By Owen Daugherty, NASFAA Staff Reporter
As the coronavirus pandemic wanes and borrowers anticipate the return of student loan payments after more than a year, the question of whether widespread student loan forgiveness will occur still lingers.
The Brookings Institution aimed to tackle that question Monday with an event featuring a panel of experts that also addressed the disproportionate impact of growing student loan debt on lower income communities and borrowers of color.
Before the start of the panel discussion, Senate Majority Leader Chuck Schumer (D-N.Y.), a vocal and staunch proponent of student loan debt forgiveness, delivered a keynote address in which he reiterated the call for President Joe Biden to use his executive authority to cancel $50,000 in federal student loans “with the flick of a pen.”
“There's never been a better time to take action,” he said. “For generations, higher education has been a ladder up into the middle class, especially for Black, Latino and Asian Americans. But for too many today, student debt has become the anchor weighing them down, making it harder to start a family, buy a home and live with financial independence.”
He said that it is imperative to move forward with widespread student debt forgiveness with Biden in the White House and Democrats holding majorities in both chambers of Congress, also pointing to recent legislation that would ensure debt forgiveness between now and 2025 would be tax-free for borrowers.
While each panelist acknowledged that growing student loan debt is a problem and the current lending program and rising cost of higher education is unsustainable, there was debate over whether widespread forgiveness is the best targeted solution to the problem.
Beth Akers, a resident scholar at the American Enterprise Institute (AEI), said that more borrowers holding student loan debt is not necessarily a bad thing, noting that it's an indication of more people investing in their education. However, she also identified the problems in student loan lending that need to be fixed, ultimately arguing that student loan forgiveness is not the most efficient or targeted mechanism to address the racial wealth gap or provide an equitable solution for borrowers of color.
“This conversation is combining some of the more systemic problems in our economy,” she said. “I'm concerned that we're using student debt as a mechanism to solve some of the deeper issues that we face.”
Braxton Brewington, press secretary for the Debt Collective, said too often the conversation surrounding debt forgiveness centers on data and not the experience of individual borrowers.
“Student debtors are not this old image that we have of affluent white doctors who have these large sums of debt and they're rich, and if we cancel that debt, it'll just give them more money,” he said, pushing back on claims that debt forgiveness is a regressive policy. “Student debtors are not being able to start families, they're not being able to buy homes, folks are living in their cars.”
Further, he agreed with Akers' assertion that borrower protection measures — such as income-driven repayment (ID) plans and the Public Service Loan Forgiveness (PSLF) program — need to be fixed, but cautioned against looking at those policies as a solution to the problem.
In attempting to explain the underlying causes of the mounting student debt, Marshall Steinbaum, an assistant professor of economics at the University of Utah and a senior in higher education finance at the Jain Family Institute, pointed to decades of underfunding of public institutions, leading more and more borrowers to take out larger sums of student loans.
“The public higher education system has been defunded in such a way that institutions that are minority-serving have suffered the worst,” Steinbaum said. “At the same time, more and more people go to college and get higher degrees in order to get a job and that means more diverse people going to college, people who are less able to rely on their families to support themselves.”
The conversation shifted to what is an appropriate amount of student loan debt cancellation, with Biden initially pledging to forgive at least $10,000 for each borrower, but Schumer and Sen. Elizabeth Warren (D-Mass.) pushing for at least $50,000 in debt forgiveness.
“We make this false equivalency like $1 worth of cancellation is then $1 that comes from the taxpayer, when we know that that's not true,” Brewington said, arguing for cancelling all student loan debt, not just an arbitrary figure. “Mass cancellation would be an economic stimulus to everyone whether you have student debt or not.”
Akers said a more nuanced solution is necessary as opposed to massive amounts of forgiveness, pointing to allowing student loan debt to be discharged in bankruptcy as a needed reform.
Steinbaum then addressed a fundamental concern many have with debt forgiveness: if we forgive all the outstanding debt, what happens when the next set of borrowers takes out loans? Do they simply expect to not have to pay them back?
Steinbaum said it's important to remember that the debt forgiveness piece is paired with free tuition proposals that would transform the higher education system as we know it today.
“The federal government needs to shift the burden of paying for higher education off of individual student shoulders, but not in a way that basically denies access to higher education to a broad swath of the population,” he said.
Publication Date: 6/29/2021