But whatever your take on Biden’s motives, a few things seem clear. First: Relieving up to $20,000 in student debt per borrower is a financial tourniquet that will help the 43 million people caught in a complex and undeniable systemic breakdown.Second: it doesn’t even start Solve the problem.
Once the debt is wiped away, we are left with the harsh reality of tuition getting out of hand, and there is no silver bullet to control them.
The economics behind tuition fees are complex and vary from institution to institution. Some states, like Louisiana and Arizona, have withdrawn funds from their own public higher education systems, forcing colleges to raise tuition and letting federal loans fill the gap. But that’s not the case in all states, said Kevin Carey, vice president of education policy at the think tank New America. In some cases, tuition has risen with inflation and population growth.
The factors fueling tuition increases have more to do with the size of the higher education system. The U.S. has a sprawling decentralized system of hundreds of nonprofit universities, and the national government doesn’t control prices. The country also has a large middle class who are willing to pay top dollar for their children’s education.
Each of these institutions is competing for talent. and for funding.
In short: “There’s no system about driving down prices,” Carey said. “Everything is pushing them.”
That’s why some critics of the Biden administration’s student debt relief worry about the precedent it sets. Universities don’t hesitate to raise tuition fees if the government expects the debt may be forgiven. Students may take on more debt, some of which is expected to be wiped out eventually.
Best of all, debt cancellation certainly doesn’t reduce tuition.
Other ways to deal with debt
Some critics of Biden’s plan have suggested that a better solution is to treat student loan debt like any other consumer debt: let the bankruptcy court handle it.
Now, it’s not impossible to relieve student loan debt through bankruptcy, but it’s much more difficult than credit card debt.
While it’s not an easy or painless solution — bankruptcy has very real financial consequences and social stigma, making it a last resort — Cass believes the cost is low enough to “ensure that the real need to start over One can get one, but high enough that most people who can avoid it will do their best to avoid it.”
Good luck, Class of 2028
For better or worse, the bachelor’s degree remains deeply ingrained in the corporate recruiting process. In recent decades, many fields such as nursing have grown to require a range of additional certifications, continuing education (and, of course, more student loans).
A bachelor’s degree has become the new standard, Carey said. “And all these post-baccalaureate degrees and certificates and credentials — all of these things are controlled by the university … and paid for through loans.”
Another flaw in Biden’s plan, critics point to, is the lack of clarity on future loan forgiveness. If you graduated in debt and earned less than $125,000 a year, congratulations—you’re $10 less now. But the younger generation whose student loans are taken out may be out of luck after the July 2022 deadline.
“As we say, ’27 students are entering college,” Carey said. “They’re not getting any loan forgiveness. I think people are going to start raising their hands and saying, ‘Wait, what?'”
