Biden administration faces gigantic college debt crisis and there is no perfect solution
Last month, 238 organizations signed a letter to President-elect Joe Biden and Vice President-elect Kamala Harris begging them to get rid of the huge tab of federal debt on college loans.
Ideally, the erasure would take place on the “first day” of the new administration, although this is a tough sell.
“Before the start of the COVID-19 public health crisis, student debt was already a drag on the national economy, weighing most heavily on black and Latin communities, as well as women,” the groups wrote. representing civil rights activists, consumers, workers, students, and more.
The organizations called for “bold and immediate action” to cancel existing debt, not only for student borrowers, but also for less-noticed borrowing parents who have taken out “Parent PLUS” loans to help their children move on. ‘university.
Today, many of these parents are grappling with new college debt – having paid off their own student loans.
Tackling the college loan crisis for some 44 million borrowers will not be easy for the new Biden administration, given the scale of the problem. Not all congressional lawmakers, and those watching the matter closely, support eliminating student and parent debt.
This fall, the Federal Reserve released data showing student loan debt alone at $ 1.676 trillion, down from around $ 1.3 trillion in 2015.
Around this time, the Florida Phoenix found that even influential Florida politicians grapple with massive student loan debts – over $ 200,000 in two cases and several others with university loan obligations over $ 100,000.
Parents who borrowed
Regarding Parent PLUS loans, the US Department of Education recently provided public data – for the first time – showing just “how much parents borrow to help their children pay for school at each institution,” according to a press release from USDE.
Many of the Parent PLUS numbers are astounding, according to new data from the department for public and private colleges.
At Ringling College of Art and Design in Sarasota, for example, the median total debt after graduation is $ 99,800 for Parent PLUS loans. That would mean a monthly loan payment of $ 1,073, based on a standard 10-year payment plan, USDE data shows.
(The data point is described as “the cumulative median PLUS loan debt of parents who borrowed on behalf of a graduate undergraduate student. This figure includes only Parent PLUS loans from the graduating school. ; it excludes Parent PLUS loans from school-attended. ”)
At Embry-Riddle-Daytona Beach Aeronautical University, the median Parent Plus loan figure is $ 74,641. The median at Eckerd College in St. Petersburg is $ 50,981, according to the data.
The list goes on, reflecting the enormity of the college debt burden.
A Ringling spokesperson made a statement saying:
“Parents generally choose the (federal) PLUS loan program over private loans because of their much better repayment terms and lower interest rates. The PLUS application process is also less complicated than that of private loans. Many parents choose to borrow amounts beyond tuition and accommodation and board to cover non-direct tuition costs, such as books, supplies, transportation …
“The Ringling College of Art and Design provides in-depth guidance to students and parents regarding the PLUS program, both upon acceptance and as it approaches graduation …
“We have seen that Ringling College graduates, given their income potential, often help their low-income parents pay off their loans. The college has identified scholarships, which help ease families’ financial obligations, as its most pressing fundraising need.
You can search for college debt information on USDE “College dashboardIn the “Financial Aid and Debt” category, which presents data on federal student loans and Parent PLUS loans.
In the presidential election, Biden’s campaign approved the elimination of at least $ 10,000 in university debt per person and the elimination of undergraduate student debt for those earning less than $ 125,000 and attending colleges and public or historically black universities, depending on the HuffPost.
And in the fall, U.S. Senate Minority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren introduced a resolution calling for the cancellation of $ 50,000 in federal student loans for borrowers, using the action of the ‘executive. The letter from the 238 organizations noted that the resolution “empowers the [U.S.] The Secretary of Education will administratively cancel the federal student debt. “
But most recently, Biden told reporters he likely won’t pursue the avenue taken by Schumer and Warren to wipe out billions of dollars in student loan debt.
The Washington Post reported that Biden said, “Arguably the president may have the executive power to write off up to $ 50,000 in student debt. … Well, I think that’s pretty questionable. I’m not sure of it. I’m unlikely to do that.
What do others think?
While many advocates support eliminating college loan debt, others do not.
A Los Angeles Times editorial stated:
“This has led some advocates to call for debt cancellation, with President-elect Joe Biden pledging during his campaign to forgive up to $ 10,000 for each borrower. More Liberal Democrats are fighting for up to $ 50,000, and the Progressive Wing says all existing debt should be canceled.
“Such a bailout, however, would be extremely costly; to forgive up to $ 50,000 would cost around $ 1 trillion. A disproportionate amount of this relief would go to the highest paid employees, who are more likely to attend university, especially private university. And the money would only help this crop of debtors. Future students would always be in the hot seat.
“There are many ways to help borrowers, but general forgiveness would be the least fair and the least profitable. Instead, the government should help graduates most in need, those who lost their income during the pandemic, and those who took steps to keep their debt low by attending public colleges and working through their university years.
Barbara Mistick is president of the National Association of Independent Colleges and Universities and spoke with the Florida Phoenix earlier this month about Parent PLUS loans and other issues.
She said part of the problem with student and parent debt was federal aid. “I think it’s more about the fact that student aid – federal aid – hasn’t really increased,” Mistick said. “If you look at the Pell Grants [for low-income students], they covered almost three quarters of the participation costs. Pell has not kept pace with inflation. “
Doubling the Pell grant could help students and parents cover tuition fees, which would reduce college debt, Mistick said.
She added that the federal government could extend eligibility for Pell Grants to the middle class, which would reduce borrowing for student and parent loans.
Overall, “This is just an extremely complex area of federal politics,” Mistick said. “There is no such thing as a perfect solution.”