Commentary

The Biden administration faces a gargantuan college debt crisis and there’s no perfect solution

December 30, 2020 7:00 am
graduates

Graduation ceremony. Credit: ShareAlike Commons

Last month, 238 organizations signed a letter to President-elect Joe Biden and Vice President-elect Kamala Harris, beseeching them to get rid of the enormous tab for federal college loan debt.

Ideally, the wipeout would happen on “Day One” of the new administration, though it would be a tough sell.

“Before the COVID-19 public health crisis began, student debt was already a drag on the national economy, weighing heaviest on Black and Latinx communities, as well as women,” wrote the groups representing civil rights advocates, consumers, labor, students, and more.

The organizations called for “bold and immediate action” to cancel existing debt, not only for student loan borrowers but also for less-noticed parent borrowers who took out “Parent PLUS” loans to help their kids go to college.

Now, many of those parents are saddled with new college debt — after paying off their own student loans.

The U.S. Capitol. Credit: Samuel Corum/Getty Images

Taking on the college loan crisis for some 44 million borrowers won’t be simple for the new Biden administration, given the breadth of the problem. Not all lawmakers in Congress, and those watching the issue closely, support getting rid of the debt taken on by students and parents.

This fall, the Federal Reserve released data showing student loan debt alone at $1.676 trillion, up from about $1.3 trillion in 2015.

At that time, the Florida Phoenix found that even influential Florida politicians are saddled by enormous student loan debt — more than $200,000 in two cases and several others with college loan obligations larger than $100,000.

Parents who’ve been borrowing

As for the Parent PLUS loans, the U.S. Department of Education recently provided public data — for the first time — showing just “how much parents are borrowing to help their children pay for school at each institution,” according to a USDE news release.

Many of the Parent PLUS numbers are stunning, based on the department’s new data for public and private colleges.

At the Ringling College of Art and Design in Sarasota, for example, the median total debt after graduation is $99,800 for Parent PLUS loans. That would mean a monthly loan payment of $1,073, based on a standard 10-year payment plan, according to the USDE’s data.

(The data point is described as “the median cumulative PLUS loan debt of parents who borrowed on behalf of an undergraduate student who graduated. This figure includes only Parent PLUS loans originated at the school awarding the credential; it excludes Parent PLUS loans originated at previously attended schools.”)

At the Embry-Riddle Aeronautical University-Daytona Beach, the median figure for Parent Plus loans is $74,641. The median at Eckerd College in St. Petersburg is $50,981, the data show.

Graduation
Graduation. Credit: Getty Images

The list goes on, reflecting the enormity of the college debt burden.

A spokesperson at Ringling provided a statement saying:

“Parents typically choose the (federal) PLUS loan program over private loans due to their much better repayment terms and lower interest rate. The PLUS application process is also less complicated than that of private loans. Many parents choose to borrow amounts beyond tuition and room-and-board to cover the costs of non-direct educational expenses, such as books, supplies, transportation …

“Ringling College of Art and Design provides extensive counseling for students and parents with respect to the PLUS program, both at time of acceptance and near graduation…

“We have seen that Ringling College graduates, given their earning potential, often assist their low-income parents with loan repayment. The college has identified student scholarships, which help ease families’ financial obligation, as its most pressing fundraising need.”

You can look up information about college debt on the USDE’s “College Scoreboard,” in the category of “Financial Aid & Debt,” which shows data on federal student loans and Parent PLUS loans.

Possible solutions

During the presidential election, Biden’s campaign endorsed removing at least $10,000 in college debt per person and eliminating undergrad student debt for those making less than $125,000 and attending public or historically Black colleges and universities, according to the HuffPost.

And in the fall, U.S. Senate Minority Leader Chuck Schumer and Sen. Elizabeth Warren of Massachusetts introduced a resolution pushing for cancellation of $50,000 in federal student loans for borrowers, using executive action. The letter from the 238 organizations noted that the resolution “empowers the [U.S.]  Secretary of Education to cancel federal student debt administratively.”

But just recently, Biden told reporters that he unlikely would pursue the avenue pushed by Schumer and Warren to eliminate billions in dollars of student loan debt.

The Washington Post reported that Biden said: “It’s arguable that the president may have the executive power to forgive up to $50,000 in student debt. … Well, I think that’s pretty questionable. I’m unsure of that. I’d be unlikely to do that.”

What do others think?

While many advocates support wiping out the college loan debt, others don’t feel that way.

An editorial in the Los Angeles Times argued:

“This has led some advocates to call for forgiving the debt, with President-elect Joe Biden vowing during his campaign to forgive up to $10,000 for each borrower. More liberal Democrats are fighting for up to $50,000, and the progressive wing says all existing debt should be canceled.

“Such a bailout would be hugely expensive, though; forgiving up to $50,000 would cost about $1 trillion. A disproportionate amount of that relief would go to higher-wage earners, who are more likely to attend college, especially private college. And the money would help only this crop of debtors. Future students would still be on the hook.

Florida State University. Credit: Diane Rado

“There are many ways of providing relief to borrowers, but across-the-board forgiveness would be the least equitable and least cost-effective. Instead, the government should help the neediest graduates, those who lost their incomes during the pandemic and those who took steps to keep their debt low by attending public colleges and working through their college years.”

Barbara Mistick is president of the National Association of Independent Colleges and Universities and spoke earlier this month with the Florida Phoenix about Parent PLUS loans and other issues.

She said the problem with student and parent debt has to do in part with federal aid. “I think it is more about the fact that student aid — federal aid — hasn’t really increased,” Mistick said. “If you look at Pell grants [for low-income students], they used to cover almost three-fourths of the cost of attendance. Pell has not kept pace with inflation.”

Doubling the Pell grant could help students and parents cover college costs, which would reduce college debt, Mistick said.

She added that the federal government could extend the eligibility for Pell grants to the middle class, which would reduce borrowing for student and parent loans.

Overall, “This is just an extremely complex area of federal policy,” Mistick said. “There is no perfect solution.”

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Diane Rado
Diane Rado

Diane Rado has covered state and local government and public schools in six states over some 30 years, focusing on policy and investigative stories as well as legislative and political reporting. She spent most of her career at the St. Petersburg (Tampa Bay) Times and the Chicago Tribune. She has a master’s degree in journalism from Northwestern University and did a fellowship in education reform at the University of Michigan in 1999-2000. She is married to a journalist and has three adult children.

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