Stranded at the crossroads of student debt • Iowa Capital Dispatch

A long-time acquaintance called me in 2022 to catch up. Throughout our nearly 50 years of friendship, I don’t recall discussing anything political.

Somehow the topic of President Biden’s signature plan for student loan debt forgiveness came up. I was startled when he challenged me, asking, “Why should I pay for someone else’s college debt?”

I could think of a few reasons. But after quickly mentioning one, I changed the subject. We’ve never discussed the topic again.

He’s a hard-working guy who grew up on a very fertile patch of Iowa farmland. After serving in Vietnam, he completed college. He isn’t married and has no children. He’s traveled extensively. Now the sole owner/manager of his family farm, he’s extremely generous to his alma mater, as well as to FFA and 4-H programs and his professional associations.

Yet he’s not an outlier on this issue. Why is college debt relief for 43.5 million Americans such a flashpoint for so many?

College education raises the stakes

My mom attended two years of college, and it always was a given that my siblings and I would continue our education following high school. The finances were challenging. We farmed with my grandparents, so we didn’t own any assets, and the cash flow from sales of livestock and Dad’s off-farm job as a school bus driver was meager.

Like many of my college classmates, I was fortunate to receive an Iowa Tuition Grant as well as a federal Pell Grant. Combined with my work-study, and summer jobs, I graduated with only a small loan. After teaching for a year, I took my earnings to graduate school in journalism at the University of Missouri-Columbia, where I was awarded an assistantship, and a job writing for the alumni magazine. Within a few years of beginning my first job, I paid off my grad school loan.

Consider this caveat: A college student in 1968-69 paid only $1,545 a year (adjusted for inflation) for tuition, fees, room, and board at a public four-year college.

Flash forward through 2015. My children completed college at a considerably higher cost with a combination of scholarships, loans, part-time jobs, and substantial support from their parents. Both were allowed the experience of repaying a small loan following their graduate school.

The College Board lists the average 2023-24 total cost as $56,190 at private, nonprofit four-year schools; it’s $24,030 at a four year public college in-state. Throughout the past decade, I’ve watched a dwindling number of students from my daughters’ rural high schools graduate with four year degrees. Two-year community college associate degrees, or technical school certificates are common, but not the norm.

Several of my nieces and nephews and their friends in Webster and Boone Counties incurred college debt, but have no degree. Unfortunately, many low-income, first-generation students are trapped in dead-end jobs, making incremental loan repayments. Many others accrued crushing debt from predatory career training programs.

Help is on the horizon

The student loan debt crisis has been decades in the making. Prior to the pandemic, about a quarter of student loan borrowers were in delinquency or default. After a March 2020 pandemic pause, loan repayments resumed in September 2023.

So what’s the status of student debt relief?

Biden’s initial sweeping effort relied on The Higher Education Relief Opportunities for Students Act of 2003 (HEROES) and justified its use of emergency powers due to Covid. It was challenged by six states, including Iowa, and the Supreme Court blocked its broad reach in 2023.

The Biden administration has retooled its approach, using rulemaking and regulations under the Higher Education Act, to target specific situations and populations. The SAVE (Saving on a Valuable Education) plan was rolled out in August 2023. A total of 7.5 million borrowers have enrolled according to a February 2024 Biden Fact Sheet, and about 153,000 borrowers have had $1.2 billion in debt cancelled. Monthly payments are based on borrower’s income and family size, instead of their loan balance. (Another 1 million borrowers have had their loans canceled through Public Service Loan Forgiveness program.)

Last week in Wisconsin, Biden announced additional actions for nearly 30 million borrowers:

• Cancellation of up to $20,000 of accrued interest for 23 million borrowers who owe more than their initial loan amount
• Cancellation of the full amount for an additional 4 million borrowers with certain income limits
• Cancellation of debt for another 2 million borrowers with loans that have been in repayment for 20 years or more
• Relief for borrowers who attended now closed or insolvent institutions
• Relief for hardship situations, including medical or childcare costs
• Altogether, more than 10 million borrowers would receive at least $5,000 in relief

The unfairness arguments

Why not help this generation of young Americans saddled with crushing debt?

Debt relief is unfair to those who repaid their loans and it’s an unfair redistribution of debt. I worked extra jobs to pay off my college loans. Everyone else should do the same!    What about my car loan, home mortgage, credit card debt — no one is helping me!

*See caveat on today’s cost differential. Lower-income Americans who qualified for Pell Grants are eligible for greater debt forgiveness than other borrowers; although it’s possible some with higher incomes might be helped.

Debt relief will worsen the U.S. economy, exacerbating inflation. Recipients won’t suddenly have money deposited in their accounts. According to the Center for Economic and Policy Research, the impact will be minimal.

It’s unfair to those who chose not to attend college. Four-year college isn’t for everyone. Many technical careers pay well, and require less investment. But any perceived lucky breaks for someone else diminishes me, takes away from me, and cheats me out of what I deserve!

Forgiving debt doesn’t reduce college tuition costs, which have risen faster than inflation. This is a valid point. The higher education cost structure requires reform; otherwise history will repeat itself. It also might encourage the expectation that debt will be forgiven in the future. Just this month, Vanderbilt University became the first to charge $100,00 in total expenses per year (few will pay the entire tab). But there needs to be a multi-faceted effort to rein in college costs and increase Pell Grants.

Both Sens. Joni Ernst and Chuck Grassley oppose student debt relief. Ernst calls it a “student loan socialism scheme.”

Socialism? Politicians love to indulge in whataboutisms, so I have a few: Don’t we bail out banks and savings and loans? Didn’t we send COVID-19 Paycheck Protection Program loans to businesses and corporations that didn’t qualify, and never repaid them? How many Americans who begrudge relief to student borrowers received tax breaks from the 2017 tax law signed by our former president? It’s obvious that both are pandering to their base and fanning the flames of antagonism against “elites” and liberals.

The common good arguments

Beginning in the 1940s and extending into the 1970s, the federal government provided generous college grant aid. Post-secondary education was perceived as a public good because it paved a pathway to the middle class. Now the focus of student aid is on loans and scholarships, and it seems as if post high school education is regarded as a private good.

Yet how many of this generation of student borrowers have postponed purchasing a house or a car, or starting a business, as well as marriage and children because of their debt? Wouldn’t these investments also contribute to our economy? What’s the downside of having an educated citizenry and workforce? Will the U.S. fall behind the economic output of other countries that fund most of the cost of public college?

Finally, how much of this debt ever will be repaid in full? At some point, isn’t it wise to cut our losses and move on as a society?

To date, about 4 million borrowers in more than 40 states already have had nearly $153 billion cancelled by the two dozen executive steps taken by the Biden administration. That’s about 9% of all outstanding student debt. This latest plan must undergo public comment, and possibly only a few provisions will take effect by the fall. There still may be legal challenges. And the Biden initiatives still won’t help borrowers who don’t have federal loans.

My core belief is the reality that almost everyone receives some type of help along life’s way. I did. My children did, along with families of my neighbors, relatives, and friends. Sure, we worked hard and tried to do the right things. But luck, timing, and the mere accident of birth play a huge role in our success. Very few of us are self-made.

My longtime friend surely attended college with help from the federal government, based on his military service. No doubt taxpayers in his county and state paid property taxes for his K-12 education. Today, as a landowner, he’s already paying taxes to educate other people’s children. All American taxpayers pay for the benefits farmers and nonfarmers receive from the Farm (food and fiber) Bill. Thanks to the Iowa Legislature in 2022, retired Iowans don’t have to pay taxes on most forms of retirement income.

In his book, “The Tyranny of Merit, What’s Become of the Common Good?” Michael J. Sandel concludes: “In an unequal society, those who land on top want to believe their success is morally justified. In a meritocratic society, this means the winners must believe they have earned their success through their own talent and hard work … For the more we think of ourselves as self-made and self-sufficient, the harder it is to learn gratitude and humility. And without these sentiments, it is hard to care for the common good.”

As a society, we’re at the crossroads for reclaiming the true value of public education as a common good.