By Candace Milner, J.D.
Americans are being forced to choose between meeting their basic needs and paying back debt. Debt accrued from medical bills, predatory lending practices, and student loans are crippling American families while lining the pockets of greedy CEOs and billionaires. During his campaign, President Biden made a promise to bring Americans economic relief through widespread student debt cancellation. He followed through, though his impressive attempt to cancel debt became temporary when it was struck down by the Supreme Court in a disappointing decision. Still, the Biden administration is working to find ways to deliver on their promise. Through a focus on discharging debt accrued from fraudulent for-profit schools, expanding income-driven repayment plans, and extending cancellation to borrowers who have been in repayment for decades, the administration has provided relief to millions. Despite the many sources supporting the boost that student debt cancellation will give communities and families, many still have questions about the merit and specifics of cancellation. Here are some answers to those questions.
Why do we need student loan debt cancellation?
Student loan debt cancellation is essential to the financial wellness of millions of Americans. With student debt cancellations, people will be able to pay off other debts, purchase homes, and invest in their communities, futures, and the American economy. College is grossly unaffordable, and loans are a predatory ‘fix’ to that larger problem. By canceling student loans, we can double down on our commitment to education while moving forward to a path where everyone has affordable access to college that meets their needs.
Wouldn’t you be able to pay back your student loan debt if you went to college?
While there was a time when if you earned a four-year degree, you were likely to be able to work your way through college or pay it off while still reaching other financial goals like home ownership, this is unfortunately no longer the case. Inflation has risen at a rate that salaries have not caught up to. This means many jobs that require a four-year degree do not come with a salary that can pay for said degree. Moreover, students are diverse, as are their backgrounds and economic needs. Depending on family size, status, and other life events, relatively quick repayment just may not be feasible.
Is student loan debt cancellation real?
Yes! We have systems in place that cancel loans for people based on careers or other circumstances. This cancelation is critical to their livelihood and all but a drop in the bucket financially. Cancellation can and should be a widespread reality for all borrowers.
Is student loan debt cancellation expensive?
Not as expensive as the estimated $197 billion the student loan program has cost the government. Critics of cancellation claim that taxpayers will be bailing out borrowers of their debt. This statement is misleading at best. First, borrowers ARE taxpayers. In addition, a GAO study found that direct student loan collection costs the government $197 billion per year. The same program only brings in $114 billion, leaving a small difference in cost to the government. So, in totality, cancellation will save taxpayers and the government money while boosting the economy and allowing families to keep more of their hard-earned income to meet their needs.
Is student loan debt cancellation happening?
Yes. It has happened to borrowers who were scammed by the schools they attended, borrowers on permanent disability, and borrowers who have made 20 years or more of payments. Cancellation can and should be extended to all borrowers. There is currently a negotiated rulemaking for Higher Education 2023-2024 process underway to expand cancellation to more borrowers and deliver more Americans economic relief through student debt cancellation.
What is the negotiated rulemaking process?
Typically, executive agencies like the Department of Education develop proposed rules without public input and publish them for comment by the public before finalizing said rules. In negotiated rulemaking, agencies convene a diverse group of stakeholders that works with the agency to develop the proposed rule. These meetings are facilitated by a neutral third party and are used to quicken the process by creating consensus before the rule is proposed. More information on negotiated rulemaking can be found on the Department of Education website.
Is student loan debt cancellation a good idea?
Student loan debt cancellation is both good and necessary! The burden of student debt does not exist in a vacuum. Debt has multigenerational consequences and impacts the mental health and retirement plans of borrowers. Cancellation followed by intentional investments to make higher education affordable is good for the overall education and wealth of the nation. The housing market, annual GDP, job creation, and entrepreneurship could all benefit from student debt cancellation. Cancellation creates pathways for borrowers to make more intentional investments in communities and will enable our economy to thrive. Not only is cancellation a great idea, we all suffer if we continue to let millions of Americans suffocate under the weight of student loan debt.