Just a few years ago, writing off large chunks of the U.S.’s $1.7 trillion in student debt seemed like a fringe idea. In a few weeks’ time, it could be government policy.
Joe Biden ran on a promise of forgiving at least $10,000 in student debt per borrower. As president elect he’s getting bombarded from all directions with advice on how to scale up that plan—or back away from it.
In Biden’s Democratic Party, many want him to cancel a bigger portion of the loans via executive order right after taking office this month. They say it’s a way to aid the economic recovery without getting bogged down in congressional wrangling. Biden told journalists just before Christmas that he’s unlikely to go that far.
Critics of debt forgiveness at liberal think tanks as well as some congressional Republicans want him to abandon the idea altogether. They say channeling resources to college grads who are already better off than most Americans is unfair and ineffective as stimulus, because it won’t trigger a jump in consumer spending.
What follows is a roundup of some of the main arguments—and the numbers attached to them—in a debate that’s set to heat up in the coming weeks.
HOW WE GOT HERE
Since the financial crisis, U.S. households have added more student debt than any other kind— almost $1 trillion compared with $760 billion in mortgage loans. Some 43 million Americans owed money for their college education (or a family member’s) as of 2019, when the typical monthly payment was $200 to $300.
Borrowing has risen in tandem with college costs, which have outpaced incomes for a generation, and accelerated after the 2008 crash—partly because state governments cut funding for higher education and public colleges covered the shortfall by charging their students more. There’s also been a decades-long expansion of higher education that has drawn in students from lower-income families more likely to depend on loans. And unpaid debts can snow ball, because even in an era of ultralow interest rates, student loans are pretty expensive. Interest rates have ranged from 4.5% to 8% in recent years, with graduate students and parents who borrowed on their kids’ behalf generally paying more.
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