It appears more likely now that some sort of college student loan forgiveness may be looming for millions of borrowers in this country. President Joe Biden is said to be weighing options that will likely not go as far as some progressives are pushing and will, certainly, go too far for conservatives who say there should be no forgiveness at all.
It’s a touchy political issue — of course, what isn’t these days? — that will certainly have financial ramifications on a lot of people.
However, assuming something is done, the biggest mistake is to think of this issue only in the past tense. Any planning here must also look ahead to make a college education affordable going forward.
The cost of higher education in this country has screamed into the stratosphere. A study conducted by College Board Research found that the average annual cost (which includes such things as housing and transportation expenses and school supplies, not just tuition and fees) for an in-state student at a public college in 2021-22 was $27,330, while the average cost for an out-of-state student was $44,150. For a private college, the average one-year cost was $54,800. (The average estimated prices for just tuition and fees is $10,740 for public, in-state students; $27,560 for public, out-of-state students; and $38,070 at private institutions.)
According to My eLearning World, the average cost of a college education in the U.S. has risen 4.6 times the rate of inflation over the past 50 years. It’s estimated that, if college costs had risen consistently with inflation over the past half-century, a student would be paying approximately $10,000 per year (in-state) to attend a public university and $20,000 a year to attend a private university.
The price of a college education has not only escalated dramatically, but it’s also putting such an education out of reach for an increasing number of Americans. This would be disastrous for the country in the long term.
Some Democrats have called for the forgiveness of $50,000 of student loan debt per person, a move that would cost more than $900 billion and forgive the full balance for more than 79% of the 37.9 million federal borrowers, according to the New York Federal Reserve.
The president reportedly seems reticent on this expansive step but appears more open to, say, setting a household income limit of $75,000, which would lower the total cost to about $507 billion while forgiving a maximum of $10,000 per borrower.
Republicans are attacking the idea as an election-year ploy, with Sen. Mitt Romney tweeting last week. “Other bribe suggestions: Forgive auto loans? Forgive credit card debt? Forgive mortgages? And put a wealth tax on the super-rich to pay for it all. What could possibly go wrong?”
This line of political attack (which, notably, was a coordinated talking point among several Republicans last week) represents an effort to gloss over the issue and place all debt in the same basket, building a case to do nothing.
Something with income limits would likely be the most prudent approach, or there could be a move to cap interest payments, which often tend to do very little to lower the principal of the loan.
The challenge — and the imperative need — is to also address the college cost issue for future students. Prohibitive education costs will do immense damage to this nation’s ability to produce scientists, doctors, educators, engineers and so much more unless costs to obtain such training are reined in at saner levels.
While current talk appears to deal with debt already on the books, the dark prospect on the horizon cannot and must not be ignored, or else the cycle will continue.