The Transylvania Times -

Cancelling Student Loans

 

Last updated 2/22/2021 at 3:33pm



Last week President Joe Biden said he supported cancelling $10,000 in student federal loan debt for individuals, far less than the $50,000 proposed by other Democrats.

There are approximately 45 million Americans who hold a total of $1.6 trillion debt in student loans. Due to the amount and terms of many of those loans, millions of Americans, particularly those earning $40,000 or less a year, are struggling to pay those loans.

It now costs about $25,000 a year to attend the University of North Carolina at Chapel Hill – roughly $100,000 to get a four-year degree. Even if a student there were to receive some scholarships and worked during the school year and summer to reduce costs by $60,000, that student would still have $40,000 in loans. According to smartasset.com, if a student owes $40,000 at 4.29 percent over 10 years, the student would pay $418 per month – a total of $50,160. If that loan were spread out over 20 years, that student would pay $249 per month – a total of $59,760. For a recent college graduate who is paying rent and quite possibly making monthly payments on a vehicle, an additional $400 a month in student loans can be quite a financial burden.

Of course, there is an argument against cancelling student loans. Most Americans do not attend a four-year college, yet they have accrued debts through other loans. And there are millions of Americans who attended community colleges for two years to cut the cost of college and four-year college graduates who worked two jobs after graduation and made sacrifices so that they could pay off their student loans.

Education, however, has become increasingly important. Thirty years ago a high school graduate could get a good-paying job. Today, people need at least a two-year degree to get a good-paying job. It pays for both the individual and society to have a higher degree of education, even if the student has to get a loan for that education.

Unfortunately, there have been several factors that have made it more difficult to pay off loans in the last 20-30 years. During the Great Recession, 8.8 million jobs disappeared. Last April alone, more than 20 million Americans lost their jobs. While many of those who lost their jobs did not have a college education, there were millions of Americans who did. Even if they did not lose their jobs, either temporarily or full-time, it became harder for many to pay all of their daily expenses.

The other factor is the cost of college itself. According to a report in 2017 from CNBC, tuition to attend a public four-year institution from 1987 to 2017 had increased 213 percent, and those numbers were adjusted for inflation. That is just tuition. Housing costs in university towns also have increased substantially since the turn of the century.

One reason costs have increased so dramatically is that many state legislatures have cut back their funding of public universities. CNBC also reported that from the 2008 school year to the 2018 school year, 41 states spent less per student, after adjusting for inflation. During that time period, states spent an average of 13 percent less per student — about $1,220.

The president’s proposal to eliminate $10,000 of federal student loan debt is reasonable. According to Elissa Nodworny, who covers higher education for NPR, a $10,000 forgiveness plan would clear the balances of 30 percent of borrowers. (By comparison, if the federal government were to allow cancellations of loans up to $50,000, according to Nodworny, it would clear the balances of 80 percent of borrowers.) The greatest beneficiaries of the president’s plan would be those who were frugal about their choice of college, who eschewed high-priced universities in favor of community colleges and/or modestly priced four-year institutions. It also would provide relief to those attended state universities, particularly those who have paid most of their loans back; yet it also would allow the federal government to still recoup a substantial portion of the loans it has made.

We need to remove or reduce as many financial barriers as possible for people to pursue their academic goals and reach their full potential. While not perfect, cancelling $10,000 of federal student loan debt would benefit millions of Americans who obtained their academic degrees but find it difficult to make ends meet by paying $400 a month in student loans well into their 40s – a time when they may be saving money for their children to attend college.

 
 

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