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    How the US student loan debt crisis started — and how it could end

    How the US student loan debt crisis started — and how it could end The $1.8tn debt has become a hot political issues as midterm elections approachAmerica’s students have a debt problem. A big one. More than 45 million Americans – more than the population of California – now owe a collective $1.7tn in student debt.What to do about that debt has become a hot political issues as midterm elections approach.The vast majority of the money is owed to the federal government, which has been backing or directly offering student loans for higher education since 1958. While student loans are not new in the United States, the amount of student debt has more than tripled over the last 16 years.The Biden administration has recently hinted that some form of student debt forgiveness could be announced soon – specifically, canceling at least $10,000 in student debt for Americans earning less than $125,000 a year. With that threshold, most student loan borrowers will qualify for some debt forgiveness.If the executive action is undertaken, it will be the first large debt cancellation by the federal government to address the student debt crisis. Understanding the impact of such a dramatic policy requires unpacking the student debt crisis, beginning with its origins.How the student debt crisis startedIn 1957 the Soviet Union successfully launching the first earth-orbiting satellite, Sputnik. With the cold war raging the federal government feared the US education system was failing to produce enough scientists and engineers to compete with the Soviets and, in 1958, started handing out student loans through the National Defense Education Act.Nearly a decade later, the Higher Education Act of 1965 allowed more people to take out loans as the federal government promised to pay back banks for any loans that were not repaid.“It all started from this choice, which I think was a terrible choice, to decide that as a policy matter we should support higher education … by giving [students] an opportunity to get a loan,” said Dalié Jimenez, professor of law and director of the Student Loan Law Initiative at the University of California at Irvine. “It was just a terrible mistake.”Starting in 2010, the federal government started directly lending money to student borrowers. In the wake of the Great Recession, the amount of student debt began to increase rapidly. Colleges were seeing increased enrollment as people left the workforce to go back to school. States slashed their higher education budgets, leading to higher tuition. More students were turning to for-profit colleges, which tend to be more expensive than public colleges.Over the last few years, the amount of grant aid, which does not need to be paid back, has risen. Yet despite this appearance of more financial support for students to attend college, the cost of attendance has remained the same.Two line charts comparing the gap between the listed price and what it actually costs to attend public and non-profit private institutions.The cost of attending public college has actually increased at a higher rate than the cost to attend a private college. The net cost of attendance for four-year public colleges, which takes into account any grants students receive, went from $17,500 in 2006 to $20,210 in 2016, according to data from College Board.Line chart of the costs of public and private non-profit increasing and then slightly decreasing from 2006-07 to 2020-21 school years.“That era 10 years ago was a really formative moment for producing a lot of debt that’s still out there,” said Kevin Miller, associate director for higher education at the Bipartisan Policy Center’s Economic Policy Project. “The cost of college attendance has gone up a lot while household incomes in the United States haven’t … there’s a real sense that if grant, state or institutional aid isn’t filling the gap, that just leaves debt as the only option.”What student debt looks like todayFor the 2021-2022 school year, the average cost of tuition and fees for a four-year public college is $10,740. The cost is nearly quadrupled for private institutions, at an average of $38,070. Even with grant aid, the cost of attendance is an average of $19,230 for public institutions and $32,720 at private schools.Estimates put the average debt of those in the class of 2019 who took out student loans at $28,950. The number is close to the maximum $31,000 that students who are dependents of parents or guardians can borrow from the federal government to fund undergraduate education.Area chart of student debt increasing from Q1 2006 to Q1 2022.Continuing racial wealth disparities are reflected in who has to take out loans to fund college. About half of Black college students take out student loans, compared with 40% of white students. Black Americans owe an average of $25,000 more in debt than their white counterparts and are more likely to be behind on their payments.Despite the amount of debt many students need to take on to attend college, nearly 20 million Americans still enroll in college every year. While earnings can depend on a person’s industry, those with a bachelor’s degrees earn 75% more in their lifetime than those with just a high school diploma.“The message is you have to get a college degree. It’s not just a rhetorical message, it’s an actual truth that if you don’t have a college degree, particularly if you are Black or brown … you will not be able to get a job that is better than your parents’,” Jimenez said.Those with graduate and professional degrees earn even more, but the price for an advanced degree is even higher. A good chunk of student debt – about 40% – is held by those who took out loans to pay for graduate school.What the government has done to address student debtThe most substantial policy addressing student debt was first implemented by the Trump administration, which paused student loan payments and interest accrual at the beginning of the Covid-19 pandemic. Both Trump and Biden extended the pause over the last two years, and it is now set to expire on 31 August.Since the beginning of this year, Biden has announced a slate of additional policies alongside the pause extension. Those who have defaulted or are delinquent on their federal student loans will be returned to good standing. Biden forgave $415m in student debt for borrowers who attended predatory for-profit schools.His administration also announced changes to the Public Service Loan Forgiveness Program, which forgives the student loans of borrowers who are non-profit and government employees after 10 years of debt or after 120 payments are made. Over 113,000 borrowers with a cumulative $6.8bn in debt are now eligible for forgiveness. Over the years, the program has been under much criticism, as relief through the program was rare and borrowers were often deemed not qualified for logistical reasons.The debate over debt forgivenessEven as it seems Biden is prepared to cancel some debt, the idea has gotten some criticism over the last few months.Republicans have been using student debt as a talking point against Biden as the midterm elections start rolling.Senator Mitt Romney suggested that Democrats canceling student loans is a way of bribing voters. “Other bribe suggestions: Forgive auto loans? Forgive credit card debt? Forgive mortgages?” he wrote on Twitter. JD Vance (who went to Yale Law School) told the Washington Post that “Biden essentially wants blue-collar workers like truck drivers – who didn’t have the luxury of going to college to get drunk for four years – to bail out a bunch of upper-middle-class kids.”The reality is that the student loans of those in the highest income quartile – people making more than $97,000 – do make up a third of all outstanding student debt. But many low-income Americans also have student debt, though the amount of debt they have is smaller. Those making below $27,000 a year make up 17% of all borrowers, but their loans comprise 12% of all the outstanding debt.An income threshold could be a way for the government to target forgiveness to those who need it most. But some have pointed out that an income ceiling does not take into consideration a person’s wealth.“You’re looking at a snapshot of what your income was this year or last year, that tells you very little,” Jimenez said. “If your family has no wealth, you’re very differently situated from someone who has family wealth or personal wealth from previous careers.”Those who have been advocating for student debt cancellation say that $10,000 in forgiveness will not be enough to address the breadth of the crisis. Democratic lawmakers, including Senate majority leader Chuck Schumer, Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez, have called on Biden to cancel up to $50,000.“I don’t believe in a cutoff, especially for so many of the frontline workers who are drowning in debt and would likely be excluded from relief,” Ocasio-Cortez told the Washington Post. “Canceling $50,000 in debt is where you really make a dent in inequality and the racial gap. $10,000 isn’t.”Ending the student debt crisis for goodEven if Biden forgives some student debt, future college students will continue to take out loans – and at higher interest rates. Tackling the price tag of college will come with its own complications, but advocates say it will be necessary to ensure student debt does not get worse.While Biden’s plan for free community college was killed along with the rest of the social and climate spending bill that was making its way through Congress, some efforts for better college funding are happening at the local level.In March, the governor of New Mexico signed a bill that would use $75m in state funds to cover tuition and fees for undergraduate students at two- and four-year colleges. Drives for similar government support have been seen in Pennsylvania, California and Maine.“The cost of college is too high for a lot of students to manage without debt. Making it so that students can go without debt or take less debt in the first place is the thing that we really need to be focusing on,” Miller said. “What about the next generation or the one after that?”
    This article was amended on 26 May 2022. An earlier version stated that student debt had doubled over 16 years. In fact, it has more than tripled.
    TopicsUS student debtUS personal financeEconomicsBiden administrationUS politicsexplainersReuse this content More

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    Biden isn’t serious about forgiving student debt. ‘Means-testing’ is a con | David Sirota

    Biden isn’t serious about forgiving student debt. ‘Means-testing’ is a conDavid Sirota and Andrew PerezThe Biden administration’s proposal is cynicism masquerading as populism – and it will enrage everyone and hurt the Democrats’ electoral chances During the 2020 Democratic primary, Pete Buttigieg’s personal ambition led him to poison the conversation about education in America. Desperate for a contrast point with his rivals, the son of a private university professor aired ads blasting the idea of tuition-free college because he said it would make higher education “free even for the kids of millionaires.”The attack line, borrowed from former secretary of state Hillary Clinton, was cynicism masquerading as populism. It was an attempt to limit the financial and political benefits of a proposal to make college free. Worse, it was disguised as a brave stand against the oligarchs bankrolling Buttigieg’s campaign, even though it actually wasn’t – almost no rich scions would benefit from free college.Buttigieg and copycats like Amy Klobuchar were pushing a larger lie. Call it the means-testing con – the idea that social programs should not be universal, and should instead only be available to those who fall below a certain income level. It is a concept eroding national unity and being carried forward by wealthy pundits and a Democratic party that has discarded the lessons of its own universalist triumphs like social security, Medicare and the GI Bill.This week the Biden administration tore a page from Buttigieg’s book. The White House leaked that it is considering finally following through on Joe Biden’s promise to cancel some student debt – but not the $50,000 pushed by congressional Democrats, and only for those below an income threshold.In trial-ballooning the college debt relief proposal, the president is boosting the media-manufactured fiction that real, universal college debt relief would mostly help rich Ivy League kids – even though data from the Roosevelt Institute conclusively proves that canceling student debt “would provide more benefits to those with fewer economic resources and could play a critical role in addressing the racial wealth gap and building the Black middle class”.As the report points out: “People from wealthy backgrounds (and their parents) rarely use student loans to pay for college.”But setting aside how the media-driven discourse omits those inconvenient facts, what’s noteworthy here is the underlying principle.This latest discussion of means-testing follows Biden and congressional Democrats pushing to substantially limit eligibility for Covid-19 survival checks and the expanded child tax credit. Taken together, it suggests that Democrats’ zeal for means-testing is no anomaly – it is a deeply held ideology that is both dangerous for the party’s electoral prospects and for the country’s fraying social contract.The superficial appeal of means-testing is obvious: it promises to prevent giving even more public money to rich people who don’t need it.But in practice, means-testing is a way to take simple universal programs and make them complicated and inaccessible. Calculating exact income levels and then proving them for eligibility means reams of red tape for both the potential beneficiary and a government bureaucracy that must be created to process that paperwork.Data from the food stamp and Medicaid programs illustrate how means-testing creates brutal time and administrative barriers to benefits, which reduce payouts to eligible populations. In the case of means-testing student debt relief, those barriers may end up wholly excluding large swaths of working-class debtors.This is a feature, not a bug – it is means-testers’ unstated objective. They want to limit benefits for the working class, but not admit that’s their goal.Universal programs like social security and Medicare were what we once defined as “society” or “civilization”. They may be derided as “entitlements”, but the reason they have (so far) survived for so long is because their universality makes them wildly successful in their missions and more difficult to demonize. Their universality also precludes austerians from otherizing and disparaging the programs’ recipients.Means-testing destroys that potential unity. It may initially poll well, but it turns “entitlements” into complicated “welfare” programs only for certain groups, which then makes those programs less popular and makes the beneficiaries easy scapegoats for political opportunists. Think of Ronald Reagan’s “welfare queen” trope vilifying recipients of means-tested food stamps.Now sure, billionaires are eligible for social security and Medicare, and their kids are eligible for free K-12 education – and that aristocracy doesn’t need that help. But when those programs were created, we accepted that rich people being granted access to those programs along with everyone else was the relatively small price to pay for simplicity, universalism and the attendant national unity that comes with it.Not surprisingly, Democrats’ creation of popular universalist programs coincided with the most electorally successful era in the party’s history.Equally unsurprising: the shift to fake means-test populism has coincided with rising popular hatred of liberal technocrats and the Democratic party they control.What is surprising is that Republicans may be starting to understand all this better than Democrats.For instance, Donald Trump’s signature spending legislation offered direct, non-means-tested aid to small businesses during the pandemic. The former president touted a plan to just pay hospital bills for Covid patients who didn’t have coverage. The programs were hardly perfect, but they were straightforward, universal, relatively successful and extremely popular because they embodied a powerful principle: keep it simple, stupid.When it comes to student debt relief, there’s a rare chance for Democrats to also embrace simplicity – and prevent Republicans from outflanking them.More specifically, they can use the student debt crisis to finally return to their universalist roots – and they don’t have to skimp and provide merely $10,000 worth of relief.Biden could simply send out a one-page letter to every student borrower telling them that their federal student debt is now $0.Yes, Republican lawmakers would try to block it and affluent pundits would tweet-cry about it to each other.But amid all that elite whining and couch-fainting, Democrats would be launching a battle against an immoral system of education debt – and directly helping 40 million voters ahead of a midterm election.It’s so easy and simple – which is probably why they won’t do it.
    David Sirota is a Guardian US columnist and an award-winning investigative journalist. He is an editor-at-large at Jacobin, and the founder of the Lever. He served as Bernie Sanders’ presidential campaign speechwriter
    Andrew Perez is a senior editor at The Lever and a co-founder of the Democratic Policy Center
    A version of this piece was first published in the Lever, a reader-supported investigative news outlet
    TopicsUS student debtOpinionUS politicsBiden administrationJoe BidenDemocratsUS CongressUS student financecommentReuse this content More

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    How we can truly repay our frontline health workers: clear their debts | Alissa Quart, Astra Taylor And Brittany M Powell

    How we can truly repay our frontline health workers: clear their debts Many of the workers risking their lives amid the pandemic are burdened with student debt. We owe them more than just applause by Alissa Quart, Astra Taylor And Brittany M Powell [embedded content] Photograph by Bayete Ross Smith/EHRP and The Guardian Every day […] More