Thanksgiving is coming. Need some cannon fodder for a rousing back-and-forth dinner table conversation? Try floating this balloon: Student loan debt relief. Then sit back and watch as the hot potato is tossed. Rampant inflation in the cost of a college education—up more than 65% since 2000, according to Best Colleges—has naturally led to a meteoric rise in student loan debt. For many, paying off the debt has become an albatross. Large numbers of debtors literally see no way out and are unable to keep up with the loans, while at the same time they are trying to start a working life and become productive members of society. As part of his campaign in 2020, President Joe Biden promised to pursue extensive debt forgiveness for many of those struggling to repay their student loans. Despite encountering roadblocks, including a 6-3 Supreme Court decision declaring the debt forgiveness plan was unconstitutional, Biden, in the nearly four years since he took office, has managed to relieve more student loan debt than any other previous administration. As of July, he’s erased $168.5 billion in debt for 4.76 million borrowers. And, like just about everything in America these days, the student debt relief issue has become polarizing. Dr. David McCuan, professor of political science at Sonoma State University, says the issue of student debt relief is a classic case of politics. The controversy, he says, boils down to two things. “One is the increased costs of college,” he explains. “And the other aspect is you cannot remove this [debt forgiveness] from the politics of today. While the president is not running for reelection and some may consider him a lame duck, the student loan issue is absolutely framed by the politics of the 2024 election.” Costs of education rising Let’s face it. A higher education today is much more expensive than in the past. The cost of earning a degree from a four-year institution is up 747% since 1963, has outpaced inflation by three times in the last 40 years and, since 2010, has risen 12% annually, according to Education Data Initiative ( educationdata.org) which collects data and statistics about the U.S. education system. Part of the reason, says McCuan, is that higher education spending has become much more discretionary in both state and federal budgets, leveling off at the federal level and declining at the state level. The rising cost of higher education is similar to the housing market, says Dr. Robert Eyler, interim associate vice president of government relations and professor of economics at Sonoma State University. “It’s very similar to housing markets in the sense that, as housing prices have gone up, it costs more to borrow in terms of just getting in the door. Ten years ago you could have borrowed half as much as what you need to borrow today to buy the same place. Because of the escalating costs of going to school, you have more financial risk in nominal terms than you did 10 years ago. A lot of that is how you see your income rising alongside the cost of school. If your wage or salary is increasing along the with the pace of local housing costs, you may not feel like you’re getting behind in terms of moving from a renter to a
David McCuan, poli-sci professor at Sonoma State, says the student-loan issue is ‘absolutely’ framed by politics.
homeowner,” Eyler explains. “School is kind of the same thing. If you do not see your ability to generate income on the other side of getting your degree keeping up with the cost of what getting the education is going to be [the total cost of the debt based on the interest you’re going to pay] versus the other things you have to pay for, the rise in that base number—what you’re basically borrowing to buy—is going to force that final number farther and farther out for you to ultimately pay off.” The higher cost “certainly has a role to play in pushing people closer to the edge,” Eyler says. “But that’s something people need to take into account when they go to school and borrow money to do that.” Politics Although the courts denied Biden’s initial federal student loan debt relief plan, the Department of Education in late July came out with a revised program, sort of a “Plan B.” “They’ve tried to come out with a new policy in response to what happened in the courts. The White House is making a pitch to forgive student loans based upon eligible criteria in order to boost up the exposure to that issue, especially among 18- to 34-year-olds [a key electoral demographic],” McCuan says. “Progressives and liberals will like it…and conservatives will rail that it’s irresponsible.” One can’t overlook the timing. The new plan will automatically cover all who are eligible, unless they choose to opt out of the relief. To opt out, they must have contacted all their loan servicers by Aug. 30.
40 NorthBaybiz
September 2024
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