Understanding Student Debt Forgiveness
By Ryan Reinhardt
With midterm elections approaching, the Biden administration has announced a plan for a one-time student loan forgiveness. While the intentions of this plan are unclear, this legislation has important implications.
Student debt forgiveness is impactful for many college students. Nationally, the average amount of student loan debt that students have at graduation is around $31,000. Last year, the average Wilson College graduate who took out loans had $34,737 of debt in student loans.
Linda Brittain, the Dean of Financial Aid at Wilson College, said, “This year 695 students were offered student loans and 530 accepted the loan.” With around 1,000 students attending Wilson, this is an issue relevant to around half of our student body.
With most of our student body using student loans to cover part of or all their tuition, it is beneficial to understand who qualifies for the program. The process begins with an application, which is scheduled to begin in October 2022.
Students with an individual income under $125,000 will be eligible for up to $10,000 in debt relief. Up to $20,000 in debt relief will be available for students who received the Federal Pell Grant.
For both groups, only federal loans disbursed prior to June 30, 2022 will qualify for forgiveness. For more important information on eligibility and to better prepare for the application process, check this website for more information.
This policy also brings larger social implications.
First, why are students in so much debt? With college being promoted as an avenue to advance future career opportunities, there has been a steady rise in college enrollment. Individuals from lower-income families, in particular, have made up an increasing number of undergraduate enrollments according to Pew Research Center.
This increase in enrollment has coincided with a rise in tuition fees among higher education institutions. Melanie Hanson of the Education Data Initiative writes, “From 2000 to 2020, tuition inflation outpaced wage inflation 86.4%.” With the price of schooling rising at a higher rate than wages, a substantial financial burden is placed upon families who are attending college as an option to improve their circumstances.
This rise in tuition is, at least in part, caused by changes in the funding of higher education. According to the Center on Budget and Policy Priorities, public funding for higher education has not been consistent with the rise in tuition. This forces prospective students to take on the brunt of the rising costs.
These factors have contributed significantly to the proliferation of student loans. With many students bearing the responsibility of funding their education, often without the financial resources to pay said tuition, many are forced to turn to loans to pay for their education.
Unfortunately, these loans often operate with higher interest rates than the typical loan. This is because unlike a loan on something tangible (like a car or a house) which can be offered as collateral, if payments are not made on a student loan, education cannot be repossessed.
This is exacerbated by the fact that these loans target students, a population that is typically not financially experienced.
Ultimately, relieving $20,000 of debt is merely a bandage over a gaping wound. This legislation does not look to tackle the root of rising tuition costs, nor to provide individuals with living wages or job guarantees, and it does not question the fact that education is not always accessible for students.
Regardless of the limited scope of this legislation, it is a start. Up to $20,000 of debt being forgiven will be life-changing for many students, including many at Wilson College.