Could full or partial student loan forgiveness be coming any time soon? It's hard to say

Americans have a bit longer to take advantage of the pause on federal student loan payments thanks to a final extension from the U.S. Department of Education. But the extra time to pay back loans has prompted some to ask: Where do lawmakers stand on the student debt forgiveness debate?

The department announced Aug. 6 that it would extend the moratorium on federal student loan payments until Jan. 31. The program, which has extended emergency relief to millions of borrowers during the COVID-19 pandemic, was set to expire in September. It is the last time the moratorium will be extended, Education Secretary Miguel A. Cardona said in a statement.

“The payment pause has been a lifeline that allowed millions of Americans to focus on their families, health and finances instead of student loans during the national emergency,” Cardona said. “As our nation’s economy continues to recover from a deep hole, this final extension will give students and borrowers the time they need."

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The pause, however, hasn't stopped the total amount of U.S. student debt from rising. As of July, approximately 43 million Americans owe $1.73 trillion in student loan debt. The national student debt total balance increased by about 8% in 2020, and the average student loan debt increased by 4.5%, according to EducationData.org.

The debate on whether or not to forgive student loan debt is a complicated one, filled with opinions across the spectrum, legal nuances and uncertain timelines. So what student debt forgiveness plans have lawmakers proposed? Where are they in the process? And what do experts say needs to happen long-term in order to make college more affordable for everyone?

What are the plans to forgive student debt?

There are two main plans on the table, said Megan Coval, vice president of policy and federal relations at National Association of Student Financial Aid Administrators (NASFAA).

President Joe Biden said multiple times on the campaign trail and since taking office that he's in favor of canceling $10,000 in student debt per person.

Another plan Biden addressed during his campaign was to forgive all undergraduate tuition-related federal student loan debt from borrowers at public colleges and universities earning up to $125,000 a year. That plan would also apply to students at private Historically Black College and Universities and other minority-serving institutions, according to his website.

Meanwhile, other Democrats are calling on Biden to cancel even more debt per person. Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren and Rep. Ayanna Pressley urged Biden in late July to forgive up to $50,000 in federal student loan debt per borrower through executive action. These lawmakers say Biden has the authority to do so under the Higher Education Act, according to Warren's website, but some financial aid experts say its not legally possible for the president to forgive student debt through executive action and that only Congress has that power.

When might student debt actually get canceled?

It's difficult to predict exactly when Biden or other elected officials might officially forgive Americans' student debt.

Any significant measures are unlikely to happen before this fall, said Mark Kantrowitz,  a Chicago-based  higher education expert who specializes in how students save and pay for college.

Kantrowitz said there isn't a lot of pressure on lawmakers right now to pursue loan forgiveness because borrowers aren't required to make payments until next year. That, on top of a hefty legislative calendar and that several senior policy positions in the U.S. Department of Education still need to be filled, could mean we might not hear anything related to student debt forgiveness until the end of the year.

On the campaign trail, Biden initially said he would authorize up to $10,000 in student debt relief per borrower as part of a COVID-19 relief spending, but March's $1.9 trillion stimulus package didn't include the provision. There is also no mention of student debt forgiveness in Biden's budget request to Congress or infrastructure package.

Biden said at a CNN town hall in February that, contrary to what Warren and Schumer say, he doesn't have the executive power to cancel up to $50,000 per borrower. He has since asked the Justice Department and the Education Department to review his authority on the matter.

Kantrowitz said once that report comes back and other priorities clear up Americans might see Congress move more quickly towards forgiveness of some form. 

Who supports, opposes student debt forgiveness? 

Americans show strong support for reforming student debt and the cost of higher education. How exactly lawmakers should do that, however, is a grab-bag of opinions.

An April 2021 survey by Intelligent.com, a Seattle-based company specializing in online degree rankings and higher education planning, found 49% of Americans say they are in favor of federal student loan forgiveness, and more than 60% believe it will stimulate the economy.

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A similar survey by The Harris Poll in December 2020 found more than half of Americans support debt-relief solutions, including forgiveness of a flat amount of student debt (64%) and forgiveness of all student loan debt (55%). In addition, nearly two-thirds of respondents support forgiving all student loan debt for people working in certain fields like health care, STEM and public service.

More than 400 organizations, including the ACLU, NAACP and the American Federation of Teachers, have also lobbied Biden to cancel student debt.

Not everyone loves the idea of forgiving student debt though. About 19% of Americans oppose student debt forgiveness, according to Intelligent.com. The most common reasons are that it discourages financial accountability and it’s unfair to those who’ve already paid off their loans.

Regardless of their feelings toward debt forgiveness, a national poll conducted for The Pew Charitable Trusts found 81% of Americans believe that the government should make it easier for borrowers to repay student loans. A majority from both major political parties — 90% of Democrats and 68% of Republicans — said the government should play a role in addressing problems with the student loan repayment system.

Those who currently have student loans were more likely to support this statement with about 88% of respondents. In addition, respondents who are women, young and people of color — those who could be most likely to benefit — were most likely to support government action, the poll found. 

How much student loan debt do Ohioans have?

Ohioans collectively have nearly $62 billion in total student loan debt, according to the U.S. Department of Education. Among the state's nearly 2 million borrowers, the average Ohioan owes nearly $35,000 in student loans — slightly less than the national average of $36,406.

And almost 15% of all Ohio residents still have some student loans to pay off.

How much debt each student carries, however, is dependent on which school they attended and what field they studied. 

Typically, most undergrads finish college with little or modest debt, according to the Brookings Institute. About 30% of undergrads leave college with no debt and about 25% with less than $20,000. Only about 6% of borrowers owe more than $100,000, and they owe about one-third of all the student debt. 

A 2019 analysis by Student Loan Hero, an online site for managing student loans from LendingTree, found that while some majors leave students with more debt, they have a higher earnings-to-debt ratio. STEM fields, for instance, had the highest return on their investment. The average mechanical engineering major in 2017 took out nearly $9,000 in student loans, but was expected to earn about $63,000 after graduation.

Debt outpaces earnings for other majors including education, visual and performing arts, and social work (which all had lower early-career median wages,) as well as law and pharmacy degrees (which usually require second degrees to earn higher wages.)

What's next?

Experts and advocates say elected officials and schools need to transform higher education altogether and solve the issue of student loan debt beyond just cancelling loan balances.

"A big question we have is what happens after this?" said Coval of the NASFAA. "What happens to the students who graduate next year and the year after that? They're still in that system that's given everyone else this debt."

Coval said NASFAA is focused on advocating for a more holistic approach to student debt forgiveness. That would include actions like simplifying the loan repayment process, increasing loan forgiveness for graduates that go into public service and doubling the federal Pell Grant amount, the main federal-aid program for needy students.

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Richard Vedder, an economics emeritus professor at Ohio University, said other targeted loan forgiveness programs that are income-based could be effective, such as debt cancellation for senior citizens. Income-share agreements, like that at Purdue University, in which students agree to give a fixed percentage of their future salary to a school in exchange for funds, are also a possible option to make college more affordable, he said. 

Regardless of how much student debt lawmakers might forgive and how, Coval said the entire system is in need of a major fix to make college affordable for students for years to come.

"Debt forgiveness alone will be a Band-Aid on the whole system if we're not making any improvements to the system at the core," she said.

shendrix@dispatch.com

@sheridan120