Student debt forgiveness: What do I need to know?
There are 43 million borrowers burdened with student loans in the United States. They are your neighbors, children, doctors and teachers.
Jerome VanOrman has been a Mount Pleasant High School social studies teacher for 14 years. He always had a passion for history and supporting kids, which he inherited from his father.
VanOrman graduated with a bachelor's degree in business from Albion College, where he had an athelete scholarship, and a bachelor’s degree in education from Central Michigan University. To be able to afford the college tuition, VanOrman decided to take out a student loan. From both his degrees, he owed $60,000.
He has been paying his student debt for 20 years, and still has a couple payments to go.
From VanOrman's experience, the problem of student loans is the high interest rate, which for him was 25%, and a confusing language when handling student loans.
"Number one, how can we make univeristy more affordable?” VanOrman said. "Number two, how can we make for those who can't afford to go ... the loan system for them easier to pay back once they graduate?"
Across the nation and right here in the heart of Michigan, politicians, policy experts and academic advocates alike are trying to find a way how to make college more affordable.
What is student debt forgiveness?
The Student debt forgiveness plan offered by the Biden administration was a way to take the edge off student loans for borrowers. In it, Biden administration announced forgiveness of up $20,000 in student loans.
However, on June 30, the Supreme Court ruled against the administration, explaining that the administration was overstepping the congressional authority.
"We hold today that the Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up,” the majority opinion stated.
"Republican officials just couldn’t bear the thought of providing relief for working-class and middle-class Americans," President Joseph Biden said in the statement. "Republican state officials sued my administration, attempting to block relief, including for millions of their own constituents."
As the Biden administration is searching for a way around the Supreme Court’s June ruling, its subsequent attempt is already being opposed.
A release from the Mackinac Center for Public Policy, based in Midland, announced their participation in a complaint filed by the Washington, D.C.,-based think tank New Civil Liberties Alliance (NCLA) against further action by the Department of Education.
“Moving on an accelerated schedule to deter court review, the department of education announced its unlawful new scheme before the ink was dry on the supreme court opinion striking down its old $430 billion student loan debt cancellation plan,” a press release read.
Mackinac Center Director of Public Relations Holly Wetzel said they are fighting Biden's plan because they did not take official action by going through Congress.
"There has been no executive order taken for this next phase of loan forgiveness," she said. "The only thing that's happened so far is a press release has been issued. ... It's a clear violation of the separation of powers. And if the administration wants to continue its debt forgiveness plans, then it has to go through Congress in order to do so."
If the plan had gone through Congress, the Mackinac Center wouldn't have fought it, yet they wouldn't have supported it either, because they don't belive that transfering student debt to taxpayers is a solution, Wetzel said.
For now, the plaintiffs are asking for a preliminary injunction to stop Biden's plan from going into effect, she said.
If Biden's proposal that is fought by the Supreme Court had passed, borrowers with federal student loans would have been forgiven between $10,000 and $20,000 per person, said Kyla Stepp, a CMU political science professor and College Democrats advisor.
That would help a third of borrowers get rid of their student loans entirely, she said.
“It would free up their money to be spent in our economy ... to buy houses and cars and goods,” Stepp said.
Therefore, the plan would have benefited “millions of people who are drowing in student loan debt,” she said.
Who benefits from student debt forgiveness?
President of College Republicans at CMU Evan Gibeau said that a student debt forgiveness program can look “very appealing” to college students, who are not “familiar with financial cost and burden on our government.”
“The way I view it is, it’s an attempt to garner more of the college vote,” Gibeau said. “In actuality, I think student debt forgiveness does not actually benefit the group of people that the majority of people think it would.”
In a May 10 statement U.S. Representative John Moolenaar called the original Biden plan “unconstitutional“ and said that the student debt forgiveness plan would benefit the top 60% of earners.
However, according to President Biden's Fact Sheet, 90% of debt cancellation will benefit borrowers earning less than $75,000.
"Today’s announcement by President Biden takes money from hardworking Michigan families and benefits mostly wealthier Americans who chose to take on debt on their own," Moolenaar said in the statement.
Central Michigan Life made several attempts to interview Moolenaar. He refused to comment.
President Biden in his statement on June 30, said the student debt forgiveness plan will specifically benefit people in the middle class.
"But I know who student loan borrowers are in this country and so do all of you: the couple putting off having a child until they can find their way to deal with their debt," he said.
Cathy Willermet, chair of Isabella Democrats said the student debt forgiveness is “an investment into students.”
She recalled when she went to college in 1986, the tuition was “much more affordable." Students were required to pay 15% to 20%, and everything else covered by the state. Since President Ronald Reagan's administration, she said, the situation flipped.
Mount Pleasant High School’s VanOrman said in the ‘90s, everything from the cost of tuition to housing rentals was more affordable.
“You have a very different situation where … our economy is still built and growing on people having college degrees,” Willermet said.
Now, students come out of college with thousands of dollars in debt on top of, for example, covering a mortgage. That creates “a very difficult situation for students,” Willermet said.
However, easing the situation with student debt can help the students start contributing back to the community.
“We want an educated populace,” Willermet said. “Your education benefits me. Because you are an educated person, you are then going to make decisions; you’re going to help; you’re going to start (a) business; you’re going to do things that are going to benefit me.
“That’s my value to why I want my tax dollars to support you for college … the same reason why we support K-12 public schools. … We want everyone to be generally educated.”
The Michigan budget for the fiscal year 2024 funds a variety of programs at the pre-k through 12th-grade levels.
- Pre-K for all
- K-12 funding
- Tutoring & literacy
- Student wellness
- Fiscal responsibility
According to a press release from Governor Gretchen Whitmer's office, the budget includes record investments to support students and promote opportunities.
Student debt forgiveness “can help people … on a monthly basis to be able to pay their bills and to be able to contribute more to the economy, which I think, is a good thing,” Stepp said.
However, VanOrman said there is no guarantee of what the borrowers' financial decision would be after having their loans forgiven. We are in an era that requires college education, but not every person requires a four-year university degree. Whether a two-year associate‘s degree, a trade school or just going straight from high school into the work force, the decision should be normalized, VanOrman said.
"We have seen an influx of people in this country going to college for, potentially, degrees that they don't even need," Wetzel from the Mackinac Center said.
Instead, Wetzel said that high schools, trade schools and community colleges are alternatives to getting a job without a college degree, because a degree does not promise you a job.
Is debt forgiveness fair?
Meanwhile, Gibeau said that paying out students’ debt now would be unfair toward those who have already paid off their debt themselves or those who decided not to go to college.
“I would be extremely unhappy if other people got the chance to have their debt relieved on my own dime,” Gibeau said. “I think it’s fundamentally unfair to pull the rug from people who’ve already paid their dues.
“I think it’s also unfair to … people who can’t afford college (to have) … now (their) taxes ... paying into other people’s college debt relief.”
That’s why, even though he would like to have his debt relieved himself, Gibeau said he doesn’t believe it is the right thing to do.
VanOrman said the student loan debt is one's financial responsibily, and it is unfair that other people would pay borrowers’ debt.
"My thing is, as an individual, if I borrow something from you ... I expect I'm going to pay you back," VanOrman said. "That's my personal responsibility."
Willermet said she paid her debt of $70,000. Now she wants to help others pay off their debts, as well.
“I paid mine, but why would I want other people to suffer?” Willermet said. “I want to make sure my kids go to college. I want to make sure those people’s kids go to college.”
You don’t have to be affected by a certain situation to be willing to care about it, she said. She believes that people are “fundamentally kind" and wants to help and understand other people’s situations.
“I’m a fan of giving people a better chance to do well in life,” CMU Prof. Stepp said.
Will it be a financial burden on the government?
Stepp explained that the student debt will be paid out of the federal government budget, which wouldn’t be a direct bill to taxpayers.
“Some think it wouldn’t make that big of a difference because the economy would, increase because people with student loans could finally start buying houses and cars and do more with their money,” Stepp said. “Others disagree, (saying) it would be a big impact.”
With the expiration of pandemic legislation intended to lighten the load for borrowers, there may be more damaging economic impacts coming this year.
“The pause in student loan payments ends in Oct., and that alone could be enough to put us into recession," Stepp said.
She added that addressing student loan debt is probably something Congress will have to address, "but with the republican-controlled house, that's unlikely to happen for a while."
"The issue keeps coming up, and as something that cripples an entire generation financially, there's certainly an economic impact there," Stepp said.
VanOrman said that the inflation could increase and taxes could go up.
"If you eliminate $1.8 trillion, it's got to come from somewhere," he said. "(Governments) tax, that's how they make the revenue stream."
Gibeau believes that student debt forgiveness would put a burden on taxpayers, since the taxes would increase.
“Our economy really isn’t in a great spot to be raising the debt ceiling even further … because we’re looking at an impending financial crisis,” Gibeau said. “I just don’t think that our federal government, with the spending that they already do, has money in the budget that could realistically be put towards student loan forgiveness.”
Gibeau called the student debt forgiveness “insanely expensive” and encouraged people to look into where this money comes from and goes.
Meanwhile, Willermet pointed out that if the taxpayers who are in the "1% of earners," which according to Forbes, means residents with a annual salary of at least $597,815 , paid their fair share, the government would have been able to make up money forgiven in student loans.
“(Billionaires) want an educated workforce, right?” Willermet said. “You can put money into the system that ultimately is benefiting the business owner because you have an educated workforce. … It’s not like those billionaires and multimillionaires are bad people … it’s about really trying to make it pay into the system … (that they are) benefiting from.”
What comes next?
As an alternative to student debt forgiveness, Gibeau offered an idea to reduce the cost of college tuition without increasing federal spending.
“In a perfect world, education would become cheaper,” he said.
This year CMU increased tuition rates, housing, food and parking permit prices, according to an email CMU One Central sent to students on June 29. For the 2023-24 academic year:
- Tuition has increased by $18 per credit hour for lower-level classes and $24 per hour for upper-level classes.
- Standard four-person and two-person suites rates have increased by $250 per semester; premium two-person suites have increased by $288; and premium four-person suites have increased by $325.
- The Central 12 meal plan has increased by $183 per semester; Central 16 meal plan has increased by $214 per semester; and the All-Access plan has increased by $215 per semester.
- Parking permits have increased by $15.
VanOrman also advocated for an affordable college, as well as making a student loan system and interest rate feasible instead of “chaining people to this huge bill of loan debt."
Additionally, he said providing job placements and "pumping up" some of the degree programs could help people pay off their debt.
"I don't believe in forgiving the loans totally," VanOrman said. "I believe in taking the interest rate way down."
Mackinac Center for Public Policy Director of Fiscal Policy James Hohman said his organization envisions making college tuition cheaper by state lawmakers using the payments to higher education into incentivize lower tuition.
"The institutions get billions through the state budget and the payments are not based on degree completion, tuition levels or even the number of students who attend," Hohman said. "Payments are based on what the schools got last year, and what they got in the past is based on nothing but politics.
"Legislators can accomplish a lot more with the money that they already give the schools each year, and putting together an outcome-based funding formula would be a better use of lawmaker interest and taxpayer money than further coverage of college costs by taxpayers."
In executive directive 2023-3, dated May 24, Whitmer signed to lower the cost of education and make student loans more accessible.
“Loans are an important component of expanding access to postsecondary education, but we must create an environment where those loans do not burden people beyond their means or drag families into a debt cycle,” the press release said.
- Thus, the Department of Treasury is now directed to study how to permit Michiganders to access lower interest rates and refinance their current state loans.
- The Department of Insurance and Financial Services is directed to study loan affordability and transparency.
- The Department of Agriculture and Rural Development, the Office of the State Employer and the Department of Labor and Economic Opportunity are directed to consider how Michigan can relief the student loan burden on Michiganders.
- Educational materials for borrowers must be assessed by the Department of Treasury and Michigan Department of Education.
Whitmer's executive order also tasked state departments with a cost-benefit analysis of having the state re-enter the market as a student loan originator.
How far does that go?
Moreover, Whitmer established the bipartisan Michigan Reconnect program to start a tuition-free education for over 100,000 Michiganders.
She also announced Michigan Achievement Scholarship to lower the college cost. With the scholarship, Michigan high school graduates enrolled in a Michigan univeristy or community college will be able to receive up $5,500 per year up to five years in the financial aid from State of Michigan.
Now that the Supreme Court struck down Biden’s plan, the Congress will decide what happens next, Stepp explained.
To voice your opinion on the student debt forgiveness plan, Willermet advised to write your senators, call their Washington office and let them know what you support.
"One thing that I learned from my years of being an activist is that ... there is power in your voice," she said.