Feb. 4, 2021, about plans to reintroduce a resolution to call on President Joe Biden to take executive action to cancel up to $50,000 in debt for federal student loan borrowers. 

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