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Reviews | Canceling student loans is worth it, but what we need is major reform

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The reaction to the news that the White House is about to write off $10,000 in federal debt for the vast majority of student borrowers is a reminder that the problem is a problem from hell. Many activists, demanding debt forgiveness of $50,000 or more, with no income limit, are unlikely to be entirely satisfied. Others are outraged by what they see as a gross misuse of public funds, a gift to people who don’t need help.

They are both wrong. It’s an extraordinary move, and one that will almost certainly benefit Democrats in the short term. But forgiveness is not enough, and the amount in question is not the issue. This is a bigger problem: if the cancellation is not accompanied by greater systemic reforms, we will almost certainly come to this pass again.

Make no mistake: the country’s $1.7 trillion student loan debt is an economic albatross.

Seven in 10 recent graduates have borrowed money to help them further their education, up from half 30 years ago. People who attend higher education will incur even more debt, sometimes in the six figures. Nor are they all high-flying business lawyers. Prospective vet graduates owe an average of more than $180,000.

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The reason for this growing mountain of debt is not mysterious. Federal and state support for students who want to pursue higher education has declined in recent decades, even as the cost of attendance has skyrocketed. (It plummeted again during the pandemic.) People have been repeatedly told that their best chance for progress is to seek higher education, whether in academia or by upgrading or retraining job skills. As a result, teenagers who are not even old enough to legally buy alcoholic beverages are now incurring life-changing debts.

Decades of policy and regulatory failures have deepened the crisis. Dodgy for-profit colleges viewed desperate Americans as easy financial choices — leaving their debt-ridden former students with few improved career prospects. Income-based repayment plans have proven to be both difficult to manage and useless in truly eliminating debt. After 12 years, many student debtors who use them will owe more than they originally borrowed. At the same time, we made student debt more onerous with legislation that made it virtually impossible to excise it in bankruptcy court — thanks to President Biden, among others.

Matt Bay

counterpointIf Biden wipes out college debt, why work hard and play by the rules?

All of this is why, contrary to the assertions of the assholes in Washington, polls repeatedly find at least some pardons have majority support, especially when combined with income caps. A study released Friday by Data for Progress and the Student Borrower Protection Center found that people who have attended college are less likely to support forgiveness than those who have not. This does not surprise me. Many of the borrowers and their families I’ve spoken to over the years were first-generation college students and couldn’t afford to go to college unless they borrowed money.

And $10,000 in debt forgiveness can make a substantial, life-changing difference. A third of all borrowers owe less than $10,000 and half owe less than $20,000. Many borrowers who default on their loans owe even less, less than $10,000 – and in some cases these are people who never graduated, leaving them worse off than if they didn’t. never went to college.

All of this also explains why debt cancellation is a likely political winner. for Democrats in 2022. But forgiveness just kicks the bucket down the road. It doesn’t solve the bigger issues: why college has become so expensive and how we as a nation should help people pay the bills.

This is where we need Congress to step in. Lowering the interest rate on student loans, which Sen. Elizabeth Warren (D-Mass.) has proposed in the past, would reduce the number of people making their monthly payments, only to find themselves further and further behind. Allowing financially overwhelmed borrowers to seek relief from bankruptcy court unless in “extreme hardship” would also help. (There is currently bipartisan legislation in the Senate that would allow this after 10 years.)

It is Congress that should vote to increase the funds low-income students can receive if they qualify for Pell Grants. And, of course, it’s Congress that should authorize the funds to, as Biden promised in his campaign, make community college free.

Instead of criticizing — or, like Republicans, proposing legislation to stop the pardon in its tracks — Congress might want to get on with it. Our economy would almost certainly benefit. Student debt is the responsibility of the individual borrower, but that makes us all poorer. This has an impact on career choices, decisions on the quality of school attended, whether or not to start a small business, even the decision to have a child and, therefore, people’s contribution to life. global economy. But a single debt jubilee is not enough. We need to put this problem behind us once and for all.

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