“I cosigned for 70K in loans to put my disabled grandchild through a private college that would meet his specific needs,” said a 70-year-old debtor I met during the Debt Collective’s virtual older debtors’ assemblyIn mid-August. “I don’t think I’ll be able to pay off these loans in my lifetime,” another debtor told me.
As I listened to these stories in a Zoom breakout room, I couldn’t help but feel overwhelmed by the conclusion that debt controls the lives of millions of people in the U.S., especially our most vulnerable. The Debt Collective, the nation’s first debtors’ union, is known for opening and facilitating powerful forums for conversation that enable folks to release the burden of shame and talk about how debt has impacted their lives. I’ve been organizing with Debt Collective for a year and I have come away with the same conclusion each time I leave an assembly: Americans desperately need full cancellation, and they need it now.
President Biden was inaugurated on August 24, AnnouncementIt was a groundbreaking decision to cancel $10,000 student debt for all borrowers earning less than $125,000 per year. Pell Grant recipients will be eligible for $20,000 cancellation. This move is intended to help the most vulnerable. The administration’s decision to cancel up to $20,000 in student loan debt, including graduate and Parent Plus loans, will transform the lives of millions of Americans. The moratorium will be extended to December 31st. Income Driven Repayment plan payments will drop to 5%. Also, changes will be made in the Public Student Loan Forgiveness Program. The debt of approximately 20 million borrowers will be completely eliminated, giving them more money to pay their daily bills like rent and food. But there are other options. the other 25 millionAmericans who have only a small amount of their loans canceled will this plan have enough impact to make a lasting, significant difference? Most people will answer no.
For many people, the $10,000 amount will not make any difference. Borrowers with high debt-to-income ratios — those who live paycheck to paycheck, who worry about making rent after their loan payments each month, who find it difficult to imagine ever being able to purchase a home — will barely feel the relief this policy was meant to offer. This is especially true for Black borrowers.
Ben Miller, currently working at the Department of Education wrote in 2019, “That means borrowers who are on IDR [income-driven repayment]Their balance will likely grow if they make low payments for extended periods of time. This is particularly worrisome because past analyses already showed significant gaps by race in the share of original loan balance repaid by borrowers over time.”
Moreover, Biden’s goal is to make it easier for people to keep up with their monthly payments by providing an IDR plan that cuts the total amount due in half. This is not the first time that we have heard the promise of a new income-driven repayment program to solve the crisis. In all cases, this has happened. been a broken promise and a spectacular failure. For example, 70,300 applications could be eligible for income driven repayment forgiveness in September 2020. only 157 had been approved by June 2021.
Millions of people will not be eligible for cancellation if there is an income limit of $125,000. This income cap was established to stop Republican opposition that student debt cancellation benefits the wealthy. has been disproven. This decision ignores the inequalities and complexities of financial life in America by treating all those who earn more than $125,000 as wealthy graduates, who should be able pay back their loans. Income is not the same as wealth. The racial wealth disparity is a reason for this. which prevents people from different racial groups from beginning at the same starting place, instituting this cap leaves out Black borrowers who might make a higher income but have negative net wealth (where one’s debts exceed their assets due to systemic racism) and who are far more likely to have immediate family members in need of financial support.
Experts, and even officials inside the Department of Education, have warnedSince months, the idea of requiring applicants has been a hindrance to relief and creating obstacles for those who really need it. We’ve seen this play out with Public Service Loan Forgiveness (PSLF), a flawed program with a massive administrative burden. People who work long hours or are disabled, those with illness or disabilities, the elderly, and those without reliable internet access, will be at an advantage.
It is a disaster waiting in the works to occur when you make the decision to means-test your measly forgiveness and to also return payments at 2023’s beginning.Biden announced his cancellation plan last Wednesday. The Federal Student Aid website crashed as a result of the rush by debtors to find out if they received Pell Grants. This makes it more persuasive to cancel automatic. Servicers and bureaucratic agencies are not equipped to navigate the complexities of the proposed plan. The Department of Education has not yet released the application that borrowers need to start the cancellation process.
The president can cancel any portion of the debt. Biden has the power to change the lives of all borrowers, but he refused to use it to its full potential. (Let’s also not forget Biden’s presidential campaign promised a more robust cancellation — $10,000 for everyone and full cancellation for all who attended public universities or Historically Black Colleges and Universities and make under $125,000). But despite the plan’s limitations, it nonetheless sets a precedent for future jubilees and underscores an important win for debtors. Presidents and cancellation naysayers won’t be able again to pretend there is no path to student debt relief via executive powers.
After the announcement, my mind immediately went to the older debtors who can’t wait years for more cancellation to come. Older borrowers have given the Department of Education so much of their money — and more than that, they’ve given up their time, their energy, their dreams. Let’s not put the next generation of Americans through the same struggle.