Will debt forgiveness finally solve the rising toll of student debt?

By Ian Lam | Illustrations by Isabelle Zee | Layout by Maegan Wang

We are all familiar with the idealized path laid out and preached to us: primary, secondary education, college, and maybe even a master or doctorate degree. Education is crucial to having a flourishing individual career and a functioning society, that’s why parents are willing to ‘invest’ hundreds of thousands into a child’s future. However, when we zoom in on college education, one thing is increasingly clear, by the time college students graduate, most students will be leaving with more than a tacky black robe and a random piece of paper, they’ll be leaving with mounting, compounding, excruciating…

The Problem of Student Debt

Living in a so-called meritocracy, where merit and hard work is rewarded, requires a fine social mobility social system. And the education system is intended to facilitate the foundation of this system, a ticket to a middle class life for those who have merit and determination. With 75% of jobs in America now requiring a bachelor’s degree, you almost have to go to college to get a middle class job. It reflects the same point: college is crucial when it comes to social mobility.

The problem is that there is a paywall set up on the path that disrupts the system, namely by expensive colleges, and so people are paying for the price of going to college.

The situation is that millions of new college students are being pumped through the student loan system, while current borrowers are struggling to exit this debt trap. You ask any college student on the street, and they will most likely have some amount of student debt, this is because 44 million Americans now owe a combined 1.7 trillion USD of student debt. That is more than credit card debt and auto loans, and is only second to the mortgage debt. What’s more is that this number has only trended one direction: up, where the total student debt has more than tripled since 2006.

This boils down to one thing: college tuition, and it’s incompatibility to society. Average tuition prices have doubled over the last 30 years, but average wages have only grown by around 20%. This means that student loans debts are increasing, and it is taking longer and longer to pay them off, creating rippling effects on the individual, the economy, and the fundamentals building blocks of society.

And it begs the question of whether or not college is even worth going to anymore. Is it the best investment we can make? And how can we fix this taxing issue? Below, I will be examining the issue of the student debt crisis in America and subsequently President Joe Biden’s recent proposal of student debt forgiveness.

Biden’s plan of student debt forgiveness

What is the Biden administration’s solution to the problem? Student loan forgiveness, a comprehensive plan targeted to make student loans more manageable by ‘forgiving’ pre-existing loans and protecting borrowers.

At its core, it targets relief to millions of Americans drowning in student loan debt, by forgiving debts and extending the pause for monthly student loan payments. The monthly loan pause will be extended through December 31, 2022, and below is a chart that shows the specifics of the loan forgiveness ness initiative will advance racial equality.

It is a given that black students need to borrow disproportionately more than white students due to their family backgrounds. Therefore, they are more severely affected by the growing issue of student debt. Ashley Harrington, Federal Advocacy Director and Senior Counsel at the Center for Responsible Lending explains that the colored population often requires more education and certifications to receive the same positions and wages in comparison to other groups. This means that they have to take on more debt to receive those certifications, and this is “preventing wealth building… and it is something that is impacting not just individuals, it’s impacting their families, their communities.”

Furthermore, the program aids undergraduate student loans, cutting monthly payments to 5% of a borrower’s discretionary income. And it fixes the Public Service Loan Forgiveness (PLSF), where people who have done public service are given credits to forgive loans. And also includes attempts to strengthen the accountability of colleges, publishing annual watch lists and requesting such actors to submit improvement plans.

Why debt forgiveness is the solution we needed

Instead of introducing the classic arguments presented showing the severity of the issue, this will outline the arguments of how this will help both people of color and college graduates who were promised a good life.

1. The student debt forgiveness directly helps current and future college graduates and students.

Statistics provided from the White House shows that if all borrowers and eligible recipients claim their relief, it will provide relief to 43 million borrowers, including canceling the remaining balance for 20 million. As seen, the relief in fact directly helps such groups from their mounting debts.

3. The student debt forgiveness will revitalize the economy amidst an economically difficult period.

Student debt like any other forms of debt prevents consumer spending and slows economic growth. A study published by the Federal Reserve Bank of Philadelphia found that “a significant and economically meaningful negative correlation” can be linked between student loan debt and bankruptcy rate of small growing businesses.

So to put simply, when a significant amount of debt is flowing throughout the economy, people can’t engage in the economy, and when that happens, the economy stagnates.

Why debt forgiveness is not the solution

There have been minor claims surrounding the untold consequences of this transformational policy and further claims that it is “illegal for the executive branch to create a 500 billion program… without statutory authority”, highlighted by Frank Garrison, lawyer at Pacific Legal Foundation. But these knitpicks and small issues mentioned do not hold weight in this extensive issue at hand, rather more convincing arguments have been made by the conservatives.

1. The student debt forgiveness plan costs an astronomical amount of money, something that can be spent more effectively.

As stated previously, this generation of college graduates are having to pay the growing amount of student debt, preventing them from achieving milestones such as getting engaged or having a family. This is apparent in many economic markets, including the housing market, where the Federal Reserve reported that student loan debt prevented about 400,000 young families from purchasing homes. Forgiving and eliminating such debt would help foster a healthier, most productive, more socially beneficial system.

2. The student debt forgiveness is an opportunity to rectify racial inequality.

Reports from Urban Institute study says that as black students are twice as likely to receive Pell grants, the forgive-

The committee for a Responsible Federal budget and Wharton School of the University of Pennsylvania economic model both found that the debt forgiveness bill will cost more than 500 billion over a decade. This whopping sum of money, and a chunk out of the federal budget, as argued, is unfairly provided to these college students and can be put to better use. A taxpayer’s dollar spent on one thing is a taxpayer’s dollar that can’t be spent on something else; Instead of failing to help blue collar workers of varying income who never went to college, but on something that can benefit the majority of American people.

2. The student debt forgiveness throws responsible and exemplary American citizens under the bus by rewarding irresponsibility.

Minority leader of Senate McConnel argues that this forgiveness program is plainly “a slap in the face” to everyone who sacrificed and did their due diligence to be debt free. These include any American who has been responsible for their own money, paid their debts, and furthermore those who “chose a career path or volunteered to serve in our armed forces to avoid taking debts”, said McConnel. These American people are just being thrown under the bus, they sacrificed for nothing, and that is simply injustice.

3. The student debt forgiveness plan is a fundamental abuse of the debt and loan system in America.

Student loans promote the idea that adults and the population do not need to be responsible for their own actions. Matthew Noyes, a columnist at Lone Conservative perfectly articulates that this debt forgiveness reflects the belief that “people are entitled to a college education and other peoples’ hard work. It codifies in policy the idea that adults are not responsible for their own actions”. In a free society, one should be responsible for taking on debt, and thereby paying it off.

Conclusion

College education is gatekeeping the middle class, social mobility and the American Dream, and it needs to be fixed; Many arguments against this plan, and any reform to fix this issue for the matter are simply insignificant to the scale of social mobility. No cost is too much to preserve the essence of American ideals.

The student loan forgiveness program is one step of many that needs to be implemented, and as certified planner Douglas Boneparth stated, it “is an opportunity to re-examine the fundamentals like cash flow”. However, it is my opinion that this set of reforms and relief will ultimately be merely a band-aid to a gushing wound of a structurally unsound social infrastructure. Without major fundamental reforms and regulations on college tuitions and loan borrowers, the problem will simply continue to exacerbate.

“We need to be careful not to fall in the quicksand of

Socially, and on a government level, though I recognize this will be excruciatingly difficult, regulation of large financial institutions and educational institutions is the only viable path. On an individual level, not only do we have to be more inclusive towards millions of people suffering from student loan debts, we need to be careful not to fall in the quicksand of student debt.

It is futile to discuss the merits and reality of college debts in society, as it will most definitely be crucial for the large majority of the population. But by understanding the cost of college education even in the arguably strongest economy and country in the world, then can we really appreciate the importance of education.