Angel Orth, 33, pays $ 500 a month for her student loans for the undergraduate and graduate degrees she received from a public university in the United States almost eight years ago. But the Florida real estate agent barely saw his $ 70,000 balance drop due to ever-increasing interest.
“I have paid off about $ 48,000, but the balance seems to be stuck,” Al Jazeera Orth, a master’s in visual rehabilitation therapy, told Al Jazeera Orth. “I would like my $ 48,000 to be credited to my capital. Eliminating the interest would be huge.
For now, Orth’s student loan payments are on hold. The passage of the $ 2.2 trillion coronavirus aid, relief and economic security law in April temporarily froze federal student loan payments and accrued interest, a measure that has since been extended by the Trump administration until January 31, 2021.
But payments and interest on private student loans have not been suspended, and federal student loan bills from borrowers will eventually fall due when forbearance ends.
For many student loan holders, this temporary pause in collection activity is simply not enough – which is why the movement to write off student loan debt is intensifying, driven by the impending inauguration of the president. Democrat-elect Joe Biden and the perspective he might take. executive action on the issue.
A open letter (PDF) signed by 238 advocacy organizations, called on Biden to cancel federal student debt, and U.S. Senate Minority Leader Chuck Schumer publicly called on the president-elect to use his executive powers to cancel up $ 50,000 in federal student debt for individual borrowers.
This is a critical relief for some. People are crushed by student loan debt.
Biden has not indicated what he will do to deal with the crisis when he takes office on January 20, but student debt reform was a central part of his presidential campaign.
As part of his coronavirus relief plan, Biden proposed to immediately write off a minimum of $ 10,000 in federal student loan debt for borrowers. Longer term, he proposed forgiving federal undergraduate student debt tied to public college tuition fees for people earning up to $ 125,000 a year.
Advocates said such action would go a long way in helping struggling Americans during and after the COVID-19 crisis. It could also inject much-needed liquidity into the struggling, consumer-driven US economy.
Advocates have argued that since consumer spending accounts for about two-thirds of U.S. economic growth, money that doesn’t go toward paying off a student loan could instead be spent on things like buying of a home or the development of the retail sector.
“Now is the time for a big and bold solution to student debt,” said Cody Hounanian, program director for Student Debt Crisis, a nonprofit pushing for loan reform. “We believe that canceling student debt can stimulate the economy, create a more level playing field on the racial level and clean the slate of future reforms,” he told Al Jazeera.
1.7 trillion dollar problem
It’s a big slate to clean. Collectively, Americans owe $ 1.7 trillion in student loan debt, says Federal Reserve data. And that’s not surprising given the high cost of higher education in America.
The average annual tuition fee for undergraduates at private universities is $ 29,500 – more than three times the tuition at public universities – and 89% of U.S. students use government loans, scholarships, or both to help pay for their undergraduate degrees, according to a OECD Report 2019 (PDF).
But many students who sign on the dotted line later struggle to repay their loans for decades, which is why Orth believes student loan companies are preying on vulnerable and naive students.
“When I was 17, I remember receiving advice on student loans when loans seemed manageable. The example they gave was that I would pay around $ 50 per month. They didn’t explain the interest at all, ”Orth said.
The problem is worse for students of color. Hounanian points out research by the Brookings Institution which found that black graduates of undergraduate programs fail to repay their student loans at five times the rate of white students.
Default rates are also highest among those who borrow relatively small amounts, Brookings found, which is why advocates have said any amount of debt forgiveness could go very far.
“It’s a critical relief for some. People are crushed by student loan debt, ”Hounanian said.
Why should I pay taxes to forgive the daily student coffee groceries and spring break when we have worked hard to pay for our own children’s education? Am I going to write off my mortgage or my car?
And while the concept of student loan cancellation has been championed by progressives, the idea is gaining traction with Americans of all political stripes.
A 2019 survey by Quinnipiac University found that 57 percent of voters supported the federal government by forgiving $ 50,000 in student loan debt for people with household income below $ 250,000.
But the idea of canceling student debt also has its detractors. Some borrowers who have paid off their student loans want to forgive the flies of others when faced with their personal liability.
Amy Hertel is a mother of four living outside of Madison, Wisconsin. Now in her 50s, the business owner has helped her sons pay for their undergraduate degrees so they can graduate debt-free.
“Why should I pay taxes to forgive the daily student coffee groceries and spring break when we have worked hard to pay for our own children’s education?” Hertel told Al Jazeera. “Am I going to write off my mortgage or my car?” “
Research also shows that debt cancellation would benefit people who took larger loans, such as for higher degrees, more than those who took smaller ones, which could increase inequality.
I have repaid about $ 48,000, but the balance appears to be frozen. I would like my $ 48,000 to be credited to my capital. Eliminating the interest would be huge.
For example, a study (PDF) by University of Chicago researchers published this month found that “forgiveness would benefit both the top decile and the bottom three deciles combined.”
Their study also found that black and Latino students would benefit less from general forgiveness programs and that borrowers who took out loans for graduate degrees can now work in higher paying professions with enough income to comfortably cover repayments. , although their first loans were larger.
This is why some experts believe that student loan policies should focus on reforming the repayment system rather than canceling debt.
“The current system is a disaster and an embarrassment,” Douglas Holtz-Eakin, former director of the Congressional Budget Office and chairman of the American Action Forum, a center-right think tank, told Al Jazeera. But he believed that canceling the debt would not solve his structural problems.
Instead, Holtz-Eakins hoped the Biden administration would reform income-driven repayment programs and create more opportunities for grants, which don’t need to be repaid, rather than loans.
“Right now there are few checks and balances for loan seekers,” he said. “More grants could create incentive programs where money depends on academic performance. With loans, there is no incentive, so people end up with loans that they cannot pay off for a degree that they may not have been able to complete.