Our Loans, Our Lives
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 of the plan are in agreement with the primary narrative used by the Biden administration - many borrowers are struggling with either debt or default, and forgiveness would provide relief. They also point out the hypocrisy of people who are opposing forgiveness, yet they themselves received Paycheck Protection Program (PPP) loan forgiveness. In a surprising and funny move by the White House, the administration tweeted the loan amounts several detractors had forgiven.
Meanwhile, of the many critiques of the plan, two are the strongest. One critique takes a fairness angle, 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 only exacerbate current levels of inflation. Conservative economists have made this argument. But so have several 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.”
Giving Help to People Who Need It
In full disclosure, I was initially tepid about Biden’s plan. My opposition was along the lines of fairness. I think this is a normal human feeling when one sees people playing by what seems to be different rules.
But even though I think loan forgiveness is unfair to some degree, I still think it is the right thing to do.
It’s the right thing to do because of who is getting the relief.
The typical student loan borrower is not a recent medical or law school graduate owing six figures in loans, but stands to make millions over a lifetime. Instead, according to the Center for American Progress, most holders of student loans owe less than $10,000 and did not graduate college. 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 Department of Education, as quoted from a White House fact sheet, estimates that about 90% of relief will go to individuals making less than $75,000 a year.
This understanding was fundamental to changing my view on things. 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 student loan borrowers during the Great Recession of 2007 - 2009. The 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 people of color.
The above studies used survey data to come to their conclusions. But nothing replaces hearing about the experiences of people in their own words. A study published this year interviewed 105 young people carrying student loan debt. The young people 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[ed] 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 now, 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 and so loans were a necessity. After graduating college, 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 downpayment on a home or investing in a business opportunity 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 many years.
I can only imagine what is 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 their wages rise. But for most other professions, they have stagnated or declined. It’s hard out there.
And so, while I am sympathetic with people who feel that loan forgiveness is unfair, this is bigger than one’s personal feelings. Loan forgiveness is the moral thing to do. Removing the burden of student loan debt off the backs of low and moderate-income people will allow them to lead fuller, more meaningful lives.