On June 23rd, 2022, the Biden Administration signed off on the latest round of student loan forgiveness. With this latest ruling, almost 150,000 borrowers have now had their loans partially or fully forgiven. The student loan forgiveness goal, initially set in 2021, aimed to give student loan forgiveness to 500,000 borrowers currently enrolled in the Public Student Loan Forgiveness Program, otherwise known as PSLF. This means the U.S Department of Education has yet to meet the proposed numbers, but it’s still progress.
The PSLF program initially started as a way to pay for those in the public sector to pay off their loans while serving their community. Some say problems have riddled the program from the start. Many found themselves originally ineligible due to requirements that many did not understand. Some didn’t qualify after years of already making payments, while others found themselves lost in a circle of bureaucracy trying to get answers. Under the PSLF program, only those holding federal loans are eligible for forgiveness, leaving millions out who only received private loans.
Many Democrats have called on President Biden to extend student loan forgiveness to everyone currently in student loan debt via executive order. Some wish to see $50,000 forgiven per borrower, others $10,000, and some all of it. At this time, there hasn’t been any decision made, but that doesn’t mean some aren’t worried about future implications.
Do our hesitations to forgive student loans en-masse outweigh the burden that of those that could benefit, or are we leaving those that could help behind?
“Will we afford my medication for my chronic health issues?”
Meet Sarah Potter, a podcast host, writer, and digital consultant. She will hopefully benefit from student loan forgiveness to the tune of $90,000 this coming December. Sarah is hopeful about what her life will look like if her student loan debt were wiped out. For one, she’ll be able to sleep at night instead of cry about how much debt she has. She’ll also be able to afford medication for her chronic health issues instead of worrying or making a tough decision between her meds or necessities for her children. Chronic health issues are expensive, and millions like Potter develop them later in life. You can have health insurance yet still struggle to pay for your meds and copays.
As a chronic asthmatic, I know firsthand. The medication that works for controlling my asthma is close to $500 a pop without health insurance. With it, it was still $75. The inhaler is just one of several different meds I need that all come with a hefty copay. Yes, you can use Good RX and generics, but many medications people need do not come with a generic option or coupon. Health insurance is better than it used to be for some, yet comes with a higher price tag for others.
When you take out student loans at the healthiest point in your life, you don’t imagine one-third of your future income being eaten up by medical costs that will prohibit you from paying back debt.
Like others, debt affects Sarah’s mental health. In this study, 53% of students with student loan debt had experienced depression. Even more shocking, 1 out of 15 people have considered suicide. Everyone is different, and for some, student loans seem like a hole they can’t climb out of for a job market that higher educators build up for no reason.
“The idea that forgiving student loans with a wide paintbrush will give us some sort of economic “stimulus” is a fallacy.”
Personal finance reporter Brent Holzhauer has concerns that aren’t moral or ethical, but economical. For years Holzhauer has studied the economy and fears that student loan forgiveness will not provide the economic stimulus our country currently needs in a post-Covid society.
“The average student loan borrower has roughly $35,000 in student loans isn’t that brutal. That’s a brand new car,” he states. “However, the issue is the interest, fees, and government mismanagement.”
Last year, College Board published its annual report on trends in tuition pricing and student aid. 54% of borrowers have less than $20,000. What’s even more interesting is that 10% of borrowers hold 45% of the total student loan debt in the country. Many with significant student debt go to prestigious schools or have higher-paying jobs such as a doctor or lawyer. Do you even need student loan forgiveness if you have a considerable income?
“I have a friend who has $2,500 in student debt. He could pay it off with a few clicks, no problem. He is only holding onto it because of the potential for forgiveness. Once forgiveness is off the table, he will simply pay it off in full. If there is one story like this, there has to be many more,” shares Holzhauer.
As a personal finance writer, I know a few people, not only online but in my day-to-day life as well that meet this criteria. Holzhauer firmly believes that making education affordable and creating policies that work is the way to stop this from happening.
It's also important to remember - if student loan debt is so toxic we have to forgive it, how come it's not toxic enough we have to stop lending it?
“How do you learn not to overspend if the world bails you out?”
With any government program, funding must be considered and made up elsewhere. Suppose President Biden was to cancel the proposed amount of $10,000 per person. In that case, our country could add an additional $230 billion dollars to our national debt. Just like any personal finance conundrum, there are two ways to make up any difference in your budget: cut spending or increase income. We all know it’s easier to increase revenue than cut spending, primarily since many government programs are not funded properly as it is. But increasing revenue would mean higher taxes. But higher taxes for who?
“Government spending is a huge factor in fueling inflation. And inflation is a brutal tax on the poor. So, what logical argument can you have to spend billions bailing out the rich (or soon-to-be rich college grads) while knowing that this is going to drastically boost the cost of living for the poor?” asks Kathy Kristof. Kristof is an award-winning journalist and founder of SideHustl. Kristof has worked with thousands in her lifetime to help them change their financial lives but feels a bailout such as this one will affect those who choose not to seek higher education just for this purpose.
“The oft-quoted statistic is that a college degree boosts your lifetime earnings by $1 million. So why should a guy who works a trade and never went to college pay higher taxes so that you can pay off your debt faster and, thus, more quickly leave him in the dust, economically speaking?” Even one percent added to your federal taxes makes a dent in your paycheck; with inflation, every penny counts. We always pay for our mistakes, yet do we pay for others while we’re at it?
Note: While the Social Security Administration estimates that those with a bachelor's degree earn $1 million more over their lifetimes compares to high school graduates, that statistic is about a decade old and very broad. More recent data and research have found that the median ROI of a bachelor's degree is $306,000.
“We need to talk about the cost of higher education and who has access.”
Financial counselor Jenny Mayer hustled her way through college. She worked various jobs to graduate with $10,000 she paid off. Despite paying off her loans, working with others led her to believe that while some student loan forgiveness would be great for many borrowers, she doesn’t think we should stop there.
“The fact that many borrowers owe more money now than at the time they graduated, even after making payments year after year, is horrifying,” states Mayer.
Historically marginalized groups have been more likely to experience predatory lending and targeting by for-profit colleges. There is already a wealth gap, which could mean that many would have a chance to catch up to others financially. “We need to talk about state programs that currently exist that have free or reduced tuition programs. We need to talk about financial literacy and predatory lending to 17 and 18-year-olds.”
Related: 100 Ways To Make Money In College
“It takes a village… until it’s student loan debt.”
At the end of the day, Potter is hopeful. She regularly speaks to her loan provider about her potential forgiveness and continues to monitor her finances just in case it doesn’t happen. Her provider is very clear that it’s new territory for everyone with no known outcome.
“We all come from this perspective of “it takes a village “but no one really wants to be a part of the greater village that is the global village or even just the national village,” says Potter wistfully. “It’s me, myself, and I. Enacting 100% student loan forgiveness for all will truly mean we are acting as a global village and taking care of one another.”
If we learn from it remains another story.
Once homeless in high school, Athena Valentine Lent is now a nationally published financial columnist for Slate Magazine. She’s also a passionate financial educator who received the Plutus Award for Best Personal Finance Resource for Underserved Communities for her work in the Latino community. When not working, she can be found reading a Stephen King novel with her main man, a polydactyl cat named Harrison George.
Editor: Robert Farrington