What's the deal with Biden's student debt forgiveness plan?
Everyone's focused on the $10,000 number, but there's some other really interesting stuff in this plan. It's just not as exciting as Twitter drama.
As you’ve probably heard, Joe Biden made good on a campaign promise today (mostly) and put forward an actual student loan relief plan. Yes, the big headlines have to do with the total amount of debt that will be forgiven (Biden ran on forgiving at least $10,000 in federal student loan debt per person, but activists and advocates for student debt forgiveness had been pressing for more). Yes, those numbers are important — $10,000 in federal student loan debt per person making less than $125,000 per year; up to $20,000 in loan forgiveness per person who went to college on Pell Grants — but they’re hardly the full story. I wanted to send out today’s newsletter to make sure the other aspects don’t get overlooked.
Let’s start with a disclaimer: While I had student loans, I have since paid them off. None of today’s announcements will directly help me (or my wife Kalya, for that matter).
Here’s what the White House actually announced.
The White House posted a fact-sheet breaking down today’s announcement.
Yes, there’s the bit about debt relief. Yadda, yadda, etc. If you’ve got questions about qualifications and whatnot, you can hop on over to the studentaid.gov website for more info about all that.
It was the second point in the White House’s “three-part plan” that caught my attention. Labeled, “Make the student loan system more manageable for current and future borrowers,” that section of the document went on to detail changes that would cap monthly payments at 5% of discretionary income for low-income borrowers. Currently, the cap is 10%. This is a big deal that can and will reduce the financial burden for a lot of people month to month.
This Education Department rule would also adjust how much income counts as “non-discretionary income.” The fact-sheet explains this as a guarantee “that no borrower earning under 225% of the federal poverty level—about the annual equivalent of a $15 minimum wage for a single borrower—will have to make a monthly payment.”
Additionally, loan balances will be forgiven after 10 years of payments (instead of the current policy of 20 years of payments) on a loan with a balance of $12,000 or less.
And finally, this new department rule would also “cover the borrower’s unpaid monthly interest.” “No borrower’s loan balance will grow as long as they make their monthly payments—even when that monthly payment is $0 because their income is low.”
This is not my area of expertise, but this section seemed like a pretty huge deal. I asked Melissa Byrne, the founder of student debt relief advocacy group We The 45 Million, what she thought about it, and she told me, “Today is a first step in reforming higher education — a first step that fully canceled the student loans of 20 million borrowers. We will keep fighting and fighting for all.”
One of the reasons I decided to veer just a tad out of my usual media-related lens on this is, well… media-related. Oops.
I don’t usually respond to individual policy announcements, but I felt like this deserved its own newsletter just because a lot of these details — the ones unrelated to the topline $10,000/$20,000 relief numbers — might get lost in the horserace-y “Let’s get a quote from a Republican” (Ted Cruz called it “Insane - and illegal!” — not sure Cruz’s plain could withstand a fact-check) / “Let’s get a quote from a Democrat” (Elizabeth Warren said it “will be transformative for the lives of working people all across this country.”) media machine.
As I write this, just a few hours after Biden’s announcement, a number of news outlets seem obsessed with the political question of whether it’s “fair” for some people to benefit from a government program while others (like me) paid our loans off with savings and hard work and yadda, yadda, you get the idea. I think that misses the mark in a huge way. After all, as business owners were getting tens of thousands, hundreds of thousands, or even millions of dollars in free money during the pandemic through the widely-abused Paycheck Protection Program, how many news organizations were asking, “But what about people who don’t own businesses? Is it fair to them that business owners got all this free money?” Were any of them asking that question? No. Naturally, the press was mostly obsessed with yelling at poor people about unemployment benefits being “too good.”
The truth is that different government programs benefit different people in different ways all the time. The only times corporate media outlets tend to get too worked up about “unfairness” in government programs seem to be when they’re talking about a program that benefits low-income and marginalized groups. When programs make the rich even richer, pundits never ask, “Do the wealthy have it too good?” The press treat the upper-class as having earned the good things that happen to them (even when this is the result of government funding and other subsidies). Can the same be said for programs that help the poor?
I’m also guessing that many of this newsletter’s readers may also have student loans, and if there’s anything in this announcement that can help you, I don’t want you to miss out on it. Again, read more info about the student loan announcement here and here.
That’s all from me for now. Hope everyone’s having a good day. What are your thoughts on this plan? Read anything about it that you found interesting? Let me know in the comments.
My parents paid for my college education. They both had complicated relationships with their own higher ed opportunities and they decided they would do whatever was possible to cover their kids' educations. And I have always seen my situation as basically being akin to being a billionaire, it allowed me to take such a low-paying job in my chosen field. And I have always wanted to share this experience with everyone. I want all the debt wiped out.
I luckily got my student loans forgiven when they expanded the PSFL. I had been paying them off for over ten years and found out around year 8 that none of my payments were "qualified payments" for whatever reason. When they expanded, they were suddenly qualified. I dunno. My wife still has about $20k in loans so I guess hers will be cut in half. Yeah, it helps my family, but I'm not bitter about paying for so long before getting relief. Parker has it exactly right - all the framing is on whether it's fair for certain groups, only because Republicans want it to be a wedge issue. There's no conversation about businesses/wealthy getting free money because both parties support it!