On Wednesday, President Joe Biden announced a student loan program that would forgive $10,000 of debt for borrowers earning less than $125,000 and an additional $10,000 for those who received Pell Grants. Many borrowers are celebrating the release of debt that, for some, has kept them from buying homes and putting aside their savings. Professor Emeritus of Sociology and Public Policy Steven Brint, author of “Two Cheers for Higher Education – Why American Universities Are Stronger than Ever And How to Meet the Challenges They Face”, represents here concerns that the cancellation of student loans is unfair.
For the September 1 issue of UCR Life, UCR financial aid experts will discuss the details of the Biden administration’s decision.
Q: Is forgiveness unfair? What about people who didn’t go to college because they couldn’t afford it? What about those who have repaid their loans?
In my view, debt cancellation is unfair. About two-thirds of high school graduates begin a postsecondary program and about one-third eventually complete a four-year degree. Two-thirds of people who never start a program or never complete a four-year degree are usually – not always, but usually – the ones in financial difficulty.
Wouldn’t government aid be better spent on them?
At the same time, I am sympathetic to students whose majors or institutions do not provide effective ways to repay loans. Some population groups still suffer from discrimination in the labor market. So speaking purely in economic terms, if you’re a minority male majoring in child development or social work at an open-entry institution, you may not be better off with a degree college than you would go straight to work after high school. .
President Biden’s plan targets loan forgiveness toward groups whose incomes remained low after college and those who took out Pell Grants. It’s better than blanket relief for anyone with student loan debt.
But even so, there are reasons to be concerned about this policy. The administration has failed to demonstrate that such expenditures are justified at a time when the country is still experiencing high levels of inflation. And we should also consider the wide range of government programs that already allow borrowers to delay repayment or condition their repayments on their income so that repayments are low when their income is low.
The politics of politics is also debatable. In my view, this announcement is being made for transparent political purposes – to energize midterm voting among young and highly educated people in debt. This may be in the interest of Democrats who increasingly rely on young and educated voters. However, there may be an equal or even stronger backlash among working-class people who vote Republican and wonder why college graduates who are already relatively privileged get this added advantage. One would expect some opposition also among those who have worked hard to pay off their student loan debt and wonder why repayment expectations have suddenly changed.
Q: A statement heard recently during a panel on student loans at a conference on higher education: “If we cancel this debt today, people will borrow tomorrow and we will be back where we are. ” Do you agree?
Borrowing has actually declined somewhat in recent years, largely because the rampant borrowing promoted by for-profit higher education institutions has been exposed as predatory. But the basic point holds; without tuition audits or other remedies to the cost problem, students will either stop trying to get to college or have to borrow more over time.
Q: Some claim that student loan debt is the symptom, not the problem, the problem being the cost of higher education.
I partially agree with this argument. The costs of college studies have stabilized somewhat in recent years, but they remain high.
There are complex reasons for this. The increase in costs is largely due to the growth in administration. Most of this growth is necessary to meet increased regulatory burdens, new customer outreach efforts, new student service expectations, and other changing expectations about what colleges should be doing. Student demand is also a cost driver. Students love state-of-the-art dorms and recreation centers and colleges feel the need to provide them to stay competitive.
Colleges are very aware of the need to reduce costs and have tried a number of mechanisms to reduce them. But most of the savings are reinvested in the programs that the professors or the students want. It does not seem possible to control most of the causes of cost increases.
On the revenue side, states could start supporting public higher education at a higher level than they currently do. This would reduce tuition fees. And it’s good to see California take over this year. But most states tend to cut spending on higher education during recessions and never return it to previous levels. They have many other responsibilities, and they tend to cut back on higher education when appropriate, as colleges and universities can also rely on household contributions in the form of tuition and fees.
The other option is to consider other financial aid reforms, such as doubling the amount of Pell grants or making all loan repayments contingent on income. In my writings and speeches, I have championed these two financial aid reforms. The Pell grants, which target students most in need of financial aid, have not tracked costs. Several countries, including England, have income-contingent loan repayment, and it wouldn’t take much effort to institute it comprehensively in the United States.
Q: Proponents of student loan forgiveness point to government bailouts in the auto, banking and airline sectors, wondering why individual bailouts clash when industry bailouts have gone through the Congress. Do you see a point in this statement?
The difference is that these industries employ tens of thousands of people so bankruptcies affect a very large number of people who had no responsibility for the problems encountered by the industry.