In an extraordinary move, President Biden recently announced that Americans earning less than $125,000 annually ($250,000 for households) would receive up to $10,000 in federal student loan forgiveness, with Pell Grant recipients having $20,000 forgiven. Additionally, the administration has capped income-driven repayment at 5% of net income, and extended the COVID initiated forbearance until the end of January, 2023. These actions follow Biden’s, and the Democratic Party’s at large, campaign promises to address large portions of the nation’s $1.5 trillion of student loan debt.
The Democratic party currently holds the presidency, along with both houses of congress, giving them the ability to enact any legislation they choose. The result is that Biden, using executive power to enact such a divisive policy, has led many to rightly question whether he has misused the power of his office to protect political allies and buy votes ahead of the midterm elections where Democrats are largely expected to lose their majority. There are many pros and cons of this student loan forgiveness, but removing the decision from Congress prevents the debate from happening among the American public, where it belongs. Thus, Congress must act.
While many conservatives oppose student loan forgiveness, there are some compelling moral, and legal arguments that may support the policy relief. One argument is that, since the 1970’s, acting as state agents, K-12 schools have aggressively promoted the idea that college graduation, specifically at residential four-year institutions, is vital to both economic and cultural success in the United States. This message has been reinforced, and the U.S. Department of Education enabled the trend with the easy availability of loans without consideration for the needs of the labor market and without concern for controlling university costs.
It’s also tempting to accept the conservative argument that adults should be wholly responsible for their financial decisions, but it is important to remember that the vast majority of borrowers were minors when they made those financial decisions. And while ideally, parents will act in the best financial interests of their children, it is well established in American law that third party actors can have undue influence on both adults and children, an idea codified with the Master Settlement Agreement against Big Tobacco, and multiple rulings against financial institutions accused of predatory lending.
It’s also true that for two generations, well-meaning school officials unfairly pressured Black students to pursue an education at out-of-state Historically Black Colleges and Universities when, in most cases, those students could have paid in-state tuition at higher ranked state schools. For many Black students, this practice resulted in increased student debt, the need for more working hours, and increased the physical and emotional distance from supportive family members. All of these additional pressures likely contribute to the unfortunate racial disparities we continue to see in college graduation rates, student loan defaults, credit scores, and delays in entering the workforce.
While all of these arguments are compelling, and possibly legally defensible, none of them address the deep unfairness that many feel when watching across-the-board loan forgiveness. This sense of unfairness comes from multiple places.
The first is setting an arbitrary $125,000 annual salary cap on his $10,000 loan waiver. This is problematic because federally reported income does not account for location based cost-of-living disparities. In Indianapolis, a $125,000 salary will buy a comfortable middle-class lifestyle, but in most parts of Chicago, just three driving hours away, it barely pays the mortgage. Additionally, income level ignores other financial factors like supporting aging parents, or raising grandkids.
The other point of unfairness, and probably the most relevant, is that arbitrary loan forgiveness does not “repay” the time and money that so many have already invested, and repaid. What are we to tell the millions of people that worked their way through college, paid off their debts, or those that deferred the privileges of homeownership, or starting a family in exchange for higher education?
And maybe, most importantly, how do we make whole the service members that gambled their freedom, health, and in many cases, gave their lives in exchange for the G.I. Bill to pay for an education when so many of their peers will receive it for free? This is why it’s imperative that Congress act, stopping one man continuing to pick winners and losers, when so many have paid in so many ways.