Finance

Student Loan Borrowers Don’t Deserve ‘Forgiveness.’ They Deserve an Apology.

Let’s stop the conversation about student loan forgiveness and start one about the necessity of saying we’re sorry.

After all, it’s not the borrowers who did anything wrong — it’s the country. We’re the ones who should be asking their forgiveness.

Teenagers go to college because we tell them to. Many people in their 20s pursue graduate education because an advanced degree is what they need to prosecute criminals, cure cancer and teach or counsel those teenagers.

And for decades we’ve failed these students over and over.

We’ve left them mostly on their own to pay for the betterment of themselves and society, and then heaped one administrative burden after another on them along the way.

Pell Grants should be renamed in honor of Ebenezer Scrooge. Franz Kafka appears to have written the rules governing our student debt system, while Rube Goldberg collects the monthly payments.

And if you can’t pay? The legal guidelines in bankruptcy court often demand that those wanting out from under their student loans quite literally have a “certainty of hopelessness.” Those woebegone souls must prostrate themselves in front of judges, begging their honors to declare them complete and total failures.

Forgiveness for these sins might — might — be reasonable. After all, plenty of policymakers were at least trying to do the right thing along the way as this slow-motion monstrosity came into focus.

If President Biden removes $10,000 of federal student loan debt per borrower, it would total $321 billion, according to Federal Reserve Bank of New York estimates. That would leave 69 percent of debtors with remaining balances.

That is a large dollar figure, but its size ought to help reframe the national conversation around what we owe the victims of this scandalous failure of public policy. This is especially true for the roughly 40 percent of borrowers who acquired some debt but did not get a degree after six years — and thus lack the earning power that a diploma often brings, according to Mark Huelsman, the director of policy and advocacy at the Hope Center for College, Community and Justice at Temple University, who looked at students entering in the 2011-12 school year.

Still not convinced that the nation should ask debtors for absolution, and not the other way around? Consider the facts.

First, there’s the Free Application for Financial Aid, or FAFSA, which for decades has yoked millions of students and families each year to its cumbersome form, confusing questions and confounding — and infuriating — “expected family contribution.” New legislation brings the number of questions down to a maximum of 36 from 108, but it, too, is so complex that it’s taking years to fully carry out the changes. And that does nothing to address the chasm that exists between what the federal system (and a second one, the CSS Profile, that many private colleges use) “expects” and what feels realistic to many families.

So what about Pell Grants?

They were named for Senator Claiborne Pell in 1980, though earlier versions existed for years because it had long been clear that the lowest-income teenagers couldn’t afford many colleges. But the help those grants offer has dwindled because legislators did not set the annual amount per person to track any index of college costs.

Phillip Levine, a Wellesley College economics professor and the author of a new book called “A Problem of Fit: How the Complexity of Pricing Hurts Students — and Universities,” has calculated just how far short this can leave low-income students.

Take teenagers from households with about $37,000 in income, which is about the 25th percentile of income and assets. By his calculations, the public schools he examined will ask the students who live on campus to pay around $14,000 each year, after accounting for Pell Grants and other scholarships. Even if these students max out their federal loans — $5,500 for most of those freshmen — and take a job via the federal work-study program, there will still be thousands of dollars each year left to cover. No one is minding that gap.

As we ask these teenagers to borrow tens of thousands of dollars that we’d never lend them for anything else, the government provides a menu of loan options. With some of this debt, interest starts ticking right away, years before you can even have a legal beer.

There wouldn’t be so much of a debt problem if, as a nation, we made a priority of subsidizing public higher education. But we don’t. Among the 26 nations that the Organization for Economic Cooperation and Development surveys, only Britain has higher average tuition for public universities than the United States.

Things don’t look much better when you examine American states. Appropriations per student in 2020 were exactly where they were in 1994, according to the State Higher Education Executive Officers Association. But over the same 26-year period, net tuition revenue per student has risen 71 percent to $6,726 a year.

If you think the borrowing is bad, we make it worse through the dystopian nightmare that is repayment. If only we could be Australia, which has a dead-simple system. The taxing authorities there help determine what you must pay: The more you make, the higher the percentage of your income that you shell out. Young adults there are aghast at how much their American peers must struggle with the bureaucracy we’ve painstakingly constructed.

Student Loans: Key Things to Know


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Debt reduction. President Biden said that he is considering wiping out some student loan debt and will make a final decision “in the coming weeks.” The comments were the clearest signal yet that he may make good on one of his campaign promises.

New sources of aid. The Education Department will use one-time waivers and adjustments to retroactively credit millions of borrowers with additional payments toward loan forgiveness. The move will help people seeking to have their loans eliminated under the Public Service Loan Forgiveness program and through the use of income-driven repayment plans.

Payments delayed again. President Biden pushed the restart date for federal student loan payments to Sept. 1, extending a pause put in place at the start of the pandemic. Millions of borrowers who have defaulted on their federal student loans will also get a fresh start and have their loans restored to good standing.

The cost of private loans. As the Fed changes its benchmark rate, private student loan borrowers should expect to pay more, as both fixed and variable rate loans are linked to benchmarks that track the federal funds rate.

Federal student loan borrowers are blessed with so-called servicers who handle their pile of individual loans. The indebted repay these loans, of which there are multiple types, through at least half a dozen types of repayment plans.

Borrowers don’t get to choose their servicer, but they do suffer the consequences when, as all manner of government investigators have noted repeatedly, the servicer makes a hash of the process by giving them terrible advice when they ask for help.

These servicers have often failed to help borrowers qualify for one good thing the government has done for borrowers: the Public Service Loan Forgiveness program. It is supposed to allow those serving the public good to have their debts wiped out after 120 months of payments. The result was a decade-long mess that the Biden administration has tried to fix.

There are other ways to qualify for loan cancellation. You could be a victim of fraud if your school misled you, which was the case for thousands of students who attended for-profit colleges. That relief program ground to a near halt during the Trump administration, but at least there’s some progress lately.

Another way: You can spend a couple of decades not making enough money to afford your loan payments. If you get into one of the federal income-driven repayment plans and make payments for 20 or 25 years (it depends on your plan, of course) without paying off all you owe, the government will cancel your remaining balance. If you do end up with that result — and your servicer (or servicers) correctly tracked your payment history — you could get a tax bill, since our laws state that many forms of canceled debt are actually income. America!

And if it just becomes impossible — your partner gets sick, your child gets sick, your parent gets sick — even bankruptcy is unlikely to help. Unlike any other debt, federal student loans are often subject to that unique and horrifying standard: the certainty of hopelessness.

How did the bankruptcy rules for student loans get so harsh? Here’s one reason: Back in 2005, a senator named Joe Biden sided with legislators who wanted to make things a whole lot harder for many student loan borrowers to discharge their debt, fearing that fledgling doctors, lawyers and others would game the system to get off scot-free.

Mr. Biden was defensive about this on the campaign trail, but his platform promised relief of all sorts. I’d like to think that his refusal thus far to rule out loan cancellation comes, at least in part, from his own guilt over what has happened since 2005.

Whether or not Mr. Biden does cancel any debt, our nation owes student loan borrowers an apology, which he might as well deliver himself.

And if that apology does come with loan cancellation, consider it payback for all the support that tens of millions of teenagers never had in the first place.

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