Revisiting Student Loans

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Tyler Sova
August 26, 2022

I originally wrote about student loan debt in September 2019 for the PA Times. Now is an opportune time to revisit that article and the progress made since it was published. The fervor over student loans has only increased since 2019 as more stories of crushing debt enter the media and loan forgiveness is being dangled in front of potential voters for the 2022 Midterm elections. There has been progress made in loan forgiveness where students were defrauded, or where programs fell short of their promises. With the staggering price tag, and the unknown consequences, the debate continues to be a fixation in the nation. 

Student Loan Polls

Support for student loan forgiveness remains mixed. 55 percent of respondents viewed $10,000 in loan forgiveness favorably—that number decreases as the amount of loan forgiveness increases. Unsurprisingly, those with loans viewed forgiveness much more favorably, with 84 percent in support of $10,000 or more, 78 percent with $50,000 or more, and 68 percent of forgiving all student loans. $10,000 seems to be the magic number that a narrow majority of Americans can stomach, with more warming up to the idea. Anything above that figure and the support falls below a majority. An income ceiling would cap the loan forgiveness based on the income of the individual with student debt. Interestingly, support for forgiveness does not change when an income ceiling is introduced into the equation. The real hunger is for affordable college. 82 percent of respondents preferred the government work on making college more affordable rather than forgiving debt.

Fraud Forgiveness

Loan forgiveness for the general population is still in discussion, but there has been relief for beleaguered groups. The Education Department canceled loans for 208,000 students who attended ITT Technical Institute to the tune of $3.9 billion. You may remember their low-quality commercials, but it turns out it was more than the advertising budget that was lacking. They were cited for purposely misleading the quality of courses in order to collect Federal loan money with blatant disregard for the welfare or outcomes of students. In total there’s been $32 billion forgiven: $9B for those who went to Corinthian College (similar case as ITT Tech), $9.6B for the Public Service Loan Forgiveness(PSLF) program, and another $9 billion through the Total and Permanent Disability program. Any students defrauded or frustrated by broken promises via bureaucracy (I’m looking at you PSLF program) should have their loans forgiven. Predatory, for-profit schools are a real issue, often targeting low income communities with the promise of a better future. The Federal government should refuse to provide loans that would go to or benefit for-profit schools.

Forgiveness and the Economy

The Federal Government forgiving loans would have complicated, and possibly unforeseen consequences for the economy. The lift of financial burden on millions of borrowers seems to be the most obvious positive outcome. Money put towards student loans can instead be put towards discretionary spending. Goals like homeownership or entrepreneurship could increase with capital freed by debt forgiveness. There are downsides, especially for taxpayers. Brookings figures that just the $10,000 loan forgiveness would cost taxpayers $373 billion dollars—the figure ventures into trillion territory when you calculate for $50,000 and higher. Those high numbers could lower interest in such plans. What income level would benefit the most? The median income for student loan borrowers is $76,400, with only 7 percent at or below the poverty line. These figures call into question if canceling debt would reach the populations it’s intended for, additionally loan forgiveness penalizes taxpayers who never attended college and would be subsidizing those who did. Finally, cancellation doesn’t address the high costs of college. What then happens to new students who are entering college and collecting debt? If one generation of borrowers are forgiven, what then happens to the following?

The government and all universities, but especially public universities, need to do more to address the cost of obtaining higher education in the United States. The promise of education and upward mobility is exciting and enticing, even more so when the promises are given to eager 18 year olds. At that age, the value of time, money and debt are rarely understood. The current model has a “put it on credit” mentality, where students and/or parents see semester based charges and end up with sticker shock at the final sum years later. Many students don’t have a choice and the only recourse is loans. The idea of loan forgiveness without fixing the root issue will just create an endless cycle of debt and (potentially) debt forgiveness.

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Author: Tyler Sova is a current Federal employee for GSA. He received his MPA in 2017 and is a member of the Keystone State Chapter of ASPA. He can be reached at [email protected].

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