[This isn’t full debt cancellation, but it will help a lot of
people, especially those who got the rawest deal. That includes
millions who have debt but no degree and those who took loans to pay
for degrees in trades like cosmetology and mechanics. ]
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NOT THE WIN WE WANTED, BUT A WIN NONETHELESS  
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Tressie McMillan Cottom
August 26, 2022
New York Times
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_ This isn’t full debt cancellation, but it will help a lot of
people, especially those who got the rawest deal. That includes
millions who have debt but no degree and those who took loans to pay
for degrees in trades like cosmetology and mechanics. _

, Damon Winter/The New York Times

 

The Biden administration has finally delivered on its long anticipated
student loan cancellation plans. The timing is critical: Midterm
elections are around the corner. Just a few weeks ago, the consensus
was that the Democratic Party was in trouble. But a series of
policy wins
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changed that narrative.

President Biden’s executive order on student loans is another win.

The top-line debt cancellation numbers do not sound impressive at
first: Ten thousand dollars will be forgiven for borrowers who earn
less than $125,000 or households earning less than $250,000. But the
policy has many layers. Taken together, it is a meaningful response
that mostly gets the diagnosis for how we got here right.

The Student Loan Law Initiative at the University of California,
Irvine School of Law and the Higher Education, Race and the Economy
Lab analyzed Biden’s executive order. They estimate that around 41
million debt holders will be eligible for some form of student loan
forgiveness, and that 25 million of those people will be eligible for
up to $20,000 in student loan forgiveness. Twenty million people,
including 3.8 million Black borrowers, could have their entire debts
canceled.

That isn’t full debt cancellation, but it will help a lot of people.
And the people it will help most are those who got the rawest deal.
That includes the millions of people who have debt but no degree —
nearly one-third of all borrowers. It also includes people who took on
student loans to pay for occupational degrees in blue-collar trades
like cosmetology and mechanics. Republicans are criticizing the policy
as giving handouts to the rich. They really want to implant the image
of a Harvard liberal arts graduate getting a free pass. But
cancellation is squarely targeted at the debt that working-class
students have accrued to hold pretty working-class jobs. The G.O.P.
will have a hard time telling those voters that this relief has not
improved their lives.

Other parts of the policy address underlying problems that created the
student loan boondoggle. Millions of people have paid their loans as
promised, following the official guidance of student loan servicers,
only to owe more than when they started with because of interest. This
negative amortization made it nearly impossible for some borrowers to
pay off their loans. And documented problems with public student loan
forgiveness programs meant that this burden often fell heaviest on
people with public interest careers, such as public defenders,
teachers and social workers. Now, income-driven repayments for
undergraduate loans will be capped at 5 percent of the borrower’s
take-home income. If you don’t have a lot of discretionary income,
that payment could be low — too low to cover interest on the loan.
Previously, this gap added up and increased the total amount owed.
Under new guidelines, the government will cover that interest as long
as the borrower is making payments. This does not get rid of the
scourge of negative amortization for all borrowers. But it does two
things: It effectively ends it for public interest workers. That lives
up to the promise of public service loan forgiveness, which is that it
becomes possible for people to do the work that society desperately
needs done without living in eternal debt peonage
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It also gives us a model for expanding that option for more borrowers
in the future. It is a safe bet that student debt cancellation
organizers are paying attention to that possibility.

The other bit of good news in the details of this proposal is targeted
relief for borrowers who were also Pell grant recipients. Pell grants
are a bright spot in our higher education financing ecosystem. They
help reduce the impact of one of the biggest drivers of inequality in
higher education access, affordability and returns: family income. As
tuition costs have dramatically increased, Pell has struggled to keep
up. Earlier this year, the Biden administration increased the maximum
amount of money attached to Pell grants. When you add that increase to
this proposal’s targeted cancellation for anyone who currently or at
any time in their undergraduate career qualified for Pell, it is a big
help for poor families.

Class — income and wealth — is how the Biden administration
prefers to deal with racial inequalities that stem from student loan
debt. Black borrowers
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from poorer families who have less income and less wealth to pay their
tuition. Those borrowers take on more student loan debt and their
families take on more family loans, like the PLUS program, to help
them pay for college. This is acute at lower levels of student loan
debt, such as the millions of borrowers that will be included in the
$10,000 and $20,000 forgiveness amounts. But these racial differences
in debt also show up at the top of distributions. Black borrowers take
on a lot of debt to be competitive in the labor market, from
associate’s degrees to graduate programs. That debt then makes it
hard for those borrowers to help their children pay for college.
It’s a vicious cycle. This program won’t help those high-earning
but negative wealth borrowers much.

It also won’t reduce the cost of college, but it was not designed
to. The executive branch does not have a lot of tools it can use to
address that. What it does have is the big stick of federal student
loan programs. It has used that stick in the past to make college more
accessible, but at a cost that became too much for many borrowers to
bear. The fight for affordability is primarily a state issue. Like
abortion rights, public education and public health initiatives, the
real battle for the future of higher education will happen at the
state level.

As for the federal fight, organizers will ask for more cancellations.
I believe that they should. And while this recent policy is not total
debt cancellation, it is far from where the Biden administration
started. It accounts for research on how the student loan crisis
became such a crisis in the first place. The administration has
reformed target areas where abuses are the most egregious: bad student
loan servicing companies and predatory for-profit colleges. The latest
analysis from Goldman Sachs projects that inflationary pressures will
be mild, at most. Restarting payments offsets a lot of the modeled
risk. And this relief comes for poor and working-class families just
as they start tuning in to midterm races. It is hard to argue that
this is anything but good news for millions of people — and for the
Democrats.

Sometimes policy
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people, and sometimes those people remember it when it is time to
vote.

 

_Tressie McMillan Cottom is a sociologist, professor and cultural
critic known for her incisive essays on social problems. She is the
author of two books: “Lower Ed: The Troubling Rise of For-Profit
Colleges in the New Economy” and “Thick: And Other Essays.” Her
second book was a 2019 finalist for the National Book Award for
nonfiction._

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* Student Debt
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* Biden Administration
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