#CancelStudentDebt shifts from progressive pipe dream to mainstream issue
It wasn’t long ago that plans to erase student loan debt were nothing but a left-wing pie in the sky. Then, along came COVID, and the US found itself in the worst economic recession since the Great Depression. Now a new poll highlights how the once-fringe idea with little institutional support has made its way firmly into the mainstream, earning “yeas” from both sides of the political aisle. Sixty-seven percent of people polled said they support some form of widespread student loan forgiveness, including 58% of Republicans. A paltry 1 in 4 people (26%) said student loan debt should not be forgiven. If those numbers surprise you, there’s a reason. The GOP has long opposed widespread student loan forgiveness and a divided Congress has sparred over the issue since March. Republican’s historic gripe has been that the cost of forgiveness would fall unfairly onto taxpayers. But now COVID has pushed the student debt crisis to its breaking point, and the effects are being felt in other areas of the economy. Democrats and Republicans seem to agree that some degree of federal intervention is necessary to achieve a swift economic recovery.
Student debt stands in the way of a V-shaped recovery
Student debt didn’t become a crisis overnight. But over the past ten years, student loan debt in America has doubled, from around $830 billion in 2010 to $1.6 trillion last year. It’s surpassed credit card debt and auto loans to become the second largest consumer debt carried by Americans (so, congrats, creditors?) Now millions of already struggling borrowers have found themselves out of work and unable to make a dent in their debt, which doesn’t bode well for that “V” shaped recovery we keep hearing about. It’s been shown that economies drowning in debt have weaker recoveries, and as millions struggle to make ends meet, non-essential spending goes way down on things like food delivery, Netflix, and everything else an economy needs to bounce back. With this in mind, it’s easier to reconcile why March’s CARES Act pressed pause on federal student loan payments and why President Trump extended the provision through the end of 2020 on August 8.
And then there’s the upcoming election to think about…
Oh right, that. Both Biden and Trump have laid out their plans to tackle the student debt crisis at the federal level. President Trump plans to consolidate multiple income-driven repayment programs into one straightforward plan. Borrowers would be required to pay 12.5% of their discretionary income toward their loans, with forgiveness after 15 years for undergraduates and 30 years for graduate debt. Under a Biden presidency, borrowers could expect to pay 5% of their discretionary income toward loan debt, followed by forgiveness after 20 years. And anyone earning $25,000 or less wouldn’t owe a dime and their loans wouldn’t accrue interest. For starry-eyed freshmen whose families earn less than $125,000/year, public colleges and universities would be tuition-free, and some students would qualify for two years of tuition-free community schooling or training programs. While the differences between the two plans are plain (Biden’s proposal is predictably more borrower-friendly), it’s noteworthy that both candidates will offer loan forgiveness to some degree.
Cue the deus ex machina, Michael Bloomberg?
Even before any ballots have been cast, some borrowers are catching breaks from unexpected places. Google has pledged to cover $2,500 of employees’ student loan debt. Benefits-eligible Starbucks employees get 100% tuition coverage toward a bachelor’s degree through ASU online. Mike Bloomberg has donated $100 million to four lucky schools to create scholarships that will ease the burden of student loan debt. And 35,000 former ITT Tech students are slated to receive a whopping $330 million in student loan forgiveness, putting to rest a 2014 lawsuit lodged against the for-profit chain. All this adds up to a mere drop in the $1.6 trillion debt bucket, but it could signal the start of a trend toward more widespread student loan forgiveness.