As of this year, one in four Americans — nearly 45 million people — have student debt, and U.S. college students and graduates collectively hold over $1.7 trillion in student loan debt. In Minnesota, 900,000 people carry student loan debt, owing an average of $31,250 in federal and private student debt.
With these numbers, it’s no surprise that canceling student debt has become a calling card for Democrats; during his 2020 presidential campaign, Joe Biden promised to cancel $10,000 in student debt per borrower once he became president.
That hasn’t happened, though Biden did extend a moratorium on student loan payments during the COVID-19 pandemic, forgave billions of dollars in federal student loans and committed to improving public service loan forgiveness programs. Beyond that, Biden has said that he thinks Congress, not the president, has the power to totally cancel student debt.
These actions and promises have not been enough for some progressive lawmakers, however, including Minnesota’s Fifth Congressional District Rep. Ilhan Omar. Earlier this month, Omar joined several other progressive lawmakers in sending a letter to President Biden and Education Secretary Miguel Cardona urging the administration to release a memo assessing whether it has the authority to cancel student debt through executive or administrative action.
“We know that there are 45 million Americans that are shackled with student loan debt, and the average amount of debt is more than $30,000,” Omar said. “I truly believe that it’s important for us to cancel student debt in its totality, because it’s going to help give Minnesota families and, you know, families across this country the opportunity to pursue their dreams of homeownership or opening a business and starting their lives.”
In April, the White House promised it would release the memo in a matter of weeks. But six months have passed since then. And though the progressive lawmakers have yet to hear back from Biden (their deadline for a response was last Friday), Cardona said on Tuesday that examining loan forgiveness is a “priority” for Biden. “Those conversations are continuing,” he said.
And yet, for all the back and forth over whether to cancel $10,000 or $50,000 of student debt — or whether or not the president even has the power to do that — even if the Biden administration decided to do what progressives are calling for, experts say it would do little to change the larger structural issues with post-secondary education in the U.S., ones that continue to disproportionately affect more disadvantaged students.
Doesn’t just affect young people
In their letter to Biden and Cardona, Omar and the other progressives wrote that federal student debt could be canceled with the “flick of your pen.”
To lawmakers like Omar, the issue of student debt is not just economic. “If you look at Minnesota, we know that while thousands of people have been struggling economically, the disparities within the people of color and Indigenous folks is a dire situation,” Omar said.
According to data from the National Center for Education Statistics, Black and African American college graduates owe an average of $25,000 more in student loan debt than white college graduates. Four years after graduation, 48 percent of Black students owe an average of 12.5 percent more than they borrowed and 29 percent face monthly student loan payments of $350 or more.
Dr. Dominique Baker, assistant professor of education policy at Southern Methodist University, said that divide comes from the racial discrimination that has been baked into American life for hundreds of years.
“For centuries, we created policies in our country that brought us to this point where Black individuals tend to rely more on student loans,” Baker said. “And at that same time, once they’ve taken out the loan, they face a discriminatory labor market, and our discriminatory society is such that they struggle more with being able to make their payments.”
Baker also pointed out that a common misconception surrounding student debt is that it only affects younger people. While it’s true that many young people are hit with student debt soon after they graduate and reduce the amount owed as time progresses, older adults are also taking out significant Parent Plus loans, which are federal student loans available to the parents of dependent undergrads.
“A lot of parent borrowers and about 15 percent of my clients are over the age of 55, and most of them will have Parent Plus loans, and they are not able to retire because of the amount of debt they have,” said Jan Miller, president of Miller Student Loan Consulting.
Miller often works with people who have significant loan amounts, like physicians or dentists, to strategize the most efficient way to pay off their loans, which often stray over six figures.
Of course, professionals in fields like medicine are different from those who may have been misled about the value of their degree in the current marketplace, or those who face the possibility of never seeing a salary that justifies the economic investment they made in college or graduate school.
That applies even to those who attend elite schools, which often market certain programs as gateways into selective industries — you pay for the connections that a program provides as much as for the education — while seldom making students aware of the financial consequences. The Wall Street Journal found that film program graduates of Columbia University with federal student loans had a median debt of $181,000, even though half the borrowers were making less than $30,000 two years after graduation.
And whatever the situation, Miller has seen the toll that student debt can take on people’s lives, from when they’re thinking about buying a house or even when they can get into a long-term relationship where marriage might be a goal.
“I sometimes call myself a student loan therapist because borrowers have to make difficult choices, and the debt is always looming over their head,” Miller said.
Omar said that her overall goal is eliminating student debt in its totality, but she conceded that it probably wouldn’t happen in the current political climate. “Any steps that the president takes to cancel student debt at any amount is going to be helpful in moving the needle for a lot of the people that I represent,” Omar said.
Instead, she hopes Biden will eventually act on canceling student debt of at least $50,000, a goal also targeted by Senate Majority Leader Chuck Schumer and Minnesota Sen. Tina Smith.
Yet Miller argues that none of the suggestions currently floating around Congress addressing debt cancellation would have life-changing consequences for many people. “If your income is really low, you can use an income-driven repayment program,” Miller said. “But if your income is higher, and you owe $70,000 in debt, and your income is $70,000. A $70,000 loan would create about an $800 monthly payment on a 10-year term at six or seven percent interest. Let’s say you forgive $10,000 of loans. That’s lowered the payment by maybe $100 a month. So for the people who aren’t already suitable for low-income forgiveness programs, it doesn’t do a whole lot for them.”
Structural change over loan forgiveness
Eliminating debt at a much higher level than Biden has proposed also wouldn’t do much to address what many see as the more fundamental issue: College is too expensive for most American families, with costs that often have “virtually no relationship to the value that students could possibly get in exchange,” argues the international Organization for Economic Cooperation and Development.
“This is one of the reasons why I think we have to be talking about larger systems of change,” Baker said. “How do we both make college more affordable and help other people who attended college when it was not affordable?”
During his 2020 campaign, Biden promised two years of free tuition and fees at community college or a public four-year university. After his election, though, that plan was downsized to funding tuition and fees only at community colleges.
Congress took one step towards making college more affordable by adding a provision for two years of free community college to its budget reconciliation package. Then, last week, Biden’s plan got downsized again: Free community college has been cut from the final budget reconciliation bill.
Biden said in a CNN town hall last week that West Virginia Senator Joe Manchin “and one other person [have] indicated that they will not support free community college.”
Without the provision in the budget reconciliation bill, it will be up to Congressional Democrats to craft new legislation that might address the high cost of college and the ability to pay for it — something unlikely to get anywhere in a Senate split 50-50.
“We have a two-tiered education system, one for the rich, whose families can afford tens of thousands of dollars for higher education, and another for low and middle-class families who have to pay off student debt for the rest of their lives,” Omar said. “We know that in this country we don’t suffer from scarcity, we suffer from greed. And we can choose to lift the burden.”