Issues with Student Debt
Back in January, we wrote about the current issues with student debt. Things have changed, few for the better, and at this point, we feel a need to provide an update. So, a recap: The federal student loan portfolio currently totals more than $1.6 trillion, owed by about 43 million borrowers. Since March 2020, due to the pandemic, student loan payment has been on hold, interest-free. President Biden signed the Debt Ceiling Bill, which was approved by the House and Senate in early June. The compromise debt ceiling bill’s statutory language tied Biden’s hands from extending the pandemic student loan payment moratorium another time. The moratorium is set to end on August 29th, and payments will then resume for those 40 million borrowers.
Meanwhile, the Supreme Court ruled on a challenge to the Biden Administration’s signature Student Loan Forgiveness Plan. This challenge came from right-wing states contesting presidential authority for the initiative. Two generations, burdened with unprecedented higher education costs and resulting debt, woke up June 3rd to find that the court's conservative majority (6-3) derailed the Biden plan, denying relief to roughly 40 million Americans who stood to have up to $20,000 in student debt wiped away under the plan. Even other members of the Court seemed distressed by the reach of the ruling. Justice Elena Kagan, who authored the dissenting opinion, said, "In every respect, the Court today exceeds its proper, limited role in our nation's governance."
Recognizing the inevitable, the Biden administration is ready and will try again with a new process based on regulations, which are subject to public comment and review. The previous plan was based on an executive order and, as we have seen, was more vulnerable to legal challenges. The new process is more targeted, more flexible, and more likely to survive a challenge in the courts.
Taking Responsibility for Solutions to the Pain
The decimation of opportunity for the working and middle class over the last forty years has been heartbreaking to watch, and here at Strategic Initiatives, we’re crossing our fingers and rolling up our activist sleeves to help the new Debt Relief Process come to a positive end. We believe higher education leaders must take a more active role in not simply helping students to borrow money but in educating borrowers in financial planning, taking out smaller loans, managing their loans, and on the current, post-pandemic options for debt relief. We could do a much better job of keeping borrowing low and the value of finishing more quickly (see Hawaii’s 15 to Finish). We helped them accumulate debt that is crushing them, and we should have better prepared them for the effects of borrowing to earn (and too often not to earn) a degree.
If Not Us, Who? If Not Now, When?
What would it take for HE to assume some responsibility for the pain and solutions to that pain that we so willingly facilitated? What would it take to help borrowers access debt relief by reminding them to check with their loan servicer, with the Department of Education website, or with their favorite search engine for the most up-to-date information on their specific debt options, along with the paperwork needed? What might happen if student financial aid and loan servicing offices taught students NOT to borrow before helping them with loan paperwork?
In a more proactive spirit, our recommendation here at Strategic Initiatives is for higher education leaders themselves to become more politically active in arguing for the future of educational affordability, for the value of a college degree, and for our own sustainability as student debt changes the landscape of higher education and society. It is past time to become more effective and engaged advocates for relief from educational debt that few nations ask their citizens to bear. Perhaps an appeal to the Better Angels of our national character might not be for naught?
Now and much more in the future higher education leaders should advocate for significant relief for two generations of student borrowers. And for future generations, we should work to bring costs down, reduce borrowing, and provide access to education for all. If not our higher education leaders, who?