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Student loan crisis awaits new generation despite Biden plan

WASHINGTON — For millions of Americans, President Joe Biden’s student loan forgiveness offers a life-changing chance to escape the burden of debt. But for future generations of students, that doesn’t solve the underlying reason for the crisis: the rising cost of a college education.

The specter of heavy debt will still hang over current high school students — and all after them — since debt forgiveness only applies to those who took out federal student loans before July 1.

One of the main causes is the increase in tuition fees: today’s four-year universities charge an average of almost $17,000 a year in tuition and compulsory fees, more than double the adjusted average of the inflation 30 years ago, according to federal data.

Biden’s failure to address the larger issue has drawn criticism from Republicans as well as some of his fellow Democrats.

Sen. Catherine Cortez Masto, D-Nev., said canceling the loan “does not address the fundamental issues that make college unaffordable.” Instead, she called for expanding Pell grants earmarked for low-income students and targeted forgiveness for borrowers in need. Other critics included Sen. Michael Bennet, D-Colo., who said the pardon should have been accompanied by action to address the “absurd” cost of college.

“We cannot continue to trap another generation of Americans in this cruel cycle,” Bennett said.

The question is at the heart of the concerns of Ariel Wolfe, 17 years old. The Borden, Indiana high school student has older siblings who are eligible for a pardon, but she won’t. Wolfe has saved about $2,000 for college and hopes to avoid loans, but she doesn’t know if she can. She wants Biden’s debt plan, or something like that, to be available to her and her peers, saying it would be “an incentive for more people to go to college.”

In Olathe, Kansas, high school student Natalie Ren said it’s frustrating that today’s students are getting relief, but not her class, within a year of college.

“So to me, it’s just like, Well, why are they getting their $10,000 of student loan debt taken out?” said Ren, 17. “In the meantime, we’re still going to have to take that full responsibility.”

There’s no doubt that Biden’s debt cancellation plan has a big upside for many Americans, if it survives the legal challenges that are likely to come. More than 20 million people will be eligible to have their federal student debt fully forgiven, and 23 million more could have it reduced, the administration said. The plan waives $10,000 per borrower and an additional $10,000 for Pell Grant recipients, for those earning less than $125,000 per year or $250,000 per household.

Biden also extended a pandemic-era pause on federal student loan payments for what he called the “last time.” Payments are now expected to restart in January.

But without broader action, the nation’s federal student loan debt will return to current levels — $1.6 trillion — within five years of cancellation, according to the nonprofit Committee for a Responsible Federal Budget. profit making that argues for deficit reduction.

“It doesn’t fundamentally solve the problem of student debt,” said Marc Goldwein, the budget group’s senior policy director. “It will be a one-time clean slate that wipes a bunch of people off the rolls. But they will just be replaced by new borrowers.

It also creates an expectation that future presidents could forgive some student debt, which could make it safer for borrowers to take on debt and, in turn, encourage colleges to raise prices further, Goldwein said.

“It has the potential to worsen college affordability,” he said.

Even higher education leaders have said Biden’s plan should only be seen as a first step toward college affordability. The American Council on Education, a group that represents college and university leaders, called on Congress to simplify repayment options and limit interest on student loans, among other changes.

“To avoid forcing current and future students into the same debt quagmire, we must act comprehensively to modernize the federal student loans program,” said Ted Mitchell, president of the group.

Mitchell pointed to state budget cuts to higher education as a “big reason” for rising tuition fees at public universities and rising student debt.

Anticipating criticism, Biden’s plan came with a separate proposal that aims to reduce federal student debt payments going forward. The proposed settlement would create a new repayment plan with monthly payments capped at no more than 5% of a borrower’s discretionary income, compared to 10% in similar existing plans.

It would also forgive any remaining balance after 10 years – compared to 20 years in existing options – and it would raise the repayment floor, meaning no one earning less than 225% of the federal poverty level would need to make payments. monthly.

The idea was well received even by some critics, but overall many saw the timing as a missed opportunity to pursue broader changes.

Major updates to the federal student debt system would require congressional approval, but there has been bipartisan support for an overhaul. There are disagreements over specifics, but lawmakers on both sides have signaled support for expanded Pell grants, simplified loan repayment options and a system to hold colleges accountable when their students get stuck with it. a debt they cannot afford.

Instead of canceling the debt, critics say the Biden administration should have brokered a deal to overhaul the federal lending system through legislation.

“It’s a real disappointment that we didn’t see this happen, and instead had this effort which, to me, is much more of a political solution than a policy,” Beth said. Akers, senior fellow at the American Enterprise Institute, a conservative think tank.

Others wonder if a sharply divided Congress would be able to reach an agreement even on student debt. Biden had previously pushed for a free community college, which many Democrats see as an answer to mounting debt, but he was ultimately unable to garner unified support even from his own party.

After Biden’s free community college proposal was dropped from a spending bill last year, he pledged to achieve it “within the next few years,” but the effort has yet to materialize. been revived.

Even without a federal program, a growing number of cities and states have experimented with their own free college programs in recent years.

Still, the momentum around student debt has raised hopes that broader change is possible. Responding to Biden’s plan, Democratic Representative Bobby Scott of Virginia, chairman of the House Education and Labor Committee, called on Congress to take the next step. He said it would take “bold steps” to ensure that every student receives an education that leads to a good career.

Without greater investments in education and improvements to the federal lending system, he said, “students will continue to take on more debt and borrowers will continue to face rising levels of debt.”


Associated Press writers Heather Hollingsworth and Arleigh Rodgers contributed to this report. Rodgers is a member of the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places reporters in local newsrooms to report on underreported issues.


The Associated Press education team receives support from the Carnegie Corporation of New York. The AP is solely responsible for all content.

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