Student loans

Borrowers on edge as Biden weighs in on student loan forgiveness

President Joe Biden boards Air Force One on May 22, 2022.

Saul Loeb | AFP | Getty Images

At the pump, at the supermarket, with its owner, all of Ryan Tucholski’s bills are going up lately.

But there’s one expense he hopes to soon reduce or maybe even disappear: his monthly student loan payment.

Like millions of others who have borrowed for their education, Tucholski eagerly awaits to hear how the Biden administration will deal with the nation’s collective $1.7 trillion in outstanding student loan balances.

A payment freeze for more than two years (due to a pandemic-era relief policy that remains in effect), growing criticism of the lending system, and consumer pain from high inflation have all stepped up pressure on President Joe Biden to act. The president said recently that he would make an announcement on the possibility of debt relief within a few weeks.

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“Nobody likes limbo,” said Tucholski, 41, who runs a professional trade association in central Florida.

It took Tucholski several years to start earning enough to start paying off his student loans after graduating from the University of Toledo in 2003. In the meantime, he registered for multiple deferrals with the government and interest on its debt has accrued. Although he has already repaid the $18,000 he borrowed to get his BA in English, his balance today is over $24,000.

“I’m not asking for alms,” he said. “Something just isn’t working with these loans.

“If it was a mortgage, there would be congressional hearings on it.”

There is no example in US history of the kind of sweeping debt forgiveness the White House is currently considering offering, though consumer advocates point out that big business and banks have been bailed out. by the government of their own crises.

Proponents of a student debt jubilee also argue that the erosion of public funding for higher education along with skyrocketing tuition fees have essentially forced families to turn to loans to send their children to school. university, an increasingly necessary step to reach the middle class.

The median annual income for high school graduates is around $38,000, compared to nearly $79,000 for college graduates, according to an analysis by education expert Mark Kantrowitz. Critics of debt forgiveness, however, say it is these higher incomes that show college graduates don’t need the relief.

The lack of precedent, high price and political calculations to write off the country’s outstanding education debt, which has nearly doubled in the past decade, likely explains why the Biden administration has not decided what to do.

Among its biggest uncertainties is the amount of debt to be written off.

On the campaign train, Biden said he favors compensation of $10,000 for all, but there are now concerns that an announcement with that amount could cause more frustration and disappointment than anything else. The average student loan balance is three times that, at around $30,000. More than 3 million borrowers, mostly graduate students, owe more than $100,000.

“For 83% of black borrowers, canceling $10,000 in debt still leaves them with a balance greater than their original amount,” said Astra Taylor, co-founder of The Debt Collective, a debtors’ syndicate. “This is unacceptable.”

The NAACP agrees. Wisdom Cole, national director of the association’s youth and middle school division, recently mentioned on Twitter that nixing just $10,000 would be “a slap in the face” and called on the president to wipe out at least $50,000.

Student debt crushes borrowers at nearly every stage of their lives.

Persis Yu

Policy Director of the Student Loan Protection Center

The White House’s decision will determine the shape of the future for tens of millions of Americans. Research shows that student debt can make it harder for borrowers to start a business, save for retirement, have children and become homeowners.

“Student debt is crushing borrowers at almost every life stage,” said Persis Yupolicy director of the Student Borrower Protection Center.

Debt cancellation is needed after “decades of mismanagement, abusive practices and general incompetence” in the student loan system, Yu added. It is estimated that around a quarter of loan holders – or 10 million people – were overdue or in default before the pandemic.

As the Biden administration deliberates how to proceed, borrower Nicole Cueto obsessively refreshes her news feed, waiting for word. She owes over $100,000 in student loans and was recently denied a mortgage because her debt-to-income ratio was too high.

“It was really sad,” said Cueto, 39, who works as a publicist in Manhattan, New York. She has already lived in five different apartments and expects rising costs to force her to repack soon.

“I’m tired of moving,” she says. “If I owned, I could at least count on my monthly payments.”

Plus, if some or all of her debt is forgiven, she says, “my future could be something I’m looking forward to.”