Forgiving $10,000 in student loans could eliminate student debt for one third of borrowers. But what about the next generation?
President Joe Biden is now expected to announce significant student loan forgiveness this month, potentially within the next few days. The new action would forgive $10,000 in federal student loans for individuals who make under $125,000 per year. The White House had been considering taking the action for a few months after campaigning on the $10,000 number throughout the last Presidential election. Most substantially, the action would eliminate all student debt for one-third of borrowers.
Although the loan forgiveness would be the largest ever from the White House—costing roughly $321 billion–there has been criticism that Biden isn’t going far enough. Senators Chuck Schumer, D-NY, and Elizabeth Warren, D-MA, have consistently argued that the President should forgive $50,000 in student loan debt.
In a statement last year, Schumer argued that Democrats should go bold. “During a time of historic and overlapping crises, which are disproportionately impacting communities of color, we must do everything in our power to deliver real relief to the American people, lift up our struggling economy and close the racial wealth gap,” Schumer said.
Criticism from the other side argues that student loan forgiveness is regressive, primarily benefitting wealthier Americans. A paper from the Brookings Institution argues that college graduates tend to have higher incomes and more wealth than people who didn’t go to college–meaning that any student loan forgiveness will provide additional benefits to those who are already better off.
Some commentators argue that “students who took out loans knew good and well they would need to be repaid” when they entered into them. But a culture that simultaneously demands a college education for professional and financial stability and success, then raises the cost of that education at a rate five times that of inflation, is hardly giving students a genuine choice.
This split can also be seen in polling. An NPR/Ipsos poll released in June found that a majority of Americans favored $10,000 in student loan cancellation. Among borrowers alone, that number was 84%, with 68% of borrowers favoring forgiveness of all student debt. But among those without any student loans, only half supported $10,000 in forgiveness, and only 37% favored complete forgiveness.
Perhaps the biggest question with any student debt forgiveness action is what happens to the next generation. Any student loan forgiveness now benefits Americans with existing student loans, but does not change the college affordability problem in the future. The same NPR/Ipsos poll found that 82% of Americans would rather prioritize making college more affordable for the current and future generations, rather than prioritizing forgiving some existing debt from current student loan borrowers.
Student loan forgiveness now could make the issue an even more pressing one in the future, as the next generation of college students push for the same kind of debt cancellation action that the White House is currently considering today.