In recent years, the rising cost of college tuition and the increasing burden of student loan debt have created a college affordability crisis in the United States. To address this issue, President Biden’s administration has proposed a student loan forgiveness plan to relieve millions of Americans struggling with student loan debt. However, there is a significant debate on whether this plan effectively addresses the root causes of the affordability crisis. The American public has responded to this policy in a variety of ways. Some people support this policy, while others are against it (Goss et al. 1046). Several others oppose the plan because they think it would not help students who have already graduated with too much debt. This paper argues that the Biden administration’s student loan forgiveness plan is a step in the right direction but falls short of addressing the college affordability crisis. The following three points will support this thesis: the plan’s limited eligibility criteria, the insufficient amount of loan forgiveness offered, and the potential negative consequences of the plan’s implementation.
The student loan forgiveness program proposed by the Biden administration has drawn significant criticism due to the stringent eligibility requirements. Only borrowers who attended historically black colleges and universities and minority-serving institutions, among others, would be eligible for the full forgiveness of their student loans under the present proposal (Cook). Although this is a significant step toward equity, it does not include many borrowers who may also be grappling with student loan debt. These borrowers include individuals who received their education from public or for-profit institutions. Because of this, a sizeable segment of the population, including borrowers with lower incomes, may be unable to benefit from the plan.
Most people who have taken out student loans did so to attend public schools, with only a small fraction going to HBCUs or MSIs. Hence, by limiting eligibility to certain organizations, many borrowers who could have the greatest requirement for loan forgiveness are excluded from consideration (Goss et al. 1046). In addition, the plan does not apply to borrowers who have already paid off their student loans, which reduces the scope of its potential impact even further. This qualifying criterion may contribute to the continuation of existing inequalities and reduce the plan’s effectiveness in addressing the rising cost of college.
Another criticism of the plan is the limited amount of loan forgiveness offered. The present proposal would forgive a maximum of $10,000 in student loans for each borrower. This figure is much smaller than the typical amount of student loan debt that most borrowers carry. The Federal Reserve reports that the average amount of student loan debt carried by graduates of the class of 2019 was $30,062 (Goss et al. 1046). As a result, the amount of loan forgiveness that is being offered is not enough to alleviate student loan debt.
In addition, the loan forgiveness program has a ceiling loan amount, which may discourage borrowers from pursuing jobs in lower-paying fields such as education, public service, or social work, which may be the fields in which loan forgiveness is required the most. According to the findings of recent studies, excessive levels of student loan debt present an obstacle to entrance into professions that are essential to the common good (Goss et al. 1046). Therefore, it is likely that a larger level of loan forgiveness is required to encourage more people to pursue these vocations, which would ultimately benefit society.
While the plan may offer relief to some borrowers, its implementation may have unintended negative consequences. Forgiveness of student loans, for instance, might incentivize colleges and universities to increase tuition rates even further, leading to a continuance of the affordability crisis. According to the findings of several studies, rises in the amount of money the federal government provides for financial aid have been linked to an increase in the cost of tuition (Goss et al. 1046). As a result, there is a possibility that the proposal will, in the end, make the affordability situation that it is attempting to solve even worse.
In addition, the expense of putting the plan into action could have a detrimental effect on the federal budget, reducing the amount of money available for funding other essential social programs. In addition, there is the prospect of moral hazard, which means that borrowers may be less likely to return their student loans if they perceive that loan forgiveness is possible (Cook). This could result in a negative financial impact on the government. When determining whether or not the Biden administration’s plan to cancel student loans is successful, it is imperative that these possible unintended outcomes be considered.
One of the most significant economic benefits of the student loan forgiveness plan is that it could stimulate the economy. Borrowers could put more money toward retirement savings, start a business, or pay off other debts if they had less to pay on their student loans. More jobs and increased economic activity would result from this. The federal government would benefit from the debt forgiveness plan because it would lower default rates, saving money on collection costs and boosting the Federal Student Loan program’s long-term viability (Cook). The societal benefit of forgiving student loans is that it would help narrow the wealth gap. Reducing the debt load of those who need it most is one way to level the playing field, and student loan forgiveness is one way to do that. Higher education would become more accessible to low-income families if the financial burden of student loans were reduced through student debt forgiveness. The result would be a more knowledgeable and skilled labor force, positively affecting the board.
In conclusion, the Biden administration’s student loan forgiveness plan is a step in the right direction towards addressing the college affordability crisis in the United States. However, several shortcomings prevent it from being sufficient to solve the problem. The plan’s limited eligibility criteria may exclude a significant portion of borrowers with the greatest need for relief. While the amount of loan forgiveness offered may not be sufficient to alleviate the burden of student loan debt for many borrowers. Moreover, the potential negative consequences of the plan’s implementation must be considered. Therefore, while the plan is a positive development, it is not enough to comprehensively address the college affordability crisis in the United States. More comprehensive and far-reaching solutions, such as tuition-free college or income-driven repayment plans, may be necessary to effectively address the root causes of the problem and provide relief to all borrowers.
Works Cited
Cook, Bryan, and Alexandra Tilsley. “Exploring the Relationship between Student Loan Forgiveness, the Pell Bonus, and Race. An Essay for the Learning Curve.” Urban Institute, 2022.
Goss, Jacob, Daniel Mangrum, and Joelle Scally. “Assessing the Relative Progressivity of the Biden Administration’s Federal Student Loan Forgiveness Proposal.” FRB of New York Staff Report, 1046, 2023.