tag:theconversation.com,2011:/global/topics/student-debt-9132/articles
Student Debt – The Conversation
2023-08-10T12:41:29Z
tag:theconversation.com,2011:article/210527
2023-08-10T12:41:29Z
2023-08-10T12:41:29Z
Beyoncé has a prenup − but do you need one if you’re not a millionaire?
<figure><img src="https://images.theconversation.com/files/541566/original/file-20230807-26-p288xv.jpg?ixlib=rb-1.1.0&rect=152%2C49%2C2815%2C1877&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A prenup allows couples to separate their debt from the debts of their spouse.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/beyonce-and-jay-z-perform-during-the-global-citizen-news-photo/1067795190?adppopup=true">Kevin Mazur via Getty Images </a></span></figcaption></figure><p>A prenuptial agreement can seem like something only high-profile people like <a href="https://www.hellomagazine.com/brides/494142/jeff-bezos-prepares-jaw-dropping-prenup-to-protect-his-138billion-fortune/">Jeff Bezos</a> – with his US$138 billion fortune to protect – actually need.</p>
<p>But prenups – contracts entered into before marriage that detail how assets will be divided in the case of divorce – can be a good idea for anyone going into a marriage, according to <a href="https://doyledivorcelaw.com/blog/9-reasons-you-need-a-prenuptial-agreement/">lawyers</a> and <a href="https://www.psychologytoday.com/us/blog/bringing-compassion-matrimonial-law/201810/the-unexpected-upside-getting-prenup">marriage counselors</a>. They have been in regular use since 1983, when a group of attorneys and law professors drafted the <a href="https://helloprenup.com/upaa/">Uniform Premarital Agreement Act</a>, a set of rules regulating prenups that 28 U.S. states have since adopted. </p>
<p><a href="https://theharrispoll.com/briefs/popularity-of-prenups-rising-2022/">A recent poll</a> showed that the percentage of couples with prenups has risen from 3% in 2010 to 15% in 2022. <a href="https://www.newyorker.com/news/us-journal/prenups-arent-just-for-rich-people-anymore">Nearly 40%</a> of married or engaged couples between the ages of 18 and 34 have signed prenups, while just 13% of couples between 45 and 54 have done so. </p>
<p><a href="https://scholar.google.com/citations?user=6kPZNuMAAAAJ&hl=en&oi=ao">As a law professor</a> who specializes in family law, I teach my students what prenups are and how to make sure they stand up in court. I also <a href="https://law.richmond.edu/faculty/atait/">write about</a> what happens to property when couples get divorced, especially unique forms of property like <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3036997">family businesses</a> or <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3259129">trust funds</a>. </p>
<h2>A shield from unwanted debt</h2>
<p>But prenups can be about more than what you own – they can also be about what you owe.</p>
<p>Millennials have accumulated <a href="https://fortune.com/2023/02/27/millennials-debt-pandemic-credit-interest-rates/">more debt</a> than previous generations, and prenups can help millennial couples navigate some of the concerns about debt in marriage. They can help couples address questions about the shared debt incurred during the marriage and who will pay what if the marriage ends. For example, couples can agree in a prenup to allocate <a href="https://www.tateesq.com/learn/prenup-student-loans">student loan debt</a> to the person who took out the loan. </p>
<p>They can also choose to protect one person from the other’s <a href="https://www.newyorker.com/news/us-journal/prenups-arent-just-for-rich-people-anymore">medical debt</a>, especially if they know that large medical bills are on the horizon. Prenups can insulate one spouse from potential debt and financial risk from their <a href="https://state48law.com/benefits-of-a-prenuptial-agreement-for-business-owners/">partner’s business</a>. </p>
<figure class="align-center ">
<img alt="A couple signs a prenup agreement." src="https://images.theconversation.com/files/541349/original/file-20230806-20589-vq6fu7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/541349/original/file-20230806-20589-vq6fu7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/541349/original/file-20230806-20589-vq6fu7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/541349/original/file-20230806-20589-vq6fu7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/541349/original/file-20230806-20589-vq6fu7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/541349/original/file-20230806-20589-vq6fu7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/541349/original/file-20230806-20589-vq6fu7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Prenups allows couples to make their own rules rather than being at the mercy of state laws.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/couple-who-signs-a-contract-at-a-new-residence-royalty-free-image/1124316087?phrase=a+couple+signing+a+prenup&adppopup=true">kokouu/E+ via Getty Images</a></span>
</figcaption>
</figure>
<h2>A shield from state laws</h2>
<p>Couples may also be drawn to prenups because these agreements allow them to make arrangements that, if executed correctly, take precedence over state laws.</p>
<p>When you get divorced, you can either follow the terms in a prenup or the terms that state law provides and be at the mercy of a divorce court’s estimation of who should get what. </p>
<p>State rules that generally divide all assets and debt equally were initially created for divorcing couples with conventional and gendered household patterns. For example, stay-at-home mothers raising children, working fathers with full-time employment, and assets like a house, life insurance and pension. </p>
<p>Younger couples are likely to organize their <a href="https://www.pewresearch.org/social-trends/2020/05/27/as-millennials-near-40-theyre-approaching-family-life-differently-than-previous-generations/">households much differently</a>. Both spouses <a href="https://www.forbes.com/sites/avivahwittenbergcox/2020/10/13/the-rise-resilience-and-challenges-of-2-career-couples/">generally work</a>. Expectations about who is responsible for child rearing <a href="https://www.nytimes.com/2015/07/31/upshot/millennial-men-find-work-and-family-hard-to-balance.html">are more varied</a>. Millennials and Gen Z workers are frequently <a href="https://www.buzzfeednews.com/article/annehelenpetersen/millennial-burnout-cant-even-anne-helen-petersen">freelance employees</a> or independent contractors, with less income security and fewer benefits like employer-provided pensions or health and life insurance. </p>
<p>Prenups are a helpful way to address these emergent work-life arrangements. For example, one spouse can choose to keep their income or pension benefits as separate property, not to be divided upon divorce.</p>
<h2>New ways to draft a prenup</h2>
<p>New platforms like <a href="https://helloprenup.com">Hello Prenup</a> – a “Shark Tank” success story – can be helpful for younger couples. The company aims to make the prenup process more accessible and less costly – think Turbo Tax but for prenups. Online platforms like Rocket Lawyer or Legal Templates, which provide outlines for all kinds of legal documents, also offer a <a href="https://www.rocketlawyer.com/sem/prenuptial-agreement?id=1319&partnerid=103&cid=15098121101&adgid=134763364211&loc_int=9008455&loc_phys=9109325&mt=b&ntwk=g&dv=c&adid=450847162998&kw=prenuptial%20agreement%20form&adpos=&plc=&trgt=&trgtid=kwd-29682911&gad=1&gclid=CjwKCAjw5remBhBiEiwAxL2M955oQgvm6K7G5HI0VwPv9dOAPRh95YgbNtrlS-rnXrW3wsEAK1J_bRoC8SAQAvD_BwE">prenup template</a>. </p>
<p>These platforms provide state-specific documents and explain the process, walking clients through things like <a href="https://helloprenup.com/prenuptial-agreements/can-online-prenups-be-valid/">financial disclosure rules</a> that are important if a prenup ever ends up being questioned in court.</p>
<h2>A valuable conversation</h2>
<p>Prenups make the news because of celebrity agreements and sensational provisions, like <a href="https://www.yahoo.com/entertainment/16-times-contents-celeb-couples-181602719.html">fidelity clauses</a> or <a href="https://www.usmagazine.com/celebrity-news/pictures/celebrity-couples-with-and-without-prenuptial-agreements/">sobriety requirements</a>. However, for most couples, these items are less important. Many people draft prenups to feel financially safe and know what will happen if they divorce. </p>
<p>One of the most significant benefits of prenups is that they get couples to talk about their financial lives and what it might look like to merge – or separate – finances as a part of marriage. And, considering conflicts around money are one of the <a href="https://www.thejimenezlawfirm.com/what-percent-of-marriages-end-in-divorce-because-of-money/">biggest causes of divorce</a>, prenup conversations may be the best kind of wedding planning you can do.</p><img src="https://counter.theconversation.com/content/210527/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Allison Anna Tait does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
A prenuptial agreement can help millennial couples navigate concerns about student debt in their marriage.
Allison Anna Tait, Professor of Law, University of Richmond
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/209810
2023-08-04T12:30:37Z
2023-08-04T12:30:37Z
College students with loans more likely to report bad health and skip medicine and care, study finds
<figure><img src="https://images.theconversation.com/files/539773/original/file-20230727-29-hz1qlc.jpg?ixlib=rb-1.1.0&rect=70%2C151%2C7629%2C4428&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A new study found that those with student loans are more likely to delay medical, dental and mental health care. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/burnout-anxiety-and-fatigue-creative-student-royalty-free-image/1445373401?phrase=college+students+mental+health">PeopleImages/iStock via Getty Images </a></span></figcaption></figure><p><em>The <a href="https://theconversation.com/us/topics/research-brief-83231">Research Brief</a> is a short take about interesting academic work.</em> </p>
<h2>The big idea</h2>
<p>Students who took out loans to pay for college rated their overall health and mental health as being worse than those who didn’t take out student loans. They also reported more major medical problems and were more likely to report delaying medical, dental and mental health care and using less medication than the amount prescribed to save money. </p>
<p>We <a href="https://doi.org/10.1080/07448481.2022.2151840">reported these findings</a> in an article published in the Journal of American College Health. The findings are based on surveys collected in 2017 from over 3,200 college students at two public universities in the United States.</p>
<p>We asked students to rate their physical and mental health on a 4-point scale – excellent, good, fair and poor. We also asked if they had experienced any major medical problems in the past year or whether they had ever postponed medical, dental or mental health care to make ends meet since starting college. Those who indicated they were taking regular medication for physical health problems, such as for asthma or high blood pressure, were asked if they ever took less medication than prescribed to save money. </p>
<p>Students with loans reported worse outcomes than those without loans, even after accounting for differences between them in terms of race, age and gender, as well as their parents’ education level and marital status.</p>
<p>Despite their worse self-reported mental health, students with loans were equally likely as students without loans to have received a new mental health diagnosis or treatment for a mental disorder in college. They also were equally likely to have visited a mental health practitioner in the past year or to use mental health medication. But they were almost twice as likely as those without debt to report delaying mental health care. </p>
<h2>Why it matters</h2>
<p>Our findings suggest that student loans may have hidden costs in the form of worse physical and mental health, more medical problems and diminished use of medical and mental health care. Stress from student loans <a href="https://eric.ed.gov/?id=EJ1141137">can affect students</a> while they are still in college, <a href="https://doi.org/10.1037/cdp0000207">harming both mental and physical health</a>.</p>
<p>College students are often at a <a href="https://doi.org/10.1037/11381-002">crucial juncture</a> when they are first leaving their parents’ home and <a href="https://doi.org/10.1038/oby.2008.365">establishing habits</a> – such as those related to medical and dental care – that may persist beyond college. Declining to seek medical care <a href="https://doi.org/10.1016/j.jchf.2021.05.010">can result</a> in <a href="https://doi.org/10.7326/0003-4819-114-4-325">worse medical problems</a>, potentially leading to diminished health and shorter lives for college graduates with loans.</p>
<p>One of the advantages of getting a college degree is <a href="https://doi.org/10.2105/AJPH.2011.300216">improved</a> <a href="https://www.forbes.com/sites/michaeltnietzel/2019/06/17/new-evidence-for-the-broad-benefits-of-higher-education/?sh=a4e88834c5c1">health</a>. But students who take out loans to attend college may not see those benefits, especially if they defer medical care or use less medicine to save money.</p>
<p>Previous generations had greater access to free or low-cost <a href="https://press.jhu.edu/books/title/12165/history-american-higher-education">public higher education</a> – access that has eroded as state budgets <a href="https://doi.org/10.1525/ctx.2009.8.1.76">failed to keep up</a> with the <a href="https://www.acenet.edu/Documents/Anatomy-of-College-Tuition.pdf">rising demand for and costs</a> of higher education. The current system of higher education funding <a href="https://educationdata.org/student-loan-debt-statistics">requires most people to take on debt</a> to get a college degree; the <a href="https://ticas.org/affordability-2/student-aid/student-debt-student-aid/student-debt-and-the-class-of-2019/">most recent national data</a> indicates that among 2019 graduates of public or private nonprofit, four-year universities, 62% had student debt.</p>
<h2>What’s next</h2>
<p>We are writing a book that explores how debt affects life after college, including the consequences for health, housing, romantic relationships and career trajectories. So far, we have found that inequalities in health and delays in doctor visits persist after graduation. We have also found that college graduates who put off doctor visits to save money in college were a little over twice as likely to experience a recent major medical problem 15 months and 3.5 years after graduation. We also found they were over four times as likely to be be putting off medical care to save money after graduation, showing these habits persist well after they leave college.</p><img src="https://counter.theconversation.com/content/209810/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Arielle Kuperberg receives funding from the National Science Foundation. </span></em></p><p class="fine-print"><em><span>Joan Maya Mazelis receives funding from the National Science Foundation.</span></em></p>
College students who postpone medical care to save money end up paying for it down the line in the form of worse health, a researcher contends.
Arielle Kuperberg, Professor of Sociology, University of North Carolina – Greensboro
Joan Maya Mazelis, Associate Professor of Sociology, Rutgers University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/200725
2023-03-01T13:28:40Z
2023-03-01T13:28:40Z
Student debt cancellation program in jeopardy as Supreme Court justices hear arguments
<figure><img src="https://images.theconversation.com/files/512751/original/file-20230228-24-gincek.jpg?ixlib=rb-1.1.0&rect=18%2C42%2C4071%2C2648&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The estimated cost of President Biden's student loan cancellation program is $430 billion.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/student-loan-forgiveness-royalty-free-image/1367015834?phrase=student%20loan&adppopup=true">Douglas Rissing via Getty Images</a></span></figcaption></figure><p><em>The U.S. Supreme Court heard oral arguments on Feb. 28, 2023, regarding a <a href="https://www.cnbc.com/2022/12/23/what-to-know-about-the-legal-challenges-over-student-loan-forgiveness.html">multistate lawsuit</a> to block the Biden administration’s student loan debt cancellation program. The Conversation asked <a href="https://scholar.google.com/citations?view_op=search_authors&mauthors=John+Patrick+Hunt&asau=9-NukXYAAAAJ&citsig=AAGBfm1T7OPdSKalrR6S3vvB1aYjsnLbIw&hl=en&oi=ao">John Patrick Hunt</a>, a law professor at the University of California, Davis, and <a href="https://scholar.google.com/citations?hl=en&user=jG9iD2AAAAAJ">Celeste K. Carruthers</a>, an economics professor at the University of Tennessee, what’s at stake and what clues the court has given as to how it may rule on the matter.</em></p>
<h2>What’s the case about?</h2>
<p><strong>Hunt:</strong> The conflict is about whether the Biden administration can cancel some student loans owed to the federal government. The administration in 2022 announced plans to <a href="https://www.msn.com/en-us/money/careersandeducation/bidens-student-loan-forgiveness-plan-to-face-crucial-test-at-supreme-court/ar-AA1808ex">cancel up to US$10,000 in student loan balances</a> for borrowers who earn under $125,000 per year ($250,000 if married), as well as an additional $10,000 for borrowers who were lower-income <a href="https://studentaid.gov/understand-aid/types/grants/pell">Pell Grant</a> recipients when they took out their loans.</p>
<p>Those opposed to the policy focus on four main arguments:</p>
<ul>
<li>It does not address the underlying problem of high cost for higher education.</li>
<li>It encourages irresponsible borrowing.</li>
<li>It primarily benefits college-educated people who are better off, on average, than the rest of the U.S.</li>
<li>It is unfair to people who do not have student loans, either because they did not take them out or because they repaid them.</li>
</ul>
<p>Arguments for cancellation include:</p>
<ul>
<li>The student loan system is irredeemably broken.</li>
<li>Many borrowers are suffering financially and need relief, especially because of the COVID-19 pandemic.</li>
<li>It is unfair to make students borrow for higher education to begin with.</li>
</ul>
<p>Two groups of plaintiffs have sued to block the program: six Republican-led states and two borrowers who would not receive forgiveness. The legal issues in the states-led case are narrower than the broad arguments set out above.</p>
<p>The <a href="https://www.supremecourt.gov/qp/22-00506qp.pdf">main ones</a> are whether the administration’s plan harms any of the plaintiffs and whether the relevant law – the <a href="https://www.law.cornell.edu/uscode/text/20/1098bb">HEROES Act of 2003</a> – gives the administration the power to carry out the plan.</p>
<h2>What’s at stake and for whom?</h2>
<p><strong>Carruthers:</strong> As proposed, under the cancellation plan the U.S. Department of Education would forgive some or all student loan debt held by about <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most/">40 million borrowers</a>. The Congressional Budget Office estimates that about <a href="https://www.cbo.gov/system/files/2022-09/58494-Student-Loans.pdf">$430 billion</a> in loans would be canceled under the plan.</p>
<p>Borrowers eligible for loan cancellation are those who took out federal college loans <a href="https://studentaid.gov/manage-loans/forgiveness-cancellation/debt-relief-info">before July 2022</a> and who meet the income requirements. Researchers at the New York Federal Reserve estimate that the plan would <a href="https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1046.pdf">erase all college debt for 40% of federal borrowers</a>.</p>
<p>Resolving the plan’s legal challenges will not only determine if these balances can be canceled as proposed, but also when and whether borrowers have to start making normal payments again. Required loan payments were put on hold in March 2020 as part of the <a href="https://www.congress.gov/bill/116th-congress/senate-bill/3548/text">CARES Act</a>, and the pause has been extended <a href="https://www.americanprogress.org/article/timeline-federal-student-loans-during-the-covid-19-pandemic/">multiple times</a> since then. In November 2022, the Biden administration extended the pause again to <a href="https://www.npr.org/2022/11/22/1138724532/with-student-loan-relief-tied-up-in-court-biden-extends-repayments-a-few-months">some point in the future</a>, after the Supreme Court decides the case.</p>
<h2>Has the court indicated how it will vote?</h2>
<p><strong>Hunt:</strong> The justices typically do not state how they will vote at oral argument, but the questions they ask can give some clues. Based on the questions the <a href="https://www.supremecourt.gov/oral_arguments/audio/2022/22-506">justices asked in the states-led case</a>, it seems likely that the court will reject the administration’s program. </p>
<p>The first issue before the court is whether any plaintiffs have been harmed. If not, the lawsuit will be thrown out.</p>
<p>As a law professor, I believe the plaintiff with the best case for harm is probably the state of Missouri. The administration admits that cancellation will harm a nonprofit corporation created by the Missouri government called the Missouri Higher Education Loan Authority, or MOHELA. MOHELA earns revenue from servicing federal student loans, and the plaintiffs argue that loan cancellation will harm it by reducing this revenue.</p>
<p>It is not clear whether this translates to harm to Missouri itself, but only one conservative member of the Supreme Court, Justice Amy Coney Barrett, asked questions about whether harm to MOHELA is harm to Missouri. Because none of the other five conservative justices asked critical questions about Missouri’s standing, it seems likely that the court will conclude that Missouri is harmed and can sue.</p>
<p>The second question, answered only if there is a plaintiff who has been harmed and can sue, is whether the law authorizes the program. Generally, the three liberal justices’ questions indicated that they believe the program is authorized, and the six conservative justices’ questions indicated the opposite.</p>
<p>On the conservative side, only Barrett and Justice Brett Kavanaugh asked questions that seemed to express any doubt about the state plaintiffs’ case. <a href="https://www.scotusblog.com/2018/07/kavanaugh-on-administrative-law-and-separation-of-powers/">Kavanaugh has historically frowned</a> on the aggressive use of bureaucratic power, making it more likely, I believe, that he may rule against the government in this case. And Kavanaugh’s vote could be crucial. If he and his fellow conservatives on the bench – Justices Samuel Alito, Neil Gorsuch, John Roberts and Clarence Thomas – find the program illegal, they will form a majority ruling even without Barrett.</p><img src="https://counter.theconversation.com/content/200725/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Patrick Hunt works for UC Davis School of Law (King Hall). </span></em></p><p class="fine-print"><em><span>Celeste K. Carruthers does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
An estimated 40 million borrowers could be affected by a pair of cases before the Supreme Court that could block the Biden administration’s plan to cancel student debt.
John Patrick Hunt, Professor of Law, University of California, Davis
Celeste K. Carruthers, Professor of Economics, University of Tennessee
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/194973
2022-11-22T13:27:18Z
2022-11-22T13:27:18Z
Student loan cancellation got blocked. Now what? 3 questions answered
<figure><img src="https://images.theconversation.com/files/496583/original/file-20221121-26-kfjb1d.jpg?ixlib=rb-1.1.0&rect=0%2C23%2C7889%2C5231&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Questions remain about whether President Joe Biden has the authority to cancel student loan debt.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/student-loan-borrowers-stage-a-rally-in-front-of-the-white-news-photo/1417997650?phrase=student%20loan&adppopup=true">Paul Morigi via Getty Images</a></span></figcaption></figure><p><em>When the Biden administration <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most/">announced in August 2022</a> that it was canceling up to $20,000 in student loan debt per borrower, it said the idea was to provide families with “breathing room as they prepare to start repaying loans after the economic crisis brought on by the pandemic.” But two federal courts recently blocked President Joe Biden’s student loan relief program, ruling it unconstitutional. Here, <a href="https://scholar.google.com/citations?user=eP0xZ1kAAAAJ&hl=en">William Chittenden</a>, a professor of finance at Texas State University, explains why and what’s next for student loan borrowers still hopeful that their loans can be forgiven.</em></p>
<h2>1. Why was Biden’s student loan cancellation program blocked?</h2>
<p>It was found to be <a href="https://www.cnbc.com/2022/11/10/federal-judge-in-texas-declares-bidens-student-debt-relief-plan-unlawful-.html">unconstitutional</a>. That determination was made on Nov. 10, 2022, by Judge Mark Pittman of the U.S. District Court of Northern Texas, who ruled that the <a href="https://www.congress.gov/bill/108th-congress/house-bill/1412">Higher Education Relief Opportunities for Students Act of 2003</a> – or Heroes Act – <a href="https://www.insidehighered.com/news/2022/11/14/biden-administration-appeals-debt-relief-ruling">“does not provide the executive branch clear congressional authorization”</a> for a student loan forgiveness program. He said further that the program was <a href="https://news.yahoo.com/bidens-student-debt-forgiveness-plan-012246385.html">“an unconstitutional exercise of Congress’s legislative power and must be vacated.”</a></p>
<p>The judge’s ruling prevents any student loans from being forgiven <a href="https://www.businessinsider.com/why-was-student-loan-forgiveness-blocked-texas-judge-debt-relief-2022-11">“until a final verdict is made”</a> in the case. Technically it could go to the Supreme Court, but it may also be settled at the appellate court level.</p>
<p>In a separate case, on Nov. 14, a three-judge panel with the United States Court of Appeals for the 8th Circuit <a href="https://apnews.com/article/biden-business-education-st-louis-student-loans-cf8136bfc75bd70839e9326cabbbf029">temporarily blocked the program</a> until the case is resolved in court. The 8th Circuit covers seven states, including Missouri, which is one of several <a href="https://apnews.com/article/biden-health-lawsuits-covid-missouri-862d783188de45b698c54b00820d3616">Republican-led states seeking to block the program</a>.</p>
<p>Both rulings effectively block Biden’s plan to forgive up to $20,000 in student loans per borrower.</p>
<h2>2. Can it be unblocked?</h2>
<p>Both court decisions could be reversed. The Biden administration has argued that the <a href="https://crsreports.congress.gov/product/pdf/LSB/LSB10818">Heroes Act of 2003</a> <a href="https://www.cnn.com/2022/11/18/politics/student-debt-relief-supreme-court">allows the Secretary of Education to forgive student loans</a> for those affected by the pandemic.</p>
<p>The Biden administration has already <a href="https://www.marketwatch.com/story/where-does-the-biden-student-loan-forgiveness-program-stand-after-texas-judge-stepped-in-to-block-it-01668206695">filed a notice to appeal</a> the Nov. 10 ruling by Pittman.</p>
<p>On Nov, 18, the Biden administration <a href="https://www.reuters.com/legal/justice-department-asks-supreme-court-lift-ruling-against-bidens-student-loan-2022-11-18/">asked the Supreme Court</a> to vacate the order by the Court of Appeals blocking student loan forgiveness. The Supreme Court has asked the plaintiffs in the case to <a href="https://www.cnn.com/2022/11/18/politics/student-debt-relief-supreme-court">provide their response by Nov. 23, 2022</a>.</p>
<p>It is unclear how the full court might rule. However, in two previous instances, Justice Amy Coney Barrett has <a href="https://www.cnn.com/2022/11/04/politics/scotus-biden-student-loans">shot down</a> attempts to block the student loan forgiveness plan.</p>
<h2>3. What kind of relief can student loan borrowers get in the meantime?</h2>
<p>Currently, student loan payments are paused but are <a href="https://www.cnn.com/2022/11/22/politics/student-loan-repayment-freeze-extended/index.html">scheduled to start again</a> – either 60 days after the legal cases against the program have been resolved, or 60 days after June 30, 2023, whichever comes first. The Biden administration could <a href="https://www.cnbc.com/2022/11/16/biden-student-debt-forgiveness-blocked-whats-next-for-borrowers.html">extend the payment pause beyond December 2022</a>. However, in August 2022 – <a href="https://www.usatoday.com/story/news/nation/2022/08/25/student-loan-repayments-refunded-forgiven/7895863001/">when the most recent payment pause extension was announced</a> – the White House stated that it was supposed to be the <a href="https://www.ed.gov/news/press-releases/biden-harris-administration-announces-final-student-loan-pause-extension-through-december-31-and-targeted-debt-cancellation-smooth-transition-repayment">final extension</a>.</p>
<p>Despite the setback for widespread student loan forgiveness, some borrowers may still qualify for one or more targeted student loan forgiveness programs. These groups include borrowers who <a href="https://www.savingforcollege.com/article/how-to-get-rid-of-student-loans">attended a school that shut down</a>. Student loans may also be forgiven for those who are <a href="https://disabilitydischarge.com/">totally and permanently disabled</a>. Students who were <a href="https://studentaid.gov/borrower-defense/">defrauded by their school</a> – such as by being misled about job placement rates for graduates or the true cost to attend the school – may also be eligible.</p>
<p>In November 2022, the Biden administration <a href="https://www.wsj.com/articles/biden-administration-to-make-it-easier-to-dismiss-student-loans-in-bankruptcy-11668706819?mod=article_inline">released new rules to make it easier for student loans to be discharged in bankruptcy</a>. If a student loan borrower can prove their expenses are equal to or greater than their income, the student loan debt may qualify to be eliminated in bankruptcy.</p><img src="https://counter.theconversation.com/content/194973/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William Chittenden does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
A finance expert explains why President Biden’s student loan forgiveness program got blocked – and what’s next for student loan borrowers in search of relief.
William Chittenden, Associate Professor of Finance, Texas State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/193288
2022-10-28T12:31:45Z
2022-10-28T12:31:45Z
The ethics of canceling student debt is more about fairness than broken promises
<figure><img src="https://images.theconversation.com/files/491932/original/file-20221026-16-z5dr49.jpg?ixlib=rb-1.1.0&rect=0%2C8%2C6000%2C3979&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Several groups have opposed President Joe BIden's plan to forgive $10,000 to $20,000 of student debt.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/student-loan-borrowers-stage-a-rally-in-front-of-the-white-news-photo/1417997441?phrase=student%20loan%20&adppopup=true">Photo by Paul Morigi/Getty Images for We the 45m</a></span></figcaption></figure><p>President Joe Biden’s plan to forgive US$10,000 to $20,000 of student debt for up to 40 million eligible borrowers was <a href="https://www.forbes.com/sites/adamminsky/2022/10/21/court-temporarily-blocks-bidens-student-loan-forgiveness-plan---heres-what-it-means-for-borrowers/">recently put on hold</a> when a federal appeals court temporarily paused the program.</p>
<p><a href="https://www.pbs.org/newshour/nation/six-republican-led-states-appealing-dismissal-of-lawsuit-over-student-loan-relief">Six states had asked the court</a> to block implementation of loan forgiveness until their lawsuits against the program were resolved. The states allege that they would be financially harmed if borrowers receive loan forgiveness.</p>
<p>As an <a href="https://lib.dr.iastate.edu/do/search/?q=author_lname%3A%22Padgett-Walsh%22%20author_fname%3A%22Kate%22&start=0&context=1759512&facet=">ethicist</a> who studies the morality of debt, my work explores the question at the heart of opposition to student loan forgiveness: Is student debt cancellation unfair? </p>
<h2>The moral case against canceling</h2>
<p>Educational debt is often regarded as an investment in one’s future. Millennials with a Bachelor of Arts degree, for instance, typically earn <a href="https://www.bls.gov/careeroutlook/2020/data-on-display/education-pays.htm">$25,000</a> more per year than those with just a high school diploma. College education is also generally correlated with a variety of positive life outcomes, including <a href="https://doi.org/10.1016/j.jhealeco.2016.08.002">physical</a> and <a href="https://doi.org/10.1016/j.socscimed.2011.10.038">mental</a> health, <a href="https://www.annualreviews.org/doi/abs/10.1146/annurev.soc.012809.102503">family stability</a> and <a href="https://www.aeaweb.org/articles?id=10.1257/jep.25.1.159">career satisfaction</a>. </p>
<p>Given the benefits of college education, <a href="https://www.brookings.edu/blog/up-front/2019/11/12/five-facts-about-student-loans/">canceling student debt appears</a> to some as a giveaway for those who are already on their way to becoming well-off. </p>
<p>Canceling debt also seems to violate the moral principle of following through on one’s promises. Borrowers have a moral duty to fulfill their loan agreements, the philosopher <a href="https://pdfs.semanticscholar.org/ff5d/112a814a2016f045f63a31755792c757e8b8.pdf">Immanuel Kant</a> argued, because reneging on promises is disrespectful to oneself and others. Once people have promised to do something, he noted, others rely upon that promise and expect them to follow through. </p>
<p>In the case of federal student loans, a borrower signs a promissory note agreeing to pay back the government and, ultimately, the taxpayers. And so student borrowers seem to have a moral duty to pay their debts unless mitigating circumstances like injury or illness arise.</p>
<h2>The moral case for canceling</h2>
<p>Fairness and respect, however, also demand that society address the magnitude of student debt today, and especially the burden it imposes on low-income, first-generation and Black borrowers. </p>
<figure class="align-center ">
<img alt="Students holding placards saying 'Freeze tuition, abolish tuition,' among others." src="https://images.theconversation.com/files/491923/original/file-20221026-13-bdki44.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/491923/original/file-20221026-13-bdki44.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/491923/original/file-20221026-13-bdki44.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/491923/original/file-20221026-13-bdki44.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/491923/original/file-20221026-13-bdki44.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/491923/original/file-20221026-13-bdki44.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/491923/original/file-20221026-13-bdki44.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Students hold a demonstration in New York to protest against ballooning student loan debt.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/students-hold-placards-as-they-stage-a-demonstration-at-the-news-photo/496932252?adppopup=true">Photo by Cem Ozdel/Anadolu Agency/Getty Images</a></span>
</figcaption>
</figure>
<p>Young people today start their adult lives burdened with much more student debt than previous generations. Almost <a href="https://ticas.org/wp-content/uploads/legacy-files/pub_files/qf_about_student_debt.pdf">70% of college students</a> now borrow to attend college, and the average size of their debt has risen since the mid-1990s from less than <a href="https://ticas.org/wp-content/uploads/legacy-files/pub_files/qf_about_student_debt.pdf">$13,000 to about $30,000</a> today. </p>
<p>As a result, total outstanding student debt has jumped to over <a href="https://www.newyorkfed.org/microeconomics/topics/student-debt">$1.5 trillion</a>, making it the <a href="https://heller.brandeis.edu/iasp/pdfs/racial-wealth-equity/racial-wealth-gap/stallingdreams-how-student-debt-is-disrupting-lifechances.pdf">second-largest</a> form of debt in the U.S., after mortgages. </p>
<p>This explosion in student debt raises two significant moral concerns, as my student <a href="https://doi.org/10.1007/s10790-020-09770-1">Justin Lewiston and I argue in an article</a> published in 2020 by The Journal of Value Inquiry. </p>
<p>The first concern is that the distribution of costs and benefits is highly unequal. Fairness requires equal opportunity, as the philosopher <a href="https://plato.stanford.edu/entries/rawls/">John Rawls</a> argued. Yet, while borrowing for education is supposed to create opportunities for students from disadvantaged backgrounds, those opportunities often fail to materialize due to educational challenges and wage gaps in the labor market.</p>
<p>Data shows that low-income students, first-generation students and Black students face much greater struggles in repaying their loans. About 70% of those in <a href="https://www.americanprogress.org/issues/education-postsecondary/reports/2017/12/14/444011/student-loan-defaulters/">default</a> are first-generation students, and 40% come from low-income backgrounds. Twenty years after college, when white borrowers have repaid 94% of their loans, the typical Black student has been able to <a href="https://heller.brandeis.edu/iasp/pdfs/racial-wealth-equity/racial-wealth-gap/stallingdreams-how-student-debt-is-disrupting-lifechances.pdf">repay only 5%</a>. </p>
<p>These repayment and default rates reflect significantly lower <a href="https://nscresearchcenter.org/signaturereport16/">graduation rates</a> for students in those groups, who typically need to work long hours while also in school and hence <a href="https://doi.org/10.1177/2378023116664351">engage</a> less with both the academic and nonacademic aspects of college.</p>
<p>But they also reflect significantly lower post-graduation incomes for such students, due in no small part to continuing social and racial wage gaps in the labor market. Black men with a bachelor’s degree make, on average, more than <a href="https://www.frbsf.org/economic-research/files/el2017-26.pdf?mod=article_inline">20% less than white men</a> with the same education and experience, though that wage gap is smaller for women. And first-generation graduates typically make <a href="https://doi.org/10.1007/s11162-018-9523-1">10% less than students whose parents graduated</a> from college.</p>
<p>A second moral concern is that student debt is increasingly causing widespread distress and constraining the lives of borrowers in significant ways. Consider that even before the pandemic, <a href="https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-student-loans-and-other-education-debt.htm">20% of student borrowers</a> were behind on their payments, and first-generation borrowers and borrowers of color are struggling even more. </p>
<p>The financial distress indicated by this high rate of delinquency is undermining both the <a href="https://ideas.repec.org/a/kap/jfamec/v40y2019i1d10.1007_s10834-018-9594-3.html">physical</a> and <a href="https://www.sciencedirect.com/science/article/abs/pii/S0277953614007503">mental</a> health of young adults. It prevents young adults from starting <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2968250">families</a>, purchasing cars, renting or buying their own <a href="https://www.sciencedirect.com/science/article/abs/pii/S0927537117303317">homes</a> and even starting new <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2633951">businesses</a>. </p>
<p>Unsurprisingly, these negative effects are <a href="https://doi.org/10.1177/2167696819879252">disproportionately</a> experienced by first-generation, low-income and Black student borrowers, whose life choices are especially restricted by the need to make loan payments. </p>
<h2>Avoiding moral hazard</h2>
<p><a href="https://www.forbes.com/sites/prestoncooper2/2019/10/28/the-massive-moral-hazard-problem-in-mass-student-loan-forgiveness/?sh=73667707e927">Some analysts</a> have argued, however, that canceling student debt will create a problem of moral hazard. A moral hazard arises when people no longer feel the need to make careful choices because they expect others to cover the risk for them.</p>
<p>For example, a bank that expects to be bailed out by the government in the event of a financial crisis thereby has an incentive to engage in riskier behavior. </p>
<p>Moral hazard can be avoided by combining student debt cancellation with programs that reduce the need for future borrowing, especially for first-generation students, low-income students and students of color. </p>
<p>One success story is the Tennessee Promise, a program enacted in 2015 to make tuition and fees at community and technical colleges free to state residents. This program has <a href="https://comptroller.tn.gov/office-functions/research-and-education-accountability/publications/higher-education/content/tennessee-promise-evaluation.html">increased enrollment</a> and retention and completion rates, <a href="https://www.academia.edu/39369076/Do_Promise_Programs_Reduce_Student_Loans_Evidence_from_Tennessee_Promise">while reducing borrowing by over 25%</a>. </p>
<p>New Mexico has recently gone a step further, offering free tuition scholarships at all public colleges and universities, including some trade programs. The <a href="https://hed.nm.gov/free-college-for-new-mexico">scholarships</a> are offered to all state residents who maintain a 2.5 GPA while in college and enroll in at least 6 credit hours per semester. </p>
<p>Ultimately, morality requires a forward-looking as well as a backward-looking approach to debt cancellation. The way forward, I would argue, is to create a fairer society by canceling some student debt and reversing the trend of funding higher education with student borrowing. </p>
<p><em>This is an updated version of a piece <a href="https://theconversation.com/the-morality-of-canceling-student-debt-150606">first published on Dec. 2, 2020</a>.</em></p><img src="https://counter.theconversation.com/content/193288/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Padgett Walsh receives funding from the National Science Foundation. </span></em></p>
A scholar who studies the morality of debt argues why canceling some student debt is fair.
Kate Padgett Walsh, Associate Professor of Philosophy, Iowa State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/189352
2022-08-24T20:53:01Z
2022-08-24T20:53:01Z
Student loan forgiveness – experts on banking, public spending and education policy look at the impact of Biden’s plan
<figure><img src="https://images.theconversation.com/files/480947/original/file-20220824-4398-o5modq.jpg?ixlib=rb-1.1.0&rect=114%2C109%2C3068%2C2009&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"> An estimated 20 million people will see their balances drop to zero.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/BidenStudentLoans/68b6eeb2eec4418d86e302bffa38a56c/photo?Query=student%20loans&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=1120&currentItemNo=15">AP Photo/Evan Vucci</a></span></figcaption></figure><p><em>President Joe Biden announced a <a href="https://studentaid.gov/debt-relief-announcement/">program to provide student debt relief</a> to millions of borrowers of federal loans. The plan would offer up to US$10,000 in forgiveness for people who earn less than $125,000 – $250,000 for couples – and up to $20,000 for Pell Grant recipients. Biden also extended the pause on repaying federal student loan debt through Dec. 31, 2022, and has proposed a cap on income that can be used to calculate how much borrowers repay through income-driven repayment.</em></p>
<p><em>We asked three experts to explain the decision and its impact.</em></p>
<h2>Relief makes real difference but ignores structural issues</h2>
<p><strong>Terri Friedline, Associate Professor of Social Work, University of Michigan</strong></p>
<p>The Biden administration’s plan is an important step that I believe will make a real difference in many people’s lives. The <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most/">White House estimates</a> that about 20 million of the nation’s <a href="https://www.forbes.com/advisor/student-loans/average-student-loan-statistics/">roughly 43 million student debt holders</a> will see their entire balance canceled. </p>
<p>Despite this considerable impact, the plan is still limited. I hope it’s just the beginning in much-needed policy conversations about debt and education in the United States. </p>
<p>For one thing, Biden’s plan <a href="https://libertystreeteconomics.newyorkfed.org/2022/04/who-are-the-federal-student-loan-borrowers-and-who-benefits-from-forgiveness/">cuts less than 20%</a> of America’s $1.75 trillion student debt tab. </p>
<p>In addition, the income cap of $125,000 focuses on borrowers’ socioeconomic class while ignoring the roles <a href="https://www.marketplace.org/2020/10/27/student-loan-debt-adds-to-racial-wealth-disparities-research-finds">structural racism</a> and sexism play in terms of who borrows and how much. For example, <a href="https://www.aauw.org/issues/education/student-debt/">Black women borrow</a> about $38,000 on average to finance their education, compared with $30,000 for white men. And because interest on student loans quickly accumulates, most Black female borrowers <a href="https://heller.brandeis.edu/iere/pdfs/racial-wealth-equity/racial-wealth-gap/stallingdreams-how-student-debt-is-disrupting-lifechances.pdf">still owe</a> their original balance 20 years after enrolling in school. By comparison, most white borrowers have paid off their loans completely within that time period.</p>
<p>The Biden administration will have to do more if it aims to adequately address these and the many other remaining structural problems with debt and education. </p>
<figure class="align-center ">
<img alt="A black student with glasses wearing a cap in gown is the focus amid a sea of other faces." src="https://images.theconversation.com/files/480949/original/file-20220824-11847-sdo0s6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/480949/original/file-20220824-11847-sdo0s6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=396&fit=crop&dpr=1 600w, https://images.theconversation.com/files/480949/original/file-20220824-11847-sdo0s6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=396&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/480949/original/file-20220824-11847-sdo0s6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=396&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/480949/original/file-20220824-11847-sdo0s6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=497&fit=crop&dpr=1 754w, https://images.theconversation.com/files/480949/original/file-20220824-11847-sdo0s6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=497&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/480949/original/file-20220824-11847-sdo0s6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=497&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Black student debt borrowers will get significant relief from Biden’s plan.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/graduates-at-graduation-ceremony-royalty-free-image/975170-004">Andy Sacks/The Image Bank via Getty Images</a></span>
</figcaption>
</figure>
<h2>Plan extends much-needed relief to Black borrowers</h2>
<p><strong>Dominique Baker, Assistant Professor of Education Policy, Southern Methodist University</strong></p>
<p>When approximately 10,000 student loan borrowers had their private student loans randomly canceled from 2010 to 2017, researchers found that it ultimately enabled them to <a href="https://www.nber.org/papers/w25810">more easily move, change jobs and earn more money</a>. The borrowers were also 11% less likely to default on credit cards or other loans.</p>
<p>I expect similar outcomes will flow from the Biden administration’s
decision to cancel federal student loans. And the decision to cancel up to $20,000 for those who received Pell Grants means that <a href="https://www.urban.org/urban-wire/more-targeted-approach-student-loan-forgiveness">even more relief may flow to borrowers who are Black</a>.</p>
<p>From the standpoint of racial justice, I believe this additional relief for Black borrowers is necessary because of <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674251489">centuries of</a> <a href="https://wwnorton.com/books/When-Affirmative-Action-Was-White/">systemic inequities</a>. Such inequities include accumulating education debt through “<a href="https://doi.org/10.1177/2329496516686620">predatory inclusion</a>,” a practice in which Black people are offered access to things like college or buying a house but on exploitative financial terms that have long-term negative effects.</p>
<p>Black student loan borrowers are also often the <a href="https://www.brookings.edu/research/the-looming-student-loan-default-crisis-is-worse-than-we-thought/">most</a> <a href="https://www.americanprogress.org/article/continued-student-loan-crisis-black-borrowers/">burdened</a> <a href="https://doi.org/10.1177/2332649218790989">by</a> <a href="https://doi.org/10.1177/2332858419860153">student</a> <a href="https://www.luminafoundation.org/wp-content/uploads/2021/02/borrowers-of-color-2.pdf">loan</a> <a href="https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/raceandloans.pdf">debt</a>. As <a href="https://www.brookings.edu/research/the-looming-student-loan-default-crisis-is-worse-than-we-thought/">one example</a>, Black bachelor’s degree earners are more likely to default on their student loans than white students who earn a bachelor’s degree – 21% versus 4%, respectively. Even more startling, Black bachelor’s degree recipients default at a higher rate than white students who leave college with no degree – 21% versus 18%, respectively.</p>
<p>The Biden administration also has <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-relief-for-borrowers-who-need-it-most/#:%7E:text=President%20Biden%20believes%20that%20a,deprives%20them%20of%20that%20opportunity">proposed changes to the income-driven repayment plan</a>, which should help future undergraduate borrowers by reducing the monthly percentage of discretionary income borrowers would pay from 10% to 5% and increasing what counts as nondiscretionary income. That means borrowers will have more money that will not be used to calculate the percentage they owe each month. </p>
<p>I’d argue there is still work to be done to create an affordable college education. But today was an excellent start.</p>
<figure class="align-center ">
<img alt="A gas station sign shows the price of gasoline with parked cars in background." src="https://images.theconversation.com/files/480948/original/file-20220824-9815-p217nk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/480948/original/file-20220824-9815-p217nk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/480948/original/file-20220824-9815-p217nk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/480948/original/file-20220824-9815-p217nk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/480948/original/file-20220824-9815-p217nk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/480948/original/file-20220824-9815-p217nk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/480948/original/file-20220824-9815-p217nk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some are concerned debt forgiveness will fuel more inflation.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/ConsumerPrices/e373951b8b9e4f2da773d65c088dc2e5/photo?Query=consumer%20prices&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=2276&currentItemNo=10">AP Photo/Gene J. Puskar</a></span>
</figcaption>
</figure>
<h2>Loan forgiveness could fuel inflation</h2>
<p><strong>John W. Diamond, Director of the Baker Institute’s Center for Public Finance, Rice University</strong></p>
<p>The price tag for Biden’s debt forgiveness plan is estimated <a href="https://budgetmodel.wharton.upenn.edu/issues/2022/8/23/forgiving-student-loans">at a little more than $300 billion</a>.</p>
<p>While it will provide direct financial benefits for some people who currently owe money on federal student loans, I believe there will be another cost: higher inflation. </p>
<p>U.S. inflation is already rising at just below the <a href="https://fred.stlouisfed.org/series/CPIAUCSL">fastest annual pace in 40 years</a>, prompting the Federal Reserve to <a href="https://theconversation.com/a-hawkish-fed-signals-further-rate-hikes-and-sees-a-slowing-economy-but-not-recession-187758">aggressively hike interest rates</a> to reduce it, even at the risk of recession. Biden’s plan will make the central bank’s job tougher. </p>
<p>The upward pressure on inflation will result from increased spending by those who see their student debts reduced, as well as from the continuing moratorium on federal loan repayments. This higher demand for consumer goods – relative to a world without debt relief or a repayment moratorium – has the effect of driving up prices for current goods and services.</p>
<p>The <a href="https://www.crfb.org/blogs/cancelling-student-debt-would-undermine-inflation-reduction-act">Committee for a Responsible Federal Budget</a> found that a similar though more modest version of debt forgiveness would lead to a measurable increase in <a href="https://fred.stlouisfed.org/series/PCE">spending on personal consumption</a>, which would have the effect of driving up prices for all consumers. That was based on a plan to spend roughly $230 billion on debt forgiveness – at least $70 billion less than Biden’s plan.</p>
<p>Another side effect could be that Biden’s debt relief offers incentives to students entering or currently in college to <a href="https://www.crfb.org/blogs/how-long-cancelled-student-debt-would-return">take on additional debt</a> in anticipation of future rounds of forgiveness. Economists call this <a href="http://investopedia.com/terms/m/moralhazard.asp">moral hazard</a>. Other research found that increases in student borrowing <a href="https://doi.org/10.1093/rfs/hhy069">can result in bigger tuition increases</a>. </p>
<p>Some research has pointed to <a href="http://www.doi.org/10.3386/w25810">positive economic outcomes</a> for those who receive debt relief, such as less future indebtedness, greater job mobility and higher salaries. But these effects are based on a full discharge of student debt and not an incremental reduction like the one Biden announced. </p>
<p>Ultimately, loan forgiveness – whatever its merits – will likely lead to larger federal deficits and higher inflation. While it benefits those with student loan debt, those benefits should be weighed against the costs it imposes on others and the economy.</p><img src="https://counter.theconversation.com/content/189352/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John W. Diamond is affiliated with Rice University's Baker Institute For Public Policy. </span></em></p><p class="fine-print"><em><span>Dominique Baker and Terri Friedline do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Biden’s plan would provide up to $10,000 in relief for individuals who earn less than $125,000 a year, and $20,000 for Pell Grant recipients.
Terri Friedline, Associate Professor of Social Work, University of Michigan
Dominique Baker, Assistant Professor of Education Policy, Southern Methodist University
John W. Diamond, Director, Center for Public Finance at Rice University's Baker Institute, Edward A. and Hermena Hancock Kelly Fellow in Public Finance, Adjunct Professor of Economics, Rice University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/183782
2022-07-26T11:57:15Z
2022-07-26T11:57:15Z
Proclaim debt amnesty throughout all the land? A biblical solution to a present-day problem
<figure><img src="https://images.theconversation.com/files/475172/original/file-20220720-11760-dzfe0b.jpg?ixlib=rb-1.1.0&rect=14%2C11%2C2481%2C1860&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Part of a restoration edict of Ammisaduqa, one of the rulers of ancient Babylon.</span> <span class="attribution"><a class="source" href="https://www.britishmuseum.org/collection/image/339237001">© The Trustees of the British Museum</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Student loan debt is one of the most burdensome forms of debt in America today. According to oft-cited statistics, <a href="https://studentaid.gov/data-center/student/portfolio">approximately 43 million Americans</a> have student loan debt, cumulatively amounting to <a href="https://www.cnbc.com/2022/05/06/this-is-how-student-loan-debt-became-a-1point7-trillion-crisis.html">around US$1.7 trillion</a>. The exorbitant costs of higher education in the United States, combined with the fact that educational credentials serve as a ticket to decent employment, require many students to take out loans that follow them long past graduation – and that are almost impossible to <a href="https://theconversation.com/can-student-loans-be-cleared-through-bankruptcy-4-questions-answered-166308">discharge in bankruptcy</a>. </p>
<p>Hence, calls for cancellation of student loan debt by legislative or executive action keep intensifying, and President Joe Biden is expected to respond by <a href="https://www.chronicle.com/article/how-would-student-loan-forgiveness-really-work?utm_source=Iterable&utm_medium=email&utm_campaign=campaign_4436193_nl_Academe-Today_date_20220609&cid=at&source=ams&sourceid=&cid2=gen_login_refresh">ordering cancellation of some amount</a>, notwithstanding arguments against any blanket debt amnesty.</p>
<p>Yet this very policy is inscribed on <a href="https://www.nps.gov/inde/learn/historyculture/stories-libertybell.htm">the U.S. Liberty Bell</a>. “Proclaim liberty throughout all the land unto all the inhabitants thereof!” it declares, quoting <a href="https://www.sefaria.org/Leviticus.25.10?lang=bi&aliyot=0">the biblical Book of Leviticus, 25:10</a>. The Hebrew word translated “liberty,” “derōr,” actually refers to debt amnesty.</p>
<figure class="align-center ">
<img alt="A large bell is displayed on a stand, with a shady courtyard in the background." src="https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=408&fit=crop&dpr=1 600w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=408&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=408&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=513&fit=crop&dpr=1 754w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=513&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/475220/original/file-20220720-16-pwtyo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=513&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Liberty Bell, with its famous crack, in Philadelphia.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/close-up-of-the-liberty-bell-news-photo/144082290?adppopup=true">Joe Sohm/Visions of America/Universal Images Group via Getty Images</a></span>
</figcaption>
</figure>
<p>In the world of the Bible, it was customary to cancel all noncommercial debts from time to time. As <a href="https://cla.umn.edu/about/directory/profile/vonda001">a scholar of the ancient Near East</a>, I’ve read many cuneiform tablets that record how people then – like Americans today – often went into debt to meet living expenses. They might mortgage their property to keep a roof over their heads, only to find that ever-accruing interest made it impossible to pay off the principal. </p>
<p>They faced the additional risk of debt bondage: People lacking sufficient property to secure their debts would have to pledge their dependents or even their own selves to their creditors. <a href="https://brill.com/view/title/7176">Their creditors thus became their masters</a>, and those pledged for debt were effectively enslaved, unless and until they were redeemed. A decree of debt amnesty would wipe the slate clean, springing people from bondage and restoring their freedom as well as their fortunes.</p>
<h2>Kings clean the slate</h2>
<p>The earliest recorded instances of this practice come from ancient Sumer, a land in the south of what is now Iraq. <a href="http://oracc.museum.upenn.edu/etcsri/corpus">Urukagina</a>, ruler of the city of Lagash around 2400 B.C., decreed a debt amnesty soon after he came to power, releasing people living in debt bondage to go home and even clearing the prisons. In the Sumerian language, this amnesty was termed “<a href="http://psd.museum.upenn.edu/nepsd-frame.html">amargi</a>” – “return to mother” – for it restored people to their families.</p>
<p>Urukagina was not the first to issue such a decree, and it may already have become traditional by his time. The practice of decreeing debt amnesty is widely documented in the Semitic-speaking kingdoms of Syria and Mesopotamia during the early second millennium B.C. Debt amnesty was routinely triggered by the death of a ruler: His successor would <a href="http://www.archibab.fr/T16766">raise a golden torch</a> and decree “andurāru,” or “restoration” – the Akkadian equivalent of Hebrew “deror.” The stated purpose of such decrees was to establish or reestablish equity. A king’s foremost duty was to maintain “justice and equity,” as Hammurabi of Babylon claimed to do when promulgating <a href="https://collections.louvre.fr/en/ark:/53355/cl010174436">his laws</a> around 1750 B.C.</p>
<p>While lending at interest was not considered unjust, debt that deprived families of their property and liberty created inequity, which had to be remedied. A decree of “andurāru” restored equity, liberty and family property by canceling debts incurred for subsistence – including tax arrears owed to the state – while leaving commercial debts untouched. When Hammurabi was on his deathbed, his son Samsu-iluna took power and <a href="http://www.archibab.fr/4dcgi/listestextes3.htm?T13">issued a decree</a> remitting noncommercial debts, canceling arrears and forbidding their collection; thus, he declared, “I have established restoration throughout the land.” </p>
<p>A decree of restoration could also be issued to address political or economic crisis. The usurper or conqueror, having subjected a people to his rule, could establish their “restoration,” both remitting debts and enabling those captured during hostilities to go free. Hammurabi himself did this <a href="https://www.bloomsbury.com/us/hammurabi-of-babylon-9781350197787/">upon conquering the kingdom of Larsa</a>, which was part of ancient Sumer.</p>
<figure class="align-center ">
<img alt="A stone relief shows two men with long beards: one standing, with a hand to his mouth, the other seated and holding a staff." src="https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=752&fit=crop&dpr=1 600w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=752&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=752&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=945&fit=crop&dpr=1 754w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=945&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/475894/original/file-20220725-12-p1oza7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=945&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Detail of a relief of King Hammurabi before the sun-god Shamash, from a stone stele inscribed with his proclamation of laws and dedicated around 1750 B.C., discovered at Susa in present-day Iran.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/diorite-stela-with-the-code-of-hammurabi-detail-showing-the-news-photo/142931321?adppopup=true">DEA / G. Dagli Orti/DeAgostini via Getty Images</a></span>
</figcaption>
</figure>
<p>Thus the conqueror could pose as a liberator setting a disordered realm to rights. The idea was to restore the inhabitants of the land to their original condition, before incurring debt, losing their property or losing their liberty.</p>
<h2>Not so forgiving</h2>
<p>The issuance of debt-canceling decrees was sporadic, not periodic, so one never knew when it would occur. But everyone knew it would happen sooner or later. Financiers would therefore prepare for this eventuality to avoid taking losses whenever debts were abruptly remitted and their collection prohibited. They used various methods to insulate transactions and investments from debt remission – because otherwise who would ever offer credit to those in need? </p>
<p>They <a href="https://doi.org/10.1086/699392">developed legal fictions</a> to disguise mortgage loans, debt bondage, and the like as contracts of other kinds, avoiding their cancellation by decree. The <a href="https://www.kriso.ee/context-scripture-volume-2-monumental-inscriptions-db-9789004106192.html?lang=eng">decree of Ammi-ṣaduqa</a>, a king of Babylon in the 17th century B.C., explicitly prohibits such subterfuge, but regulation was a step behind entrepreneurs. Clever financial instruments immunized debt from amnesty and kept credit, as well as profit, flowing.</p>
<p>Ultimately a program for periodic debt cancellation was developed in biblical law. <a href="https://www.sefaria.org/Deuteronomy.15?lang=bi&aliyot=0">The Book of Deuteronomy</a> requires remission of debts among Israelites every seventh year, using the term “šemiṭṭah” – “remission” – and stipulating that every creditor should remit the debt owed him. <a href="https://www.sefaria.org/Leviticus.25.10?lang=bi&with=all&lang2=en">The Book of Leviticus</a> adds the requirement to proclaim amnesty, Hebrew “deror,” after every seventh cycle of seven years, restoring every Israelite to his property and family in the 50th year – <a href="https://www.sefaria.org/Leviticus.25.9?lang=bi&aliyot=0">the jubilee</a> year. Recognizing that a predictable debt amnesty would only make creditors’ planning easier, <a href="https://www.sefaria.org/Deuteronomy.15?lang=bi&aliyot=0">Deuteronomy 15:9</a> warns against refusing to lend as the seventh year approaches. </p>
<p>The biblical authors must have had some experience with creditors’ efforts to evade the requirement to remit debts. According to <a href="https://www.sefaria.org/Jeremiah.34.9?lang=bi">the Book of Jeremiah</a>, when Zedekiah, the last king of Judah, decreed “deror” in the face of the Babylonian invasion of 587 B.C., creditors agreed to release their enslaved fellow Judeans, then found ways to force them back into bondage.</p>
<p>Not only was the ostensible purpose of debt-remission decrees <a href="https://doi.org/10.1086/699392">defeated by creative credit instruments</a>, the true purpose of such decrees was not to fix the problems that made them necessary. People would still need to go into debt to survive, pay their taxes and keep a roof over their heads. They would still risk impoverishment, debt bondage and eventual enslavement. Sporadic debt cancellation did not eliminate chronic indebtedness, nor was it meant to.</p>
<p>Instead, the function of such decrees was to restore socioeconomic balance – and the tax base – enough that the cycle of borrowing to survive could start over. In a sense, debt amnesty actually served to restore society to its ideal state of inequity, so that it would always need the same remedy again.</p>
<p>This dynamic is worth considering amid calls for canceling student loan debt. Certainly a student debt amnesty would benefit <a href="https://www.washingtonpost.com/education/2022/05/22/student-loan-borrowers/">millions</a> whose lives are shackled by interest on loans they took out in the hope that a degree would guarantee them gainful employment. It would do nothing to <a href="https://wdet.org/2020/12/09/forgiving-student-loans-wont-fix-the-root-cause-of-the-student-debt-crisis/">address the problems</a> that make incurring such debt necessary. </p>
<p>As long as higher education is treated simultaneously as a private good and a job requirement, people will still need to go into debt to get degrees. Then the same remedy will have to be applied again.</p><img src="https://counter.theconversation.com/content/183782/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eva von Dassow was awarded a fellowship funded by the National Endowment for the Humanities at the American Academy in Rome (2016). </span></em></p>
A scholar of the ancient Near East explains how loan forgiveness was handled thousands of years ago in the Bible and royal decrees.
Eva von Dassow, Associate professor of Ancient History, University of Minnesota
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/183808
2022-06-05T20:02:12Z
2022-06-05T20:02:12Z
The inequity of Job-ready Graduates for students must be brought to a quick end. Here’s how
<p>Labor’s <a href="https://theconversation.com/labors-promised-universities-accord-could-be-a-turning-point-for-higher-education-in-australia-183810">promise of a “universities accord”</a> suggests a slow and careful approach to higher education policy. A <a href="https://www.theaustralian.com.au/higher-education/jason-clare-rides-his-zingers-into-the-education-ministry/news-story/05f80142fe540653a596b9eb0908fe13">new education minister</a> without a strong background in the portfolio may also want time to get across the issues. </p>
<p>In general, taking this time to get policy right and build support for it is a good approach. But when current policy is causing problems and lacks significant support there is a case for acting more quickly. This is the situation with the previous government’s <a href="https://www.dese.gov.au/job-ready">Job-ready Graduates</a> student funding policy <a href="https://www.aph.gov.au/Parliamentary_Business/Bills_LEGislation/Bills_Search_Results/Result?bId=r6584">enacted in late 2020</a>. </p>
<p>Job-ready Graduates imposes unfair <a href="https://www.studyassist.gov.au/help-loans">HELP debts</a> on some students, adds to the government’s costs of running the HELP loan scheme, and <a href="https://theconversation.com/labor-offers-extra-university-places-but-more-radical-change-is-needed-173219">distorts university incentives</a> in distributing student places between courses. </p>
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Read more:
<a href="https://theconversation.com/labors-promised-universities-accord-could-be-a-turning-point-for-higher-education-in-australia-183810">Labor's promised universities accord could be a turning point for higher education in Australia</a>
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<h2>How are university courses funded?</h2>
<p>A mix of <a href="https://www.dese.gov.au/higher-education-loan-program/approved-hep-information/funding-clusters-and-indexed-rates">contributions from the Commonwealth and students</a> fund domestic undergraduates in public universities. Added together, these contributions are the overall funding rate per subject. </p>
<p>The government sets Commonwealth contributions, which vary by academic discipline. The government pays universities according to their enrolments up to a <a href="https://www.dese.gov.au/collections/higher-education-providers-2021-2023-funding-agreements">capped total grant amount</a>.</p>
<p>Universities set student contributions up to a legal maximum, which also varies by discipline. Universities are paid directly by students or through <a href="https://www.studyassist.gov.au/help-loans/hecs-help">HECS-HELP loans</a>. Total student contribution revenue is not capped.</p>
<p>Once universities reach their maximum Commonwealth contribution grant they can still increase enrolments, but on student contribution revenue only. These extra students are called “over-enrolments”. Historically, over-enrolments have been an important source of flexibility in meeting student demand.</p>
<p>In its basic architecture, Job-ready Graduates has similarities with previous funding policies, other than the <a href="https://theconversation.com/demand-driven-funding-for-universities-is-frozen-what-does-this-mean-and-should-the-policy-be-restored-116060">demand-driven system</a>, which uncapped both Commonwealth and student contributions.</p>
<p>Where Job-ready Graduates differs is in the setting of Commonwealth and student contributions. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/demand-driven-funding-for-universities-is-frozen-what-does-this-mean-and-should-the-policy-be-restored-116060">Demand-driven funding for universities is frozen. What does this mean and should the policy be restored?</a>
</strong>
</em>
</p>
<hr>
<h2>Commonwealth cut per student contribution</h2>
<p>Job-ready Graduates increases student places by keeping <a href="https://andrewnorton.net.au/2021/05/14/the-budget-and-higher-education/">total university grants at roughly the same level</a> but reducing the average Commonwealth contribution. Universities need to deliver more student places for each million dollars in public funding.</p>
<p>Labor has already promised a <a href="https://andrewnorton.net.au/2022/05/22/a-few-notes-on-the-future-of-higher-education-policy/">small, and possibly temporary</a>, increase in total Commonwealth contribution funding. Given the government’s <a href="https://budget.gov.au/2022-23/content/bp1/index.htm">overall budget position</a>, a significant increase per student may not be feasible.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/labor-offers-extra-university-places-but-more-radical-change-is-needed-173219">Labor offers extra university places, but more radical change is needed</a>
</strong>
</em>
</p>
<hr>
<p>For universities, increases in student contributions at least partly offset reductions in Commonwealth contributions under Job-ready Graduates. </p>
<h2>Student contributions changed radically</h2>
<p>The most radical element of Job-ready Graduates was a further change to student contributions. Before this policy took effect, a mix of assumed private financial benefits and course costs explained student contribution levels by discipline. The price gap between the cheapest and most expensive discipline was about $4,500 a year. </p>
<p>Job-ready Graduates abandoned this system. Instead, it uses student contributions to manipulate student demand. </p>
<p>In nursing and teaching, “job-ready” courses the previous government favoured, student contributions were cut by about $2,700 a year. In disfavoured courses they went up. The biggest increases of $7,800 a year were in humanities other than languages. </p>
<p>The gap between the cheapest and most expensive course more than doubled, to $10,550 a year. </p>
<p>Higher or lower Commonwealth contributions partly offset these changes to student contributions, so overall funding rates changed by less than the student contribution levels. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/3-big-issues-in-higher-education-demand-the-new-governments-attention-183349">3 big issues in higher education demand the new government's attention</a>
</strong>
</em>
</p>
<hr>
<h2>Job-ready Graduates has long-term impacts</h2>
<p>The Job-ready Graduates assumption that students would respond to these price signals and change enrolment patterns was never sound. Course preferences still <a href="https://andrewnorton.net.au/2020/06/21/jobs-interests-and-student-course-choices/">depend on student interests</a>. For financially motivated students, <a href="https://andrewnorton.net.au/2020/06/28/financial-influences-on-job-seeking-university-applicants/">differences in job and salary prospects</a> are also more significant than how much they pay for their course. </p>
<p>Job-ready Graduates annually shuffles hundreds of millions of dollars in HELP debt between students. Some students, like those in nursing or teaching, will owe less than previously and repay their debt earlier.</p>
<p>Others, like those taking humanities courses, will owe much more and keep repaying for years longer than before. Some may never fully repay their HELP debt.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1392075423094173697"}"></div></p>
<p>While HELP is designed to allow slow or incomplete repayment, this should reflect varying individual circumstances. It is not sensible or fair to assign repayment periods and risks based on course choices. </p>
<p>Slow or no repayment increases the <a href="https://twitter.com/andrewjnorton/status/1392075423094173697/photo/1">cost of HELP to the government</a>. This is not prudent when it already faces large budget deficits.</p>
<iframe title="Higher education loan repayments and outstanding debt" aria-label="Grouped Column Chart" id="datawrapper-chart-BX3aq" src="https://datawrapper.dwcdn.net/BX3aq/2/" scrolling="no" frameborder="0" style="border: none;" width="100%" height="400"></iframe>
<p>The system also affects the economics of over-enrolment. </p>
<p>In fields such as arts, law or business, the student contribution covers more than 90% of the maximum revenue a university could get per student. These fields are close to a de facto demand-driven system, with only minor financial constraints on increased enrolments for universities already earning their maximum Commonwealth grant. </p>
<p>In fields such as education and nursing, less than 25% of maximum per student revenue comes from the student. Over-enrolments in these fields are almost certainly loss-making, creating a deterrent to accepting more students.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1437324540107964419"}"></div></p>
<h2>How can this system be fixed?</h2>
<p>To fix the system we need student and Commonwealth contributions that vary within a narrower range. </p>
<p>This change can be close to budget-neutral. Course that are too expensive, relative to other fields, would have student contributions decreased and Commonwealth contributions increased. Courses that are too cheap would have student contributions increased and Commonwealth contributions decreased. </p>
<p>Estimates of 2022 enrolments could be used to ensure contribution increases and decreases balance each other, leaving the government and universities in the same financial position. </p>
<h2>A fast or slow change?</h2>
<p>Student contribution increases are normally “grandfathered”, so only new students are affected and continuing students are retained on the old rates. </p>
<p>Grandfathering is generally preferable, so students partway through their course are not suddenly hit with unexpected extra charges to finish it. But Job-ready Graduates creates so many problems that it should be ended as quickly and comprehensively as possible.</p>
<p>If the new student pricing system was introduced for 2023, students facing higher charges would have benefited from up to two years of discounted student contributions. Their total course cost at graduation would still be lower than for other students.</p>
<p>A fast fix for the problems of Job-ready Graduates does not preclude later changes coming from the accord process. It is an interim measure to correct errors rather than a long-term policy.</p><img src="https://counter.theconversation.com/content/183808/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Norton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Huge disparities in how much students pay for courses mean graduates of high-fee disciplines will take longer to repay their debts or might never do so. That will ultimately add to government debt.
Andrew Norton, Professor in the Practice of Higher Education Policy, Australian National University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/176218
2022-03-04T13:20:33Z
2022-03-04T13:20:33Z
Your chances of getting rid of student loan debt depend on who you are
<figure><img src="https://images.theconversation.com/files/448144/original/file-20220223-25-4urvqy.jpg?ixlib=rb-1.1.0&rect=7%2C0%2C4977%2C3325&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Single mothers are more likely than single fathers to have their debts discharged in court. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/license/522936678?adppopup=true">Heide Benser/Getty Images</a></span></figcaption></figure><p>To get rid of student loan debt through bankruptcy, you must prove to the court that paying back your student loans would cause an “<a href="https://codes.findlaw.com/us/title-11-bankruptcy/11-usc-sect-523.html">undue hardship</a>.” But in our <a href="https://doi.org/10.1037/law0000338">peer-reviewed study of nearly 700 student loan discharge cases spanning 1985 to 2020</a>, we found that judges’ decisions to dismiss student loans are often influenced by personal factors, such as your gender.</p>
<p>To determine whether repaying the student loan debt is causing the debtor to experience an undue hardship, most courts <a href="https://scholar.google.com/scholar_case?case=5270362258430051298&q=brunner+v.+new+york&hl=en&as_sdt=3,43">apply three criteria</a> outlined in a case known as “<a href="https://law.justia.com/cases/federal/appellate-courts/F2/831/395/398433/">Brunner</a>.”</p>
<p>Under Brunner, to prove they are experiencing an undue hardship, debtors must first demonstrate that repaying their student loans would not allow them to maintain a minimal standard of living. In other words, repaying the debt would prevent them from meeting their basic needs, including food, clothing and shelter. Second, debtors must show that additional circumstances exist that indicate their finances are unlikely to improve. These additional circumstances could include having a medical condition or caring for dependents. Third, debtors must show that they have made good-faith efforts to repay their loans. This includes efforts to make payments on the loans or attempts to consolidate their debt.</p>
<p>Meeting these three criteria is tough. Our data shows that about 38% of the debtors in the cases that we studied received a full or partial discharge of their student loans. But we also discovered other factors regularly come into play in the court’s decisions. Here are three factors that stood out in <a href="https://doi.org/10.1037/law0000338">our research</a>.</p>
<h2>1. Being a single mom helps, but not being a single dad</h2>
<p>In student loan discharge decisions, judges <a href="https://sgp.fas.org/crs/misc/R45113.pdf">regularly consider the expenses associated with a debtor’s children</a>. Our research team found it also sometimes matters to the court whether the debtor is a single parent. Being a single parent more than doubled the chances of obtaining a discharge, but only for mothers. Single fathers did not experience any notable benefit from being a single parent.</p>
<figure class="align-center ">
<img alt="A woman seated in a kitchen looks over paperwork while a boy lingers over her shoulder with his arm around her." src="https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&rect=47%2C0%2C7892%2C5304&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/448126/original/file-20220223-15-tl6e3p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Courts are more likely to see the mother as a caregiver than they are a father.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/woman-struggling-with-home-finances-and-debt-while-royalty-free-image/1215795289?adppopup=true">Fertnig/E+ via Getty Images</a></span>
</figcaption>
</figure>
<p>We’re not certain about why courts view single moms as more deserving of a discharge than single dads. It could have something to do with stereotypes about mothers being the <a href="https://doi.org/10.1371/journal.pone.0147315">“caregivers” in a family, whereas men are the “breadwinners</a>.” A mother’s plea to help fulfill her role as a caregiver may be seen as more persuasive than a father’s plea to be relieved of his financial obligations.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/can-you-get-rid-of-your-student-loans-by-filing-for-bankruptcy-130995">Can you get rid of your student loans by filing for bankruptcy?</a>
</strong>
</em>
</p>
<hr>
<h2>2. Disclosing a medical condition helps men, but not women</h2>
<p>When assessing a debtor’s ability to repay a debt, <a href="https://casetext.com/case/educ-credit-mgmt-corp-v-jorgensen-in-re-jorgensen">case law suggests</a>
that judges must consider any difficulties a person has in trying to find a decent-paying job. </p>
<p>Such struggles are captured by the “additional circumstances” mentioned in the second Brunner criterion. Those additional circumstances include medical conditions. However, judges appear to give medical conditions more consideration for men than they do for women.</p>
<p>Our research found that men reporting a medical condition are 93% more likely to obtain a student loan discharge than men who did not report a medical condition. We did not find this same effect for women. This gender gap is highly relevant, given that female debtors outnumbered male debtors in our analysis almost 2 to 1.</p>
<p>Women’s medical concerns seem to be dismissed or overlooked in multiple arenas – from courts to <a href="https://doi.org/10.1177/2372732220942894">hospitals</a>. Psychologists theorize this may arise from <a href="https://doi.org/10.1155/2018/6358624">stereotypes</a> that suggest women may dramatize medical conditions and exaggerate their pain. </p>
<h2>3. Not having an attorney hurts your cause</h2>
<p>Thanks to ubiquitous crime dramas, it is widely known that those who cannot afford an attorney <a href="https://www.law.cornell.edu/wex/miranda_warning">can have one appointed</a>. Lesser known is that this constitutional right applies only to criminal proceedings. In most civil trials, like bankruptcy proceedings, there is no <a href="https://www.law.cornell.edu/wex/right_to_counsel">right to an attorney</a>. When debtors cannot afford an attorney, they often must represent themselves.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/every-year-millions-try-to-navigate-us-courts-without-a-lawyer-84159">Every year, millions try to navigate US courts without a lawyer</a>
</strong>
</em>
</p>
<hr>
<p>In student loan bankruptcy proceedings, 33% of debtors represent themselves, often to their detriment. We found that debtors who retained an attorney improved their chances of getting their student loans discharged by at least 60%. This was true whether the debtor was male or female.</p>
<p>The benefit of having an attorney in court is <a href="https://psycnet.apa.org/record/2004-16118-011">well-supported by research</a>. Attorneys who specialize in bankruptcy are likely to be aware of the factors upon which judges rely and can build a strong case for discharge. Without an attorney, it can be difficult to know which details to disclose and how to present them.</p>
<h2>Potential solutions</h2>
<p>Getting student loan debt discharged can be difficult and emotionally draining. </p>
<p>If you are thinking about seeking relief from student loan debt, the following suggestions may help.</p>
<p><strong>Develop a strategy that takes your gender into account:</strong> For single fathers, it might be advantageous to emphasize your “breadwinning” role, show the court that you have made efforts toward repaying the loans or have tried very hard to get a decent-paying job. For women with medical conditions, provide as much evidence as you can in the form of hospital visits, attempts to declare disability and the like.</p>
<p><strong>Regardless of gender, remember that having an attorney matters:</strong> Familiarize yourself with <a href="https://www.americanbar.org/groups/legal_services/flh-home/flh-free-legal-help/">legal aid organizations in your area</a>, which can offer free legal services. Also, be sure to search for <a href="https://www.uscourts.gov/services-forms/bankruptcy/filing-without-attorney">other free legal information</a> that can be found on <a href="https://www.flsb.uscourts.gov/dont-have-lawyer">court websites</a> and similar venues.</p>
<p>[<em>Over 150,000 readers rely on The Conversation’s newsletters to understand the world.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-150ksignup">Sign up today</a>.]</p>
<p>None of this advice matters if you fail to file a separate case to get your student loans discharged – as is the case with most student loan debtors who file a bankruptcy case. Without the separate proceeding, students loans cannot be discharged. Around 241,000 people with student loan debt filed for bankruptcy in the U.S. in 2017, but <a href="https://ssrn.com/abstract=3715975">only 447 of those also filed a separate case to get rid of their student loans</a>. Consult the free legal resources to learn how to file this separate case.</p><img src="https://counter.theconversation.com/content/176218/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kelsey Lynne Hess receives funding from the National Conference of Bankruptcy Judges.</span></em></p><p class="fine-print"><em><span>Andrea C. F. Wolfs receives funding from the National Conference of Bankruptcy Judges. </span></em></p><p class="fine-print"><em><span>Deborah Goldfarb receives funding from the National Conference of Bankruptcy Judges, the National Institute of Justice, and the National Science Foundation. She is affiliated with the American Bar Association. </span></em></p><p class="fine-print"><em><span>Jacqueline R. Evans receives funding from the National Science Foundation, the National Institute of Justice, the Federal Bureau of Investigation, and the National Conference of Bankruptcy Judges. </span></em></p>
When researchers examined the outcomes for cases to discharge student loan debt, they found that judges are often biased against people based on their gender and other factors.
Kelsey Lynne Hess, Ph.D. Candidate in Legal Psychology, Florida International University
Andrea C. F. Wolfs, Teaching Professor in Psychology, Plymouth State University
Deborah Goldfarb, Assistant Professor of Psychology, Florida International University
Jacqueline R. Evans, Associate Professor of Psychology, Florida International University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/166338
2021-09-10T12:26:49Z
2021-09-10T12:26:49Z
Student loan debt is crushing Americans – 4 essential reads
<figure><img src="https://images.theconversation.com/files/416822/original/file-20210818-13-yypj2b.jpg?ixlib=rb-1.1.0&rect=20%2C0%2C4537%2C3100&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Currently, the total outstanding federal student loan debt is $1.7 trillion. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/the-reality-of-college-tuition-debt-was-on-display-at-the-news-photo/1141704405?adppopup=true">Suzanne Kreiter/The Boston Globe via Getty Images</a></span></figcaption></figure><p>US$1.7 trillion. That’s how much college students and graduates <a href="https://fred.stlouisfed.org/series/SLOAS">owed in federal student loan debt</a> as of July 2021. </p>
<p>The rising amount of student loan debt can pose serious challenges for individual borrowers. For that reason, colleges and universities and even the federal government have been pursuing solutions to alleviate the burden. But what are the best ways to go about student debt relief? Who should qualify? And what practical effect will debt relief have, not only on individual borrowers but society and the economy as a whole?</p>
<p>To answer these questions, The Conversation sought out an array of scholars – from economists to philosophers – who all specialize to some degree in student loan debt and how it impacts those who borrow.</p>
<h2>1. How does student loan debt affect borrowers?</h2>
<p>Student loan debt doesn’t just cause financial harm to borrowers. <a href="https://theconversation.com/profiles/kate-padgett-walsh-704116">Kate Padgett Walsh</a>, an associate professor of philosophy at Iowa State University, argues that it also causes <a href="https://doi.org/10.1016/j.socscimed.2014.11.027">mental</a>, <a href="https://doi.org/10.1186/1471-2458-14-489">emotional</a> and <a href="https://doi.org/10.1007/s10834-018-9594-3">physical harms</a> as well.</p>
<p>Walsh and two other scholars – Dalié Jiménez, a law professor at the University of California, Irvine, and Raphaël Charron-Chénier, an assistant professor of sociology at Arizona State University – write on <a href="https://theconversation.com/student-loan-debt-is-costing-recent-grads-much-more-than-just-money-158189">how student loans affect borrowers</a> well after they graduate.</p>
<p>“Students who are the first in their family to attend college and low-income students have a much harder time paying off their student loans, and they end up defaulting more often than other students,” Walsh and her colleagues write. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/student-loan-debt-is-costing-recent-grads-much-more-than-just-money-158189">Student loan debt is costing recent grads much more than just money</a>
</strong>
</em>
</p>
<hr>
<h2>2. Will student debt relief help the economy?</h2>
<p>Some economists argue that relieving student loan debt will <a href="https://www.npr.org/2019/11/25/782070151/forgiving-student-debt-would-boost-economy">help boost the economy</a>. However, <a href="https://theconversation.com/profiles/william-chittenden-1169666">William Chittenden</a>, an economist at Texas State University, writes that the economic benefits of canceling student debt might be modest at best. </p>
<p>“If all US$1.5 trillion in federal student loans were forgiven, the average borrower would have an extra US$393 per month,” Chittenden writes. “It is estimated that the economy would only grow by about $100 billion, or about 0.5% …”</p>
<p>Chittenden <a href="https://theconversation.com/canceling-student-loan-debt-will-barely-boost-the-economy-but-a-targeted-approach-could-help-certain-groups-162076">argues</a> that student debt relief should be targeted toward borrowers that typically owe less than $10,000 but who are <a href="https://www.nytimes.com/2015/09/01/upshot/why-students-with-smallest-debts-need-the-greatest-help.html">more likely to default on their loans</a>. Demographically, this would benefit people of color and women the most, since <a href="https://www.cnbc.com/2021/05/07/student-loan-forgiveness-would-benefit-these-groups-the-most-.html">women on average owe more than two-thirds</a> of outstanding student loan debt, and <a href="https://www.cnbc.com/2021/05/07/student-loan-forgiveness-would-benefit-these-groups-the-most-.html">85% of Black college graduates</a> owe money on student loans, compared to just 69% of white college graduates. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/canceling-student-loan-debt-will-barely-boost-the-economy-but-a-targeted-approach-could-help-certain-groups-162076">Canceling student loan debt will barely boost the economy, but a targeted approach could help certain groups</a>
</strong>
</em>
</p>
<hr>
<h2>3. Who benefits when colleges clear outstanding balances?</h2>
<p>Colleges and universities are using federal money from the <a href="https://www2.ed.gov/about/offices/list/ope/arp.html">American Rescue Plan</a> to clear outstanding debts for students and recent graduates who enrolled in their institution on or after March 13, 2020. <a href="https://theconversation.com/colleges-are-using-federal-stimulus-money-to-clear-students-past-due-debts-an-economist-answers-five-questions-165657">Both students and their respective institutions will benefit</a> from this debt clearance, according to Chittenden. The debt clearance will enable students to continue with their education and pursue career goals, he writes. Meanwhile, institutions will be able to clear debts without tapping into their own finances. </p>
<p>“For recent graduates, having debt outstanding to their school may prevent them from obtaining a transcript or proof that they graduated,” Chittenden writes. “By clearing the debts for recent graduates, alums can, as noted by the chancellor of City University of New York, Félix V. Matos Rodríguez, ‘move ahead in pursuit of their educational and career objectives without the specter of unpaid tuition and fees.’” </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/colleges-are-using-federal-stimulus-money-to-clear-students-past-due-debts-an-economist-answers-five-questions-165657">Colleges are using federal stimulus money to clear students' past-due debts – an economist answers five questions</a>
</strong>
</em>
</p>
<hr>
<h2>4. Is filing for bankruptcy a solution to clearing student loan debt?</h2>
<p>As things stand now, student loan borrowers are mostly barred from discharging their loans through bankruptcy. However, under the proposed <a href="https://www.congress.gov/bill/117th-congress/senate-bill/2598/text">FRESH START through Bankruptcy Act</a>, borrowers can get their federal loan debts discharged if they prove that the debt caused “undue hardship” during the first 10 years of payment. </p>
<p><a href="https://theconversation.com/profiles/brent-evans-955091">Brent Evans</a>, assistant professor of public policy and higher education, and <a href="https://theconversation.com/profiles/matthew-patrick-shaw-956386">Matthew Patrick Shaw</a>, assistant professor of public policy, education and law, both at Vanderbilt University, explain <a href="https://theconversation.com/can-student-loans-be-cleared-through-bankruptcy-4-questions-answered-166308">what proving undue hardship entails</a> for borrowers looking to discharge their student loan debt through bankruptcy.</p>
<p>“Declaring bankruptcy is not an ideal option to deal with student loans because it comes with substantial immediate and long-term consequences,” they write.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/can-student-loans-be-cleared-through-bankruptcy-4-questions-answered-166308">Can student loans be cleared through bankruptcy? 4 questions answered</a>
</strong>
</em>
</p>
<hr>
<p><em>Editor’s note: This story is a roundup of articles from The Conversation’s archives.</em></p><img src="https://counter.theconversation.com/content/166338/count.gif" alt="The Conversation" width="1" height="1" />
As federal student loan debt continues to rise, a number of scholars discuss how debt affects the nation’s college students, graduates and the economy as a whole.
Jamaal Abdul-Alim, Education Editor, The Conversation
Alvin Buyinza, Editorial and Outreach Assistant, The Conversation US
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/166067
2021-09-09T12:26:50Z
2021-09-09T12:26:50Z
Buying groceries isn’t a problem just for the poor – middle-class millennials like me with student debt have trouble too
<figure><img src="https://images.theconversation.com/files/418976/original/file-20210901-27-1vefsj3.jpg?ixlib=rb-1.1.0&rect=120%2C65%2C3527%2C2266&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">When people can't afford what they want to eat, they have to make a lot of calculations at the supermarket.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/young-woman-wears-medical-mask-against-virus-while-royalty-free-image/1214224515">oonal/E+ via Getty Images</a></span></figcaption></figure><p>When I teach undergraduate and graduate students about <a href="https://theconversation.com/what-is-food-insecurity-152746">food insecurity</a>, I sometimes mention that my perspective is based not only on professional expertise but also on my personal experience. </p>
<p>Food insecurity might sound like the same thing as hunger, but that’s not the case. The somewhat technical term food insecurity applies when people can’t get the food they need for themselves or their families because of a lack of money or other resources. </p>
<p><a href="https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/definitions-of-food-security.aspx#ranges">Food security</a>, on the other hand, is more of an ideal – being able to access culturally preferred foods to support an optimal diet and health. This is my personal take on the gray area between food security and food insecurity – and how <a href="https://www.investopedia.com/student-loan-debt-2019-statistics-and-outlook-4772007">student loan debt</a> blurs the line between low-income and middle-income families.</p>
<p>Some <a href="https://www.ers.usda.gov/publications/pub-details/?pubid=102075">38.3 million Americans </a> – 11.8% of the population – experienced food insecurity in 2020, according to U.S. Department of Agriculture data. Like many other experts, I believe these numbers <a href="https://doi.org/10.1007/s11205-009-9455-4">underestimate the scale of this problem</a>. And that’s not only because <a href="https://doi.org/10.3945/an.112.003228">it can be hard to detect</a>.</p>
<p>One group of Americans who might also be dealing with problems accessing food is middle-class millennials with a lot of student loan debt – like me. Despite being an <a href="https://scholar.google.com/citations?hl=en&user=9pS6dhUAAAAJ">assistant professor</a> in a double-income household, in my opinion, I am not able to afford the foods I feel my family should be eating.</p>
<p>To be clear, based on the <a href="https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/survey-tools/">official criteria</a>, my family is not food insecure. I’ve never been to a food pantry and my family always gets enough to eat. My family’s frugal diet is packed with <a href="https://doi.org/10.3945/an.114.006973">nutritional value</a>: beans, white potatoes, sweet potatoes, carrots, broccoli, tomatoes, milk and eggs. In some regards, however, I believe that my family is not fully <a href="https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/">food secure</a> because our choices are somewhat limited. </p>
<h2>Settling for a frugal diet</h2>
<p>For example, I know the benefits of <a href="http://www.doi.org/10.1001/jama.296.15.1885">eating more fresh seafood</a>. It’s a lean source of protein, packed with heart-healthy fats and full of minerals and vitamins. Plus, I like how it tastes. But it can be expensive.</p>
<p>Fresh fish can cost US$15 per pound or more at <a href="https://www.heb.com/search/?q=fish">my local grocery store in central Texas</a>. That’s far higher than fresh <a href="https://www.bls.gov/regions/mid-atlantic/data/averageretailfoodandenergyprices_usandmidwest_table.htm">poultry, pork and beef</a>. Canned and frozen fish are much cheaper and last longer. Aside from a few special occasions, I’ll buy large cans of chunk light tuna and frozen packages of mussels and fish. Because price is a limiting factor, I usually stock up on vegetarian sources of protein like beans, legumes and tofu.</p>
<p>Another example is fruit. I don’t buy much fresh fruit in quantity or variety, as recommended by <a href="https://www.dietaryguidelines.gov">dietary guidelines</a>, because of cost. Instead, I rely on a small quantity of seasonal fresh fruit on sale and some <a href="https://www.heb.com/search/?q=dried+fruit">dried fruit</a>, such as raisins. </p>
<p>I make trade-offs like these in terms of what my family of four wants to eat and what our diet needs to include with every food group the government and nutritionists consider to be part of a <a href="https://www.dietaryguidelines.gov/">recommended dietary pattern</a>.</p>
<p>I track items I want to buy based on what we like to eat, the food’s nutritional value or importance for culture. But I buy them only on sale or for celebrations. While I recognize my circumstances and compromises are not the same as those of a family of four with a <a href="https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines">poverty-level income</a>, some experiences – relative deprivation and stress – may be similar.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/418975/original/file-20210901-17-1bt4v5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Bowls of oranges, bananas, tomatoes, scallions and other produce are attractively arrayed." src="https://images.theconversation.com/files/418975/original/file-20210901-17-1bt4v5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/418975/original/file-20210901-17-1bt4v5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=394&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418975/original/file-20210901-17-1bt4v5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=394&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418975/original/file-20210901-17-1bt4v5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=394&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418975/original/file-20210901-17-1bt4v5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=495&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418975/original/file-20210901-17-1bt4v5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=495&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418975/original/file-20210901-17-1bt4v5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=495&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Eating plenty of fresh fruit and vegetables is good for your health, but the costs can add up quickly.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/february-2021-berlin-different-kinds-of-vegetables-and-news-photo/1231046674">Annette Riedl/picture alliance via Getty Images</a></span>
</figcaption>
</figure>
<h2>Food insecurity economics</h2>
<p>Even though the economics of <a href="https://www.jstor.org/stable/41237221?seq=1#metadata_info_tab_contents">food insecurity</a> is complex, <a href="https://www.ers.usda.gov/webdocs/publications/44678/19980_eib96.pdf">more nutritious food usually costs more and less nutritious food typically costs less</a>. </p>
<p>In pursuit of a healthy diet, low-income families, in addition to receiving assistance such as SNAP, can employ a <a href="https://pubmed.ncbi.nlm.nih.gov/12859882/">variety of strategies</a> to spend less money on food. For example, they can use budget-conscious grocery shopping, daily cooking and food prep, reheating and reusing leftovers, packing lunches to eat at work and rarely eating in restaurants or buying takeout foods. </p>
<p>We live with my parents and pay what we used to pay in rent into our savings account so that someday we can buy a house. After paying for housing, utilities, transportation, health care, child care and education, credit card debt and student loans, almost half of what’s left over covers groceries: about $900 per month.</p>
<p>Spending almost half of our disposable income on food is more in line with <a href="https://www.ers.usda.gov/data-products/ag-and-food-statistics-charting-the-essentials/food-prices-and-spending">what happens in low-income households</a>, according to the USDA. Households in the lowest, middle, and highest income groups spent about 36%, 20% and 8% of their disposable income on food, respectively, in 2019. </p>
<p>I wonder how many more Americans would be eligible for government assistance if student debt payments were taken into account. </p>
<h2>A gray area</h2>
<p>The U.S. Department of Agriculture Economic Research Service <a href="https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/survey-tools/">measures food insecurity through a survey</a> of <a href="https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/measurement/#measurement">nationally representative households</a>. One of its questions is:</p>
<p>“Which of these statements best describes the food eaten in your household in the last 12 months?” These are the options:</p>
<ul>
<li>Enough of the kinds of food (I/we) want to eat</li>
<li>Enough, but not always the kinds of food (I/we) want</li>
<li>Sometimes not enough to eat</li>
<li>Often not enough to eat </li>
</ul>
<p>If someone asked me this question on food sufficiency, I would answer without hesitation: We eat enough, but not always the kinds of food I want for myself or my family.</p>
<p>In short, we – and many others making relatively high incomes – don’t meet the official criteria for food insecurity. But we also don’t have the resources to feel food secure.</p>
<h2>College debt</h2>
<p>Millennials like me are doubly burdened: Our income excludes us from many government benefits, and our needs, because of our student loan payments, leave us with very little disposable income.</p>
<p>I was the first person in my family to graduate from a four-year college and the first to obtain a graduate degree. But my career path came with a cost: Now in my 30s, I’m stuck with $133,000 in student loan debt, most of which I racked up as an undergraduate.</p>
<p>I hustled in my mid-20s to get a series of fellowships and research jobs for my top-ranked doctoral program. All that work made my career dreams come true and meant I could stop borrowing so much to finance my doctorate. But it didn’t make it easier to deal with the challenges of <a href="https://www.insidehighered.com/advice/2021/06/01/first-generation-grad-student-laments-lack-career-opportunities-academe-opinion">being a first-generation academic</a>. In the past I have resorted to credit card debt to buy groceries and sometimes borrowing money from my relatives. It felt awful and awkward to ask for help with food while earning my doctorate in nutrition.</p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/418977/original/file-20210901-17-1gwkspj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A piggy bank is divided into categories of spending, such as mortgage, car and food." src="https://images.theconversation.com/files/418977/original/file-20210901-17-1gwkspj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/418977/original/file-20210901-17-1gwkspj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=386&fit=crop&dpr=1 600w, https://images.theconversation.com/files/418977/original/file-20210901-17-1gwkspj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=386&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/418977/original/file-20210901-17-1gwkspj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=386&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/418977/original/file-20210901-17-1gwkspj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=485&fit=crop&dpr=1 754w, https://images.theconversation.com/files/418977/original/file-20210901-17-1gwkspj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=485&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/418977/original/file-20210901-17-1gwkspj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=485&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">People appearing financially comfortable can actually be cash strapped.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/financial-piggy-bank-decisions-royalty-free-image/164814703">Peter Dazeley/The Image Bank via Getty Images</a></span>
</figcaption>
</figure>
<p>Other millennial professionals are struggling to make ends meet too. Monthly payments for housing, health and medical care – including health insurance premiums – and transportation leave very little money left for food. Parents, like me, also contend with high child care costs. It’s no wonder that researchers are finding that student loan debt is taking a <a href="https://theconversation.com/student-loan-debt-is-costing-recent-grads-much-more-than-just-money-158189">toll on my generation’s health and well-being</a>.</p>
<p>The average American with student loan debt spends about <a href="https://educationdata.org/average-student-loan-payment">$393 per month servicing it</a>.</p>
<p>I shell out nearly triple that much to keep up with my loans. It’s the equivalent of a mortgage payment, and one-third of what I earn. My college loan payments will soar in December when the <a href="https://www.consumerfinance.gov/coronavirus/student-loans/">COVID-19 relief for federal student loan payments</a> expires in tandem with <a href="https://studentaid.gov/manage-loans/repayment/plans/income-driven">regularly scheduled increases</a>. My husband’s student loans are smaller, but it’s another bill we contend with.</p>
<p>While it can be frustrating to feel that the food I want for my family remains out of reach, I do realize that we are the lucky ones. I know how to shop, cook and eat on a budget and make sure my family eats a variety of nutritious and tasty meals on a regular basis. Many others in this situation don’t have what they need to cope with it.</p><img src="https://counter.theconversation.com/content/166067/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cassandra M. Johnson receives funding from the U.S. Department of Agriculture via Tufts University. </span></em></p>
A scholar of nutrition opens up with a personal take on food insecurity in America.
Cassandra M. Johnson, Assistant Professor of Nutrition and Foods, Texas State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/166308
2021-08-25T12:27:17Z
2021-08-25T12:27:17Z
Can student loans be cleared through bankruptcy? 4 questions answered
<figure><img src="https://images.theconversation.com/files/417615/original/file-20210824-17-yedxbr.jpg?ixlib=rb-1.1.0&rect=11%2C0%2C3918%2C2610&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Proving that student loans are too hard to pay off is often a difficult burden to meet.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/college-and-money-royalty-free-image/1294785284?adppopup=true">Kameleon007</a></span></figcaption></figure><p><em>For decades, student loans have mostly been prohibited from being discharged through bankruptcy proceedings. That could change under the <a href="https://www.congress.gov/bill/117th-congress/senate-bill/2598/text">FRESH START through Bankruptcy Act</a>. Here, public policy scholars Brent Evans and Matthew Patrick Shaw, both of Vanderbilt University, explain why student loan debt cannot usually be cleared through bankruptcy and how that might change if the proposed bill becomes law</em>.</p>
<h2>Why can’t people get rid of student loans through bankruptcy now?</h2>
<p>Although not impossible, discharging student loans in bankruptcy is difficult. Due to <a href="https://www.tateesq.com/learn/student-loan-bankruptcy-law-history">a 1976 law</a>, student loans are not treated during bankruptcy proceedings like other forms of debt, such as credit card debt or auto loans. This policy stems from a <a href="https://books.google.com/books/about/Report_of_the_Commission_on_the_Bankrupt.html?id=q1JtuAEACAAJ">federal commission on bankruptcy laws</a>, which heard testimony that claimed the easy discharge of educational loans in bankruptcy could undermine federal student loan programs. Congress was concerned that students might borrow thousands of dollars from the federal government, graduate, declare bankruptcy to have their student loans discharged and never repay their educational debt.</p>
<p>In an extension of the <a href="https://www.investopedia.com/terms/h/higher-education-act-of-1965-hea.asp">Higher Education Act of 1965</a>, Congress passed the <a href="https://www.congress.gov/94/statute/STATUTE-90/STATUTE-90-Pg2081.pdf">1976 law</a>, which made borrowers wait five years after the first student loan payment was due before they could have the loan discharged through bankruptcy. Congress created an exception that allowed for discharge within that five-year period if the loan caused “undue hardship.”</p>
<p>Congress extended the five-year bankruptcy ban to seven years in <a href="https://www.congress.gov/101/statute/STATUTE-104/STATUTE-104-Pg4789.pdf">1990</a>. Then Congress extended it to the borrower’s lifetime in <a href="https://www.congress.gov/bill/105th-congress/house-bill/6/text?overview=closed">1998</a>.</p>
<p>Currently the “undue hardship” exemption is the only way to have student loans discharged in bankruptcy – that is a much higher threshold than many other common forms of debt. This higher threshold includes both federal student loans and, since <a href="https://www.govinfo.gov/content/pkg/PLAW-109publ8/html/PLAW-109publ8.htm">2005</a>, most forms of private student loans. </p>
<h2>Haven’t there been cases where people still got rid of their students loans through bankruptcy?</h2>
<p>Absolutely. Though difficult, it is still <a href="https://theconversation.com/can-you-get-rid-of-your-student-loans-by-filing-for-bankruptcy-130995">possible to have student loans discharged</a> through bankruptcy by meeting the undue hardship requirement. A 2011 study found that <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1894445">only 1 in 1,000 student loan borrowers who declared bankruptcy</a> even tried to have their student loans discharged. However, those that did succeeded at a rate of 40%.</p>
<p><a href="https://www.usbankruptcycode.org/chapter-5-creditors-the-debtor-and-the-estate/subchapter-ii-debtors-duties-and-benefits/section-523-exceptions-to-discharge/">Section 523 of the Bankruptcy Code</a> does not set out a specific test to determine what qualifies as undue hardship. The federal courts are split on what the appropriate standard should be for discharging student loan debt. The Second Circuit case, <a href="https://scholar.google.com/scholar_case?case=5270362258430051298&q=brunner+v.+new+york&hl=en&as_sdt=3,43">Brunner v. New York State Higher Education Services Corporation</a>, established three requirements that determine whether undue hardship applies.</p>
<p>First, the borrower must demonstrate that if forced to repay the student loans, they will be unable to meet a minimal standard of living based on income and bills.</p>
<p>Second, the borrower must be unable to repay for a “significant portion of the repayment period.”</p>
<p>Third, they must have made good-faith efforts to repay the student loan. </p>
<p>If a bankruptcy court agrees that a borrower meets these three requirements, the court can discharge the student loan debt. </p>
<p>But bankruptcy courts in the <a href="https://scholar.google.com/scholar_case?case=14163741936545416277&q=322+F.3d+549+(8th+Cir.+2003)&hl=en&as_sdt=6,43">Eighth Circuit</a> (in the Upper Midwest) — and occasionally courts in the <a href="https://scholar.google.com/scholar_case?case=14715509405075894100&q=435+B.R.+791+(B.A.P.+1st+Cir.+2010)&hl=en&as_sdt=6,43">First Circuit</a> (in Puerto Rico and parts of New England) — reject Brunner and examine the “totality of the circumstances” instead.</p>
<p>For example, the 2003 case <a href="https://scholar.google.com/scholar_case?case=14163741936545416277&q=322+F.3d+549+(8th+Cir.+2003)&hl=en&as_sdt=6,43">In re Long</a> states that a borrower can meet the undue hardship requirement in a different way from Brunner. The borrower must establish that they cannot meet a minimum standard of living given financial resources, necessary living expenses and other circumstances.</p>
<p>This test is considered less difficult to meet than Brunner because it does not require a borrower to establish “certainty of hopelessness” or “total incapacitation.”</p>
<h2>Explain the proposed law to allow bankruptcy for student loans</h2>
<p>If enacted, the bipartisan <a href="https://www.congress.gov/bill/117th-congress/senate-bill/2598/text">FRESH START through Bankruptcy Act</a> would change the current law to remove the lifetime ban on student loan discharge in bankruptcy and replace it with a 10-year ban. </p>
<p>Under the proposed law, if borrowers can show that paying their student loans caused undue hardship during the first 10 years, then they can get it discharged after that 10-year period is over without having to prove that it would be an undue hardship from that point forward.</p>
<p>This change would only apply to federal student loans, not private student loans. Any discharge of private student loans, regardless of the repayment timeline, would still require proving undue hardship.</p>
<p>To help shoulder some of the financial cost to the federal government of this proposed change, the bill also includes an accountability measure for colleges and universities. The schools would have to reimburse the government for a portion (either 50%, 30% or 20%) of the discharged student loan amount depending on the cohort default rate and repayment rate of the institution at the time the first loan payment comes due.</p>
<h2>Would bankruptcy become an attractive way to get rid of student loans?</h2>
<p>Declaring bankruptcy is not an ideal option to deal with student loans because it comes with substantial immediate and long-term consequences. The immediate consequence is that bankruptcy can result in the sale of property to pay off debts. The longer-term consequence is that, depending on the type, <a href="https://www.experian.com/blogs/ask-experian/bankruptcy-chapter-7-vs-chapter-13/">Chapter 7 or 13</a>, bankruptcy stays on credit reports for seven to 10 years. The substantial negative mark on credit reports means it will be more difficult to obtain a credit card, auto loan and mortgage. When any form of credit is obtained, the <a href="https://doi.org/10.1086/674573">interest rates are likely to be much higher</a> with a bankruptcy on record.</p>
<p>Another solution to a large student loan debt is to enroll in an <a href="https://studentaid.gov/manage-loans/repayment/plans/income-driven">income-driven repayment plan</a>, such as <a href="https://studentaid.gov/manage-loans/repayment/plans/income-driven#repaye">Revised Pay As You Earn</a>. These plans limit the amount of the monthly payment on federal student loans to a percentage of your <a href="https://studentaid.gov/help-center/answers/topic/glossary/article/discretionary-income">discretionary income</a>, which is the difference between your income and 150% of the state poverty guideline, adjusted for family size. </p>
<p>After 20 years of repayment for undergraduate loans (only 10 years if the borrower is in a public service job), the remaining balance is forgiven. If the new bill becomes law, borrowers in income-driven repayment plans will have a choice. They can either pursue bankruptcy after 10 years and suffer the consequences, or continue paying through loan forgiveness.</p>
<p>[<em>Over 110,000 readers rely on The Conversation’s newsletter to understand the world.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=100Ksignup">Sign up today</a>.]</p><img src="https://counter.theconversation.com/content/166308/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Congress first imposed a lifetime ban on discharging student loans through bankruptcy in 1998. Two scholars explain how that could change under a proposed law.
Brent Evans, Assistant Professor of Public Policy & Higher Education, Vanderbilt University
Matthew Patrick Shaw, Assistant Professor of Public Policy, Education and Law, Vanderbilt University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/165657
2021-08-13T12:27:04Z
2021-08-13T12:27:04Z
Colleges are using federal stimulus money to clear students’ past-due debts – an economist answers five questions
<figure><img src="https://images.theconversation.com/files/415905/original/file-20210812-19-h77ol2.jpg?ixlib=rb-1.1.0&rect=44%2C0%2C4928%2C3268&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Trinity Washington University in Washington, D.C. is one of several colleges using federal money to clear their students' debt. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/trinity-washington-university-is-opening-its-first-new-news-photo/537977310?adppopup=true">Astrid Riecken For The Washington Post via Getty Images</a></span></figcaption></figure><p><em>Editor’s note: A growing number of <a href="https://www.wsj.com/articles/city-university-of-new-york-to-wipe-out-125-million-in-student-balances-11627575951">colleges and universities</a> across the country are using money from the American Rescue Plan to clear their current and graduating students’ debt. The <a href="https://www2.ed.gov/about/offices/list/ope/arp.html">American Rescue Plan</a> was signed into law in March 2021 and allocated nearly $40 billion to the Higher Education Emergency Relief Fund III. Colleges and universities may use a portion of these funds to cover <a href="https://www2.ed.gov/about/offices/list/ope/heerflostrevenuefaqs.pdf">lost revenue</a>, including unpaid student account debts. Here William Chittenden, an expert on debt in higher education, explains what this means for college students’ futures.</em> </p>
<h2><strong>1. How does debt clearance work?</strong></h2>
<p>Current students, recent graduates and colleges and universities will all benefit from debt clearance. </p>
<p><a href="https://www.wsj.com/articles/hbcus-deploy-covid-19-pandemic-funds-to-forgive-millions-in-student-debt-11627464602">Debt clearance</a> is not the same as student loan forgiveness. Rather, debt clearance refers to the forgiveness of amounts that students and recent graduates owe to their universities for past semesters for things like tuition, fees and room and board. With these debts outstanding, current students may not be able to <a href="https://www.wsj.com/articles/city-university-of-new-york-to-wipe-out-125-million-in-student-balances-11627575951">register for classes the following semester</a>. </p>
<h2>2. <strong>How do students benefit?</strong></h2>
<p>Students and recent graduates who were <a href="https://www2.ed.gov/about/offices/list/ope/heerflostrevenuefaqs.pdf">enrolled on or after March 13, 2020</a>, may be eligible for debt clearance. Those who can demonstrate financial hardship will benefit, as they will not have to repay the debt. By clearing this debt, universities are <a href="https://www.wsj.com/articles/hbcus-deploy-covid-19-pandemic-funds-to-forgive-millions-in-student-debt-11627464602">allowing current students to finish their studies</a>.</p>
<p>For recent graduates, having debt outstanding to their school <a href="https://policies.txstate.edu/university-policies/03-01-06.html">may prevent them</a> from obtaining a transcript or proof that they graduated. By clearing the debts for recent graduates, alums can, as noted by the chancellor of City University of New York, Félix V. Matos Rodríguez, “<a href="https://www.wsj.com/articles/city-university-of-new-york-to-wipe-out-125-million-in-student-balances-11627575951">move ahead in pursuit of their educational and career objectives without the specter of unpaid tuition and fees</a>.”</p>
<h2><strong>3. How will colleges and universities benefit?</strong></h2>
<p>Colleges and universities will also benefit, since the debts that are being cleared are being paid for by the federal government instead of the university. Schools are receiving funds they may have had to write off. This gives universities money to spend in the local economy on things like office supplies and catering services. </p>
<h2><strong>4. Will school debt clearance benefit the economy?</strong></h2>
<p>The direct economic benefit to students and recent graduates is simple to measure, as it is equal to the amount of the debt forgiven. A student who has $1,000 in debt cleared receives a direct economic benefit of $1,000. </p>
<p>The indirect benefits to students are positive but harder to measure. If the debt clearance allow students to finish their final semester and earn their undergraduate degree, they will <a href="https://www.bls.gov/careeroutlook/2020/data-on-display/education-pays.htm">earn 50% more</a>, on average, than those who completed some college but did not earn a degree. I consider that a significant benefit to students.</p>
<p>Federal dollars used for debt clearance will be spent by colleges and universities on a variety of goods and services. That spending ripples through the economy. The estimated size of the economic impact of this spending by universities varies greatly. The state of Washington estimates that each dollar the state spends on higher education at the University of Washington <a href="https://www.seattletimes.com/opinion/the-multiplier-effect-of-skimping-on-higher-education/">generates $1.48 in economic activity</a>, while Oklahoma estimates there is <a href="https://tulsaworld.com/business/multiplier-effect-local-economies-boost-from-colleges-and-universities-is-studied/article_85052b14-cbca-527c-86c4-4a92806e5701.html">$9.40 of economic impact</a> per dollar spent on higher education. Although the exact dollar impact is unknown, all estimates are that <a href="https://courses.lumenlearning.com/boundless-economics/chapter/introduction-to-fiscal-policy/">it will be positive</a>. </p>
<h2><strong>5. How fair is it to clear balances for students and graduates at this time but not others?</strong></h2>
<p>We are in the midst of a <a href="https://onlinelibrary.wiley.com/doi/10.1111/jocn.15365">once-in-a-century global pandemic</a>. In the second quarter of 2020 we saw the <a href="https://www.usatoday.com/story/news/factcheck/2020/08/08/fact-check-u-s-quarterly-gdp-drop-worst-modern-history/5569089002/">largest decrease</a> in gross domestic product on record. In April 2020, <a href="https://www.cnbc.com/2020/05/08/jobs-report-april-2020.html">over 20 million people</a> lost their jobs, and unemployment hit levels <a href="https://www.washingtonpost.com/business/2020/05/08/april-2020-jobs-report/">not seen since the Great Depression</a>. The economic hardships students are facing because of the pandemic are extraordinary. Therefore, it can be argued that federal funding for debt clearance is fair, given the extraordinary circumstances.</p>
<p>On the other hand, one could ask the question: Is it fair that those students who also experienced financial hardship this past year, but still managed to pay their tuition in full, will not get debt clearance? What about students who suffered financial hardship before March 2020 and owe money to their university? Why is their debt not eligible for clearance? </p>
<p>Nobel Prize-winning economist <a href="https://miltonfriedman.hoover.org/internal/media/dispatcher/214184/full">Milton Friedman stated</a>, “There is no objective standard of ‘fairness.’” Unfortunately, without such a standard, individuals will disagree on the question of debt clearance fairness.</p>
<p>[<em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=youresmart">You can read us daily by subscribing to our newsletter</a>.]</p><img src="https://counter.theconversation.com/content/165657/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William Chittenden does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Colleges and universities are using federal money to clear their students’ debt. An economist explains who will benefit from this move.
William Chittenden, Presidential Fellow, Texas State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/162076
2021-07-22T12:14:27Z
2021-07-22T12:14:27Z
Canceling student loan debt will barely boost the economy, but a targeted approach could help certain groups
<figure><img src="https://images.theconversation.com/files/411509/original/file-20210715-13-1j6glsn.jpg?ixlib=rb-1.1.0&rect=7%2C0%2C5189%2C3410&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Already the Biden administration has forgiven nearly $3 billion of student loan debt from 113,000 borrowers. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/as-college-students-around-the-country-graduate-with-a-news-photo/1323721983?adppopup=true">Paul Morigi/Getty Images for We The 45 Million</a></span></figcaption></figure><p>At the end of June 2021, 43 million borrowers – or about <a href="https://www.investopedia.com/student-loan-debt-2019-statistics-and-outlook-4772007">14% of all adults</a> in the U.S. – owed approximately <a href="https://studentaid.gov/data-center/student/portfolio">US$1.59 trillion in outstanding</a> federal student loans. Although in many cases the media has focused on borrowers with extremely large balances – such as the <a href="https://www.wsj.com/articles/mike-meru-has-1-million-in-student-loans-how-did-that-happen-1527252975">orthodontist who owes over $1 million</a> in student loans – the average balance is a more modest <a href="https://thecollegeinvestor.com/33643/average-student-loan-monthly-payment">$39,351 per borrower</a> with an average monthly payment of $393 per month. The <a href="https://studentaid.gov/manage-loans/repayment/plans/standard">standard repayment period</a> for $39,351 in student loans is 20 years.</p>
<p>The amount of student debt outstanding varies greatly based on the type of degree pursued. The average bachelor’s degree debt is <a href="https://www.credible.com/blog/statistics/average-student-loan-debt-statistics/">under $29,000</a> while the average dental school debt is more than 10 times higher at <a href="https://www.nerdwallet.com/article/loans/student-loans/whats-the-average-student-loan-debt-for-a-bachelors-degree">over $290,000</a>. In general, those who pursue careers that <a href="https://www.businessinsider.com/personal-finance/average-student-loan-debt#average-student-loan-debt-by-household-income">pay lower salaries</a> owe less in student debt. </p>
<p>Policymakers have put forth proposals to forgive anywhere from <a href="https://www.msn.com/en-us/money/personalfinance/student-loan-debt-forgiveness-update-see-where-the-latest-policies-and-proposals-currently-stand/ar-BB1g45bX">$10,000 to $50,000 or more per borrower</a>. </p>
<p>President Biden has stated that he is <a href="https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/02/17/remarks-by-president-biden-in-a-cnn-town-hall-with-anderson-cooper/">“prepared to write off a $10,000 debt,”</a> but not $50,000.</p>
<p><iframe id="39BmX" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/39BmX/13/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>If up to $10,000 per borrower were to be canceled for all 43 million student loan borrowers, the <a href="https://www.cnbc.com/2021/01/22/experts-weigh-in-on-10000-in-student-debt-forgiveness.html">cost would be $377 billion</a>. This would completely eliminate the student loan balances for over <a href="https://www.cbsnews.com/news/student-loan-forgiveness-wipe-out-debt/">15 million borrowers</a>. The total cost of forgiving up to $50,000 for all 43 million borrowers would be <a href="https://abcnews.go.com/Politics/congressional-democrats-propose-50000-debt-cancelation-biden-sold/story?id=75682608">just over $1 trillion</a>. It would also wipe clean the student loan balances for over <a href="https://www.warren.senate.gov/imo/media/doc/Education%20Department%20Response%20to%20Sen%20Warren%20-%204-8-21.pdf">36 million people</a>. Some limited student loan forgiveness has already begun. The Biden administration has canceled <a href="https://www.forbes.com/sites/zackfriedman/2021/07/09/biden-cancels-55-million-of-student-loans/">a combined nearly $3 billion</a> of student loans for 131,000 borrowers who either had been defrauded by their school or have a total and permanent disability.</p>
<h2>The effects of loan forgiveness</h2>
<p><a href="https://www.npr.org/2019/11/25/782070151/forgiving-student-debt-would-boost-economy">Some economists</a> view the staggering amount of outstanding student debt as a <a href="https://www.forbes.com/sites/joshfreedman/2014/02/11/student-loans-are-a-big-drag-on-the-economy-and-society">drag on the economy</a>. These economists argue that any forgiveness of student debt will stimulate the economy. However, I and <a href="https://www.crfb.org/blogs/partial-student-debt-cancellation-poor-economic-stimulus">other economists</a> argue that any boost to the economy from student loan forgiveness would be small compared to the cost to taxpayers. </p>
<p>If $10,000 per borrower is forgiven, it is not as if the borrower is receiving $10,000 that they can go out and spend today. Rather, it is estimated this would free up only about <a href="https://www.urban.org/urban-wire/student-loan-forgiveness-effective-form-economic-stimulus">$100 per month</a> for the average borrower to spend or save over 10 years. If all $1.5 trillion in federal student loans were forgiven, the average borrower would have an extra <a href="https://thecollegeinvestor.com/33643/average-student-loan-monthly-payment/">$393 per month</a>. It is estimated that the economy would <a href="https://www.businessinsider.com/economic-benefits-of-student-debt-forgiveness-2020-12">only grow by about $100 billion</a>, or <a href="https://www.bea.gov/sites/default/files/2021-05/gdp1q21_2nd.pdf">about 0.5%</a>, if all $1.5 trillion in federal student loans were canceled. For perspective, it would be like making $20,000 a year and getting a one-time raise of $100 for a new salary of $20,100, but it costs the company $1,500 today to give you that $100 raise.</p>
<p>The immediate economic impact would likely be lower, as the Department of Education is currently allowing 90% of borrowers to <a href="https://www.cnbc.com/2021/05/07/student-loan-forgiveness-would-benefit-these-groups-the-most-.html">not make their required monthly payments</a> <a href="https://studentaid.gov/articles/5-repayment-flexibilities/">through September 2021</a> due to the pandemic. </p>
<p>Since most borrowers are already not making payments on student loans, the financial benefit may already be reflected in the current level of economic activity.</p>
<p>Overall, the evidence suggests that broad-based loan forgiveness may have a modest positive impact on the economy. It is estimated that every dollar of student loan forgiveness translates to <a href="https://www.forbes.com/sites/zackfriedman/2020/11/24/student-loan-forgiveness-wont-provide-economic-stimulus/">only 8 to 23 cents</a> of economic benefit. By comparison, the stimulus checks had an estimated economic benefit of 60 cents for each dollar sent to taxpayers.</p>
<p>Eliminating some or all student debt may help with other issues beyond the economy. Borrowers may delay marriage or buying a home because of the amount of student debt they owe. The student debt burden has been shown to be the cause of mental and physical health problems and “<a href="https://theconversation.com/student-loan-debt-is-costing-recent-grads-much-more-than-just-money-158189">less overall satisfaction with life</a>.”</p>
<h2>Uneven benefits</h2>
<p>One criticism of forgiving student debt for everyone is that most of the benefits will go to those with higher incomes. In addition, relatively few of the benefits would go to those who borrowed to finance an undergraduate education. <a href="https://www.nytimes.com/2015/06/12/upshot/student-loans-the-facts.html">Sixty-eight percent</a> of those who took out student loans for a bachelor’s degree borrowed less than $10,000.</p>
<p>Only 2% <a href="https://www.nytimes.com/2015/06/12/upshot/student-loans-the-facts.html">borrowed more than $50,000</a>. Borrowers with the highest loan balances tend to have graduate degrees earning higher incomes. Households with <a href="https://www.brookings.edu/blog/up-front/2020/10/09/who-owes-the-most-in-student-loans-new-data-from-the-fed/">incomes above $74,000 owe nearly 60%</a> of the outstanding student loans.</p>
<p>If the idea behind loan forgiveness is to stimulate the economy, I believe loan relief should be targeted to those <a href="https://www.bostonfed.org/publications/research-department-working-paper/2019/estimating-the-marginal-propensity-to-consume-using-the-distributions-income-consumption-wealth.aspx">most likely to spend</a> any savings from student loan forgiveness. This suggests student loan forgiveness should be targeted to those with low incomes, who typically have <a href="https://www.cnbc.com/2021/04/06/what-the-student-debt-forgiveness-debate-is-about.html">less than $10,000</a> in student loan debt but <a href="https://www.nytimes.com/2015/09/01/upshot/why-students-with-smallest-debts-need-the-greatest-help.html">are more likely to default</a> on those loans.</p>
<p>Any student loan relief program should consider the effect it may have on borrowers, as student debt impacts some groups more than others. For example, <a href="https://www.cnbc.com/2021/05/07/student-loan-forgiveness-would-benefit-these-groups-the-most-.html">women owe approximately two-thirds</a> of the outstanding student loan debt. About <a href="https://www.cnbc.com/2021/05/07/student-loan-forgiveness-would-benefit-these-groups-the-most-.html">69% of white college graduates owe student loans</a>, compared to 85% of Black college graduates. The point is that women and people of color would benefit the most from student loan forgiveness.</p>
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<h2>A matter of fairness</h2>
<p>If the government forgives current student loans and then continues to make new student loans, this may lead future students to borrow with the assumption or hope that the government will cancel their loans too. </p>
<p>Unless the underlying issue of the <a href="https://www.today.com/tmrw/why-college-so-expensive-4-reasons-ever-rising-costs-t194972">increasing cost of a college degree</a> is addressed, <a href="https://www.forbes.com/sites/prestoncooper2/2019/10/28/the-massive-moral-hazard-problem-in-mass-student-loan-forgiveness">a similar student debt “crisis” may occur again</a>.</p>
<p>Another difficulty of any student loan forgiveness program is the perceived fairness or unfairness of the program. Assume two students pursued the same undergraduate degree, took out the same amount in student loans to finance their education and secured jobs with the same salary in cities where the cost of living is the same. Both borrowers have been making their monthly payments for the last five years, but borrower number 1 made larger payments than required. Because of this, borrower number 1 just completed paying their loan off, while borrower number 2 still has a balance. Is it fair for borrower number 2’s loan to be forgiven? Should borrower number 1 be compensated for paying the loan off early? Lawmakers will need to consider the issue of fairness.</p><img src="https://counter.theconversation.com/content/162076/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>William Chittenden does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Student loan debt has long been considered a drag on the economy. But will canceling it actually do much to spur spending? An economist weighs in.
William Chittenden, Presidential Fellow, Texas State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/157848
2021-04-02T12:17:30Z
2021-04-02T12:17:30Z
Should there be a limit on how much debt a young person takes on?
<figure><img src="https://images.theconversation.com/files/393167/original/file-20210401-21-z0p5lq.jpg?ixlib=rb-1.1.0&rect=10%2C15%2C3527%2C1973&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Do young people pose a threat to their future freedom by taking on too much debt?</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/credit-cards-in-a-mouse-trap-3-december-2003-afr-picture-by-news-photo/539538353?adppopup=true">Fairfax Media via Getty Images</a></span></figcaption></figure><p>Young Americans between the ages of 18 and 29 <a href="https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2018q4.pdf">owe over US$1 trillion</a> in student loans and mortgage and credit card debt that many will be paying back for decades. </p>
<p>The law generally allows adults to accrue significant debt so long as they can find a willing lender. However, as a <a href="https://www.paulschofieldphilosophy.com/">philosopher</a> who has written about the <a href="https://doi.org/10.1111/phpr.12034">duties people have to themselves</a>, I see a case for legislation that limits the amount and types of debt that people can take on.</p>
<p>While this may seem unappealingly paternalistic, my work suggests that it can be a justifiable way to protect people from their own choices and to enhance their freedom. </p>
<h2>Debt and injustice toward oneself</h2>
<p>It’s easy to assume that decisions about how much debt to take on should be left up to the individual. The philosopher and economist Adam Smith – known to most as the father of capitalism – voiced this sentiment <a href="https://www.penguinrandomhouse.com/books/260705/the-wealth-of-nations-by-adam-smith/">when he wrote that</a> the government should resist meddling in people’s decisions unless doing so is necessary to perform its “duty of protecting … every member of society from the injustice or oppression of every other member.” </p>
<p>However, in my 2021 book “<a href="https://global.oup.com/academic/product/duty-to-self-9780190941758?cc=us&lang=en&#">Duty to Self</a>,” I suggest that the ability to accrue vast amounts of debt puts people in a position to commit injustice against themselves. </p>
<p>A typical case of injustice involves having one’s own interests and choices discounted or ignored by some other person who selfishly prioritizes himself or herself over others. But people can suffer similarly on account of decisions they make during their younger years that ultimately burden them later in life. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/393190/original/file-20210401-15-u8prrk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A man holds up a dollar sign during a rally against the high cost of college tuition in New York in 2012." src="https://images.theconversation.com/files/393190/original/file-20210401-15-u8prrk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/393190/original/file-20210401-15-u8prrk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/393190/original/file-20210401-15-u8prrk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/393190/original/file-20210401-15-u8prrk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/393190/original/file-20210401-15-u8prrk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=487&fit=crop&dpr=1 754w, https://images.theconversation.com/files/393190/original/file-20210401-15-u8prrk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=487&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/393190/original/file-20210401-15-u8prrk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=487&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The high cost of college tuition puts many Americans under considerable debt.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/young-man-holds-up-a-dollar-sign-during-an-occupy-wall-news-photo/143396551?adppopup=true">Don Emmert/AFP/GettyImages</a></span>
</figcaption>
</figure>
<p>There is reason to think that this is the situation that a considerable number of Americans will find themselves in as they enter middle age. A quarter of those between the ages of 18 and 34 owe <a href="https://www.nbcnews.com/news/us-news/poll-majority-millennials-are-debt-hitting-pause-major-life-events-n862376">at least $30,000</a>, with 1 in 10 owing over $100,000. </p>
<p>Evidence suggests that this burden is often taken on without much consideration for the future.</p>
<p>Young people <a href="https://www.brookings.edu/wp-content/uploads/2016/06/are-college-students-borrowing-blindly_dec-2014.pdf">borrow without knowledge</a> of the amount and without considering how they will pay it back. <a href="https://www.gsb.stanford.edu/insights/money-you-borrowed-remember-who-owns-it">Many indebted persons report</a> feeling that they don’t actually owe anything at all, viewing borrowed money as theirs to spend rather than debt to be repaid. Very often, borrowers <a href="https://link.springer.com/chapter/10.1007/978-3-030-45500-2_12">focus on the immediate benefits of spending while discounting</a> almost entirely any burden associated with repayment.</p>
<p>Thus, many people will likely end up suffering through their own actions in the same way that they might through the actions of some other unjust person. </p>
<p>This raises the question of whether a government concerned about protecting its people from injustice should concern itself with the ways that young people burden themselves when they borrow. I argue that it should. And here’s why.</p>
<h2>Freedom and borrowing</h2>
<p>In seeking to prevent injustice, the law often aims to ensure that people’s lives are free from domination. This involves seeing to it that people are able to pursue values and plans that they embrace, rather than ones that are imposed upon them.</p>
<p>According to the philosopher <a href="https://www.princeton.edu/%7Eppettit/">Philip Pettit</a>, <a href="https://oxford.universitypressscholarship.com/view/10.1093/0198296428.001.0001/acprof-9780198296423">a commitment to removing all forms of domination is fundamental</a> to <a href="https://plato.stanford.edu/entries/republicanism/">republican governments</a> – notably <a href="https://www.palgrave.com/gp/book/9780333605776">the United States</a> – and is the basis for many foundational laws such as those prohibiting physical coercion, threatening behavior and indentured servitude agreements. </p>
<p><a href="https://doi.org/10.1111/jopp.12127">My own work</a> highlights ways in which freedom from domination can be promoted through laws protecting one from one’s younger self, including laws against taking on excessive debt.</p>
<p>The life choices of a person who enters middle age with a lot of debt are often governed by the need to repay it rather than by a commitment to things cared about, valued or loved. Some <a href="https://www.cnbc.com/2018/05/22/student-loan-debt-is-a-hurdle-for-many-would-be-mothers.html">forgo having children</a> or do not pursue <a href="https://www.nytimes.com/2018/05/25/business/how-student-debt-can-ruin-home-buying-dreams.html">homeownership</a>, believing that such choices are cut off because of the burden of debt they already carry. Many are <a href="https://www.nber.org/papers/w13117">locked into careers</a> they would no longer choose simply because they provide a steady income necessary to pay down what they owe.</p>
<p>In other words, people may reach middle age and find that they are made to carry out plans forced upon them by younger versions of themselves who benefited at the time and gave little thought to the burdens they were imposing.</p>
<p>The government could best protect freedom, I argue, through legally imposed restrictions on the amount and types of debt that a person takes on from a private lender. </p>
<p>[<em>3 media outlets, 1 religion newsletter.</em> <a href="https://theconversation.com/us/newsletters/this-week-in-religion-76/?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=religion-3-in-1">Get stories from The Conversation, AP and RNS.</a>]</p>
<p>While a moderately priced degree from a reputable college might <a href="https://www.usnews.com/education/best-colleges/paying-for-college/articles/2019-06-17/is-college-worth-the-cost">open up future opportunities</a>, an expensive education at <a href="https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr811.pdf?la=en">a for-profit college</a> or an extravagant vacation financed with credit cards might well serve only to restrict a person’s future choices.</p>
<p>A society concerned with preventing injustice will take a nuanced approach toward debt. It will permit the kinds of borrowing that may enhance people’s ability to pursue plans and goals of their choosing. But I believe it will restrict through legal regulation the types of borrowing that render individuals a threat to their own freedom.</p><img src="https://counter.theconversation.com/content/157848/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Schofield does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Young people might take on a lot of debt without considering its consequences for their older years. A philosopher makes a case for laws to limit that debt as a duty toward self.
Paul Schofield, Assistant Professor of Philosophy, Bates College
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/152914
2021-01-12T13:25:26Z
2021-01-12T13:25:26Z
Through her divisive rhetoric, Education Secretary DeVos leaves a troubled legacy of her own
<figure><img src="https://images.theconversation.com/files/378102/original/file-20210111-17-yu4nsv.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5507%2C3702&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">U.S. Secretary of Education Betsy DeVos speaks during the daily briefing on COVID-19 on March 27, 2020, in Washington, D.C. </span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/secretary-of-education-betsy-devos-speaks-during-the-daily-news-photo/1208441564?adppopup=true"> JIM WATSON/AFP via Getty Images</a></span></figcaption></figure><p><em>Editor’s note: U.S. Secretary of Education Betsy DeVos resigned from her post effective Jan. 8, 2021, saying there was “<a href="https://static.politico.com/8b/7a/29084d4f45b89aa9e49f4ba01690/devos-letter.pdf">no mistaking</a>” the impact that President Donald Trump’s rhetoric had on the insurrection at the U.S. Capitol. Here, five scholars offer their views on DeVos’ legacy at the federal agency she headed for four years</em>.</p>
<h2>Mark Hlavacik, associate professor of communication studies, University of North Texas:</h2>
<p>In her <a href="https://www.washingtonpost.com/context/betsy-devos-resignation-letter/cfd93504-2353-4ac3-8e71-155446242dda/?itid=lk_interstitial_manual_7">resignation letter</a>, Secretary of Education Betsy DeVos explained that her sudden departure from the administration was motivated by President Donald Trump’s <a href="https://www.rev.com/blog/transcripts/donald-trump-speech-save-america-rally-transcript-january-6">incendiary words</a> to the crowd that <a href="https://www.washingtonpost.com/graphics/2021/politics/trump-insurrection-capitol/">went on to ransack</a> the U.S. Capitol on Jan. 6. </p>
<p>“There is no mistaking the impact your rhetoric had on the situation,” she declared, “and it is the inflection point for me.”</p>
<p>Interestingly, DeVos has a history of using some rather caustic and divisive language herself. Although she never encouraged or condoned the use of force to achieve political ends, her insulting characterizations of public educators as “<a href="https://www.washingtonpost.com/news/answer-sheet/wp/2017/10/10/the-new-insult-betsy-devos-is-hurling-at-her-critics-and-why-it-matters/">sycophant[s] of the ‘system’</a>” and “<a href="https://www.ed.gov/news/speeches/prepared-remarks-us-education-secretary-betsy-devos-american-enterprise-institute">Chicken Littles</a>” will leave a troubled legacy of their own.</p>
<p>Much like democracy, public education is an enterprise that relies on a basic civic faith that Americans can come together as a nation and in their communities to do worthwhile things that benefit all. Traditionally, the secretary of education plays a key role as a rhetorical leader who brings the country together to face its educational challenges. But that has rarely been the case with DeVos. </p>
<p>As recently as October she <a href="https://www.ed.gov/news/speeches/prepared-remarks-secretary-devos-hillsdale-college">used her position to warn</a> that an “unholy mob” of young socialists who “hate freedom” are using a “Marxist playbook” to attack “the family.”
Rhetoric like that in her <a href="https://www.ed.gov/news/speeches/prepared-remarks-secretary-devos-hillsdale-college">speech to Hillsdale College</a> reflects an affinity for blaming that DeVos <a href="https://www.tamupress.com/book/9781623499068/demagogue-for-president/">shares with her former boss</a>.</p>
<p>As I have <a href="https://www.hepg.org/hep-home/books/assigning-blame">warned elsewhere</a>, such <a href="https://www.ed.gov/news/speeches">routine blaming</a> leaves the impression that any <a href="https://www.hepg.org/blog/the-paradox-of-public-blame-and-the-prospects-of-p">meaningful conversation</a> on an important issue like education will devolve into a war of accusations. </p>
<p>And that can leave not just the nation’s Capitol but also public education defenseless before a tide of extremism.</p>
<figure class="align-center ">
<img alt="U.S. Secretary of Education Betsy DeVos testifies during a meeting." src="https://images.theconversation.com/files/377817/original/file-20210108-21-17etg8o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/377817/original/file-20210108-21-17etg8o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/377817/original/file-20210108-21-17etg8o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/377817/original/file-20210108-21-17etg8o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/377817/original/file-20210108-21-17etg8o.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/377817/original/file-20210108-21-17etg8o.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/377817/original/file-20210108-21-17etg8o.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">U.S. Secretary of Education Betsy DeVos testifies before a Senate subcommittee.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/secretary-of-education-betsy-devos-testifies-during-a-news-photo/1133269507?adppopup=true">Zach Gibson/Getty Images)</a></span>
</figcaption>
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<h2>Stanley Litow, visting professor of the practice in public policy, Duke University:</h2>
<p>Although college readiness, access and affordability are more important now than ever – particularly for people of color and those who are low-income – Betsy DeVos sadly did little to address these issues.</p>
<p>Expanding <a href="https://studentaid.gov/understand-aid/types/grants/pell">Pell Grants</a> – the major source of federal aid in defraying tuition costs for low-income students – should have been the focus of the Department of Education to ensure more people can afford college. The same is true of the <a href="https://www.businessinsider.com/student-loan-debt-crisis-college-cost-mind-blowing-facts-2019-700">growing crisis of college debt</a>, which now stands at a record <a href="https://fred.stlouisfed.org/series/SLOAS">US$1.7 trillion and counting</a>.</p>
<p>While it was up to Congress to reauthorize the <a href="https://www.investopedia.com/terms/h/higher-education-act-of-1965-hea.asp">Higher Education Act</a> – a federal law that regulates federal student aid, among other things, and effectively funds higher education – passage wasn’t a priority for the leadership in the department, and it didn’t happen. This was particularly troubling in light of the fact that <a href="https://www.insidehighered.com/news/2020/05/05/public-higher-education-worse-spot-ever-heading-recession">state funding for higher education has declined by 18%</a> in the last two decades. </p>
<p>Also, instead of a focus on the divisive issues of <a href="https://www.usatoday.com/story/news/education/2019/03/27/charter-school-betsy-devos-school-choice/3251111002/">charter schools</a>, <a href="https://www.usnews.com/news/elections/articles/2020-10-20/betsy-devos-says-school-choice-is-coming-like-it-or-not">choice schools</a> and <a href="https://www.bloomberg.com/opinion/articles/2020-02-18/betsy-devos-s-billion-dollar-voucher-boondoggle">vouchers</a>, the nation’s schools needed a laser-like focus on teaching. This is especially true when it comes to recruiting and retaining good teachers. But here, too, the Department of Education under DeVos’ leadership played little to no role. In fact, DeVos <a href="https://www.insidehighered.com/news/2020/05/05/public-higher-education-worse-spot-ever-heading-recession">pushed back on efforts to provide teachers with needed professional development</a>. </p>
<p>The Department of Education also fell short in terms of how it dealt with the COVID-19 pandemic. In spite of the escalating rate of hospitalizations and deaths, no issue was as important to America’s future – in my opinion – as its long-term impact on education. After months of school being largely online, K-12 students were projected to start the 2020-21 school year with <a href="https://doi.org/10.3102/0013189X20965918">significant losses in reading and math</a>. I believe the Department of Education’s support for remote learning was minimal at best, based on conversations I’ve had with school superintendents throughout the nation.</p>
<p>It was a total disaster for poor children. More than <a href="https://www.brookings.edu/blog/education-plus-development/2020/06/22/unequally-disconnected-access-to-online-learning-in-the-us/">1 in 4 children experience food insecurity</a>, and children in those homes similarly lack online access.</p>
<h2>Kevin Welner, professor of education, University of Colorado Boulder</h2>
<p>When Donald Trump was elected in 2016, there was little doubt that he would appoint a secretary of education who would support private school vouchers, oppose teacher unions and be reluctant to enforce civil rights statutes. That agenda is consistent with every Republican administration going back to Ronald Reagan. Why, then, did Betsy DeVos become “<a href="https://www.politifact.com/factchecks/2020/jan/06/frederica-wilson/how-unpopular-betsy-devos">the most unpopular person in our government</a>”?</p>
<p>What set her tenure apart was not what she did – it’s that she personified those policies. </p>
<p>Unlike her predecessors, DeVos had no relevant experience in public education. She was never a governor or state legislator like <a href="https://bioguide.congress.gov/search/bio/A000360">Lamar Alexander</a>, or a legal scholar of education like <a href="https://www.nytimes.com/2016/04/01/us/shirley-hufstedler-pioneering-judge-and-first-cabinet-level-education-secretary-is-dead-at-90.html">Shirley Hufstedler</a>, a K-12 teacher and school administrator like <a href="https://www.ecs.org/award/1985-terrel-h-bell/">Terrel H. Bell</a> or a university professor like <a href="https://www.encyclopedia.com/people/history/historians-miscellaneous-biographies/william-j-bennett">William Bennett</a>.</p>
<p>Also unlike her predecessors, she <a href="https://www.washingtonpost.com/local/education/education-nominee-betsy-devos-never-attended-a-public-school-theres-nothing-wrong-with-that/2017/01/29/5f63b2f6-e37c-11e6-a547-5fb9411d332c_story.html">never attended public school herself</a>, <a href="https://www.nytimes.com/2017/06/10/us/politics/betsy-devos-private-schools-choice.html">nor did she send her children to public schools</a>.</p>
<p>Instead, she made her mark as a <a href="https://mcfn.org/node/6043/devos-family-made-14-million-in-political-contributions-in-the-last-2-years-alone">political donor</a> and <a href="https://www.dbdvfoundation.org/news/dick-and-betsy-devos-lift-the-veil-on-their-139m-in-philanthropy">philanthropist</a>. Her advocacy for private school vouchers culminated in her founding of the <a href="https://www.federationforchildren.org">American Federation for Children</a> in 2010. </p>
<p>Upon taking office, she embarked on a “<a href="https://www.washingtonpost.com/local/education/a-quarter-of-the-k-12-schools-betsy-devos-has-visited-are-private/2017/10/27/02d5f7a2-a946-11e7-850e-2bdd1236be5d_story.html">Rethink Schools</a>” tour. Almost 40% of the schools she visited were private. “Even when DeVos has visited public schools, she has tended to bypass traditional neighborhood schools, instead making stops at charter schools and other schools of choice,” The Washington Post <a href="https://www.washingtonpost.com/local/education/a-quarter-of-the-k-12-schools-betsy-devos-has-visited-are-private/2017/10/27/02d5f7a2-a946-11e7-850e-2bdd1236be5d_story.html">noted in 2017</a>.</p>
<p>In short, DeVos stood out because she embraced the role of privatization advocate – a role she never relinquished. She made no pretense about this advocacy. For her, all that’s required for schooling to be considered “<a href="https://www.washingtonpost.com/education/2019/02/28/betsy-devos-her-allies-are-trying-redefine-public-education-critics-call-it-absurd/">public education</a>” is public funding and use by the public, meaning that private schools can provide “public” education. DeVos, from the moment of her appointment, became a powerful symbol. That, more than any action she took while in office, set her apart.</p>
<figure class="align-center ">
<img alt="Protesters rally against U.S. Secretary of Education Betsy DeVos" src="https://images.theconversation.com/files/377820/original/file-20210108-19-607b9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/377820/original/file-20210108-19-607b9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/377820/original/file-20210108-19-607b9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/377820/original/file-20210108-19-607b9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/377820/original/file-20210108-19-607b9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/377820/original/file-20210108-19-607b9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/377820/original/file-20210108-19-607b9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Protesters rally against U.S. Secretary of Education Betsy DeVos outside of a banquet hall in New York.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/protestors-rally-against-u-s-secretary-of-education-betsy-news-photo/1140636202?adppopup=true">Drew Angerer/Getty Images</a></span>
</figcaption>
</figure>
<h2>Dustin Hornbeck, postdoctoral research fellow of educational leadership and policy, University of Texas at Arlington</h2>
<p>Betsy DeVos made it clear in her confirmation hearings that she believed that public schools were not “<a href="https://www.nbcnews.com/politics/congress/betsy-devos-trump-s-pick-education-secretary-won-t-rule-n708171">working for the students that are assigned to them</a>,” while she refused to answer direct questions about whether she intended to work to privatize public schools.</p>
<p>In her four-year tenure as secretary of education, it could be said that her biggest achievement was making the role of the U.S. Department of Education less prominent, and, similar to Donald Trump, <a href="https://theconversation.com/betsy-devos-6-month-report-card-more-undoing-than-doing-81793">undoing that which was done during Barack Obama’s tenure</a>. DeVos made no bones about her dedication to school choice programs, <a href="https://www2.ed.gov/about/overview/budget/budget18/index.html">attempting to include $400 million in the 2018 budget</a>, which Congress rejected. She later argued that some of the funding in the Coronavirus Aid, Relief, and Economic Security Act – better known as the <a href="https://home.treasury.gov/policy-issues/cares">CARES Act</a> – intended for public schools should be <a href="https://www.ed.gov/news/press-releases/secretary-devos-issues-rule-ensure-cares-act-funding-serves-all-students">designated for private schools</a>. </p>
<p>Controversially, DeVos rolled back <a href="https://www.ed.gov/news/press-releases/secretary-devos-takes-historic-action-strengthen-title-ix-protections-all-students">Obama-era Title IX guidance</a> that gave victims of sexual assault additional recourse on college campuses. She also instituted a <a href="https://theconversation.com/heres-how-the-new-title-ix-regulations-will-affect-sexual-assault-cases-on-campus-138091">more complicated burden of proof</a>. Additionally, she rescinded guidance <a href="https://www.aclu.org/blog/lgbt-rights/lgbt-youth/betsy-devos-denies-trans-students-basic-rights">to protect transgender students’</a> ability to use toilet facilities and locker rooms that correlate with their gender identity. In another incident, she rescinded education department guidance about student discipline tactics intended to curb school suspensions and overly harsh punishments that <a href="https://www.edweek.org/policy-politics/betsy-devos-revokes-obama-discipline-guidance-designed-to-protect-students-of-color/2018/12">disparately impact students of color</a>.</p>
<p>Her administration <a href="https://panetta.house.gov/congressman-panetta-over-150-democrats-call-devos-release-more-information-about-department-s">dramatically slowed the approval of Public Service Loan Forgiveness</a>, which forgives federally subsidized student loans after a period of 10 years for public servants: that is, people who work for governmental agencies or for nonprofit organizations. As well, she <a href="https://studentaid.gov/sites/default/files/sweet-proposed-settlement-notification-sample.pdf">curtailed borrower defense practices</a> meant to protect consumers from predatory lending from for-profit colleges that might close before students earn a degree. She also <a href="https://www.smith.senate.gov/us-senator-tina-smith-leads-senate-colleagues-calling-secretary-devos-further-improve-program">scaled back the TEACH Grant program</a>, which gave future teachers federal money for college if they agreed to teach for a length of time in a high-need area.</p>
<p>While many of these actions have noticeably impacted educational policy, almost all of them can be overturned quickly in a new administration through direct administrative action. Few, if any, of DeVos’ school choice plans were codified and passed into law, making her legacy one of controversy and little action.</p>
<h2>Nicholas Tampio, professor of political science at Fordham University</h2>
<p>One of the great questions at the start of Betsy Devos’ tenure was whether she would enforce the federal education law signed by President Barack Obama at the end of his second term. Four years later, we know the answer: She did not try to undermine the federal testing regime instituted by the <a href="https://theconversation.com/devos-vows-to-require-standardized-tests-again-4-questions-answered-145979">Every Student Succeeds Act</a> of 2015.</p>
<p>At her contentious confirmation hearing in January 2017, Sen. Maggie Hassan, a New Hampshire Democrat, asked DeVos if she thought Congress took the right approach in preserving federal guardrails in education. One of these was the requirement that states test students annually in grades 3-8 and once in high school in reading and math. <a href="https://www.govinfo.gov/content/pkg/CHRG-115shrg23667/pdf/CHRG-115shrg23667.pdf">DeVos replied</a>: “I believe that Congress made great strides in returning the responsibility for education primarily to states and localities, where it belongs.”</p>
<p>Former Sen. Al Franken, a Minnesota Democrat, for one, was not sure whether DeVos really supported or understood the testing requirements of the law. After listening to her apparently struggle to explain the difference between testing for proficiency or growth, <a href="https://www.govinfo.gov/content/pkg/CHRG-115shrg23667/pdf/CHRG-115shrg23667.pdf">Franken replied</a>: “It surprises me that you don’t know this issue.” Every Democratic senator, and two Republicans, <a href="https://www.nytimes.com/interactive/2017/02/07/us/politics/betsy-devos-confirmation-vote.html">voted against her nomination</a>. DeVos became secretary only because Vice President Mike Pence cast the deciding vote. Before the vote, <a href="https://www.nytimes.com/2017/02/07/us/politics/betsy-devos-education-secretary-confirmed.html?searchResultPosition=1">Franken said</a>: “It was the most embarrassing confirmation hearing that I have ever seen.”</p>
<p>Senate Democrats, it turns out, did not need to worry about DeVos’ commitment to federal testing requirements.</p>
<p>In the spring of 2019, the U.S. Department of Education warned Arizona that it could lose <a href="https://www.edweek.org/education/devos-team-arizona-could-lose-340-million-for-skirting-essas-testing-requirements/2019/04">$340 million</a> in federal education funds. Why? Because their state education plan did not use a single test for all high school students in the state. Arizona wanted to offer school districts a “menu of assessments,” but the <a href="https://azsbe.az.gov/sites/default/files/media/AZ%20high%20school%20assessments%20waiver-%20final%20letter%2019-000167.pdf">Trump team rejected that plan</a>.</p>
<p>Miguel Cardona, President-elect Joe Biden’s choice for secretary of education, has <a href="https://www.edweek.org/policy-politics/where-bidens-choice-for-education-secretary-stands-on-key-k-12-issues/2020/12">reaffirmed</a> his commitment to federally mandated standardized testing as a tool of equity. Ultimately, DeVos’ reign at the Department of Education will not have changed the testing regime between the Obama and Biden administrations.</p><img src="https://counter.theconversation.com/content/152914/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
US Secretary of Education Betsy DeVos has resigned. Five experts comment on the impact she had on education.
Mark Hlavacik, Associate Professor of Communication Studies, University of North Texas
Dustin Hornbeck, Postdoctoral Research Fellow of Educational Leadership and Policy, University of Texas at Arlington
Kevin Welner, Professor, Education Policy & Law; Director, National Education Policy Center, University of Colorado Boulder
Nicholas Tampio, Professor of Political Science, Fordham University
Stanley S. Litow, Visting Professor of the Pratice, Public Policy, Duke University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/150606
2020-12-02T13:26:10Z
2020-12-02T13:26:10Z
The morality of canceling student debt
<figure><img src="https://images.theconversation.com/files/372083/original/file-20201130-21-1boo981.jpg?ixlib=rb-1.1.0&rect=7%2C28%2C4770%2C2507&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Students pulling a heavy ball representing the total outstanding student debt in the U.S. at over $1.5 trillion.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/students-pull-a-mock-ball-chain-representing-the-1-4-news-photo/613631652?adppopup=true">PAUL J. RICHARDS/AFP via Getty Images</a></span></figcaption></figure><p>President-elect <a href="https://joebiden.com/beyondhs/">Joe Biden promised to forgive</a> at least some student debt during his campaign, and he now supports immediately canceling <a href="https://www.npr.org/sections/biden-transition-updates/2020/11/17/935743741/biden-wants-to-help-pay-some-student-loans-but-theres-pressure-to-go-further">US$10,000</a> per borrower as part of COVID-19 relief measures.</p>
<p>Such proposals are likely to be quite popular. A poll from 2019 found that <a href="https://thehill.com/hilltv/rising/461106-majority-of-voters-support-free-college-eliminating-student-debt">58% of voters support</a> canceling all federal student debt.</p>
<p>But there are <a href="https://www.bostonglobe.com/2020/11/22/opinion/student-debt-bailout-would-be-unjust">those who question the idea</a> of debt forgiveness and call it unfair to those who never took out student debt or already paid it off.</p>
<p>As an <a href="https://lib.dr.iastate.edu/do/search/?q=author_lname%3A%22Padgett-Walsh%22%20author_fname%3A%22Kate%22&start=0&context=1759512&facet=">ethicist</a> who studies the morality of debt, I see merit in the question: Should student debt be canceled?</p>
<h2>The moral case against canceling</h2>
<p>Educational debt is often regarded as an investment in one’s future. Millennials with a B.A., for instance, typically earn <a href="https://www.bls.gov/careeroutlook/2020/data-on-display/education-pays.htm">$25,000</a> more than those with a high school diploma. College education is also generally correlated with a variety of positive life outcomes, including <a href="https://www.sciencedirect.com/science/article/pii/S0167629616301382">physical</a> and <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3298813/">mental</a> health, <a href="https://www.annualreviews.org/doi/abs/10.1146/annurev.soc.012809.102503">family stability</a> and <a href="https://www.aeaweb.org/articles?id=10.1257/jep.25.1.159">career satisfaction</a>. </p>
<p>Given the benefits of college education, <a href="https://www.brookings.edu/blog/up-front/2019/11/12/five-facts-about-student-loans/">canceling student debt appears</a> to some as a giveaway for those who are already on their way to becoming well-off. </p>
<p>Canceling debt also seems to violate the moral principle of following through on one’s promises. Borrowers have a moral duty to fulfill their loan agreements, the philosopher <a href="https://pdfs.semanticscholar.org/ff5d/112a814a2016f045f63a31755792c757e8b8.pdf">Immanuel Kant</a> argued, because reneging on promises is disrespectful to oneself and others. Once people have promised to do something, he noted, others rely upon that promise and expect them to follow through. </p>
<p>In the case of federal student loans, a borrower signs a promissory note agreeing to pay back the government and, ultimately, the taxpayers. And so student borrowers seem to have a moral duty to pay their debts unless mitigating circumstances like injury or illness arise.</p>
<h2>The moral case for canceling</h2>
<p>Fairness and respect, however, also demand that society addresses the magnitude of student debt today, and especially the burdens it imposes on low-income, first-generation and Black borrowers. </p>
<p>Young people today start their adult lives burdened with much more student debt than previous generations. Almost <a href="https://ticas.org/wp-content/uploads/legacy-files/pub_files/qf_about_student_debt.pdf">70% of college students</a> now borrow to attend college, and the average size of their debt has risen since the mid-90s from less than <a href="https://ticas.org/wp-content/uploads/legacy-files/pub_files/qf_about_student_debt.pdf">$13,000 to about $30,000</a> today. </p>
<p>As a result, total outstanding student debt has jumped to over <a href="https://www.newyorkfed.org/microeconomics/topics/student-debt">$1.5 trillion</a>, making it the <a href="https://heller.brandeis.edu/iasp/pdfs/racial-wealth-equity/racial-wealth-gap/stallingdreams-how-student-debt-is-disrupting-lifechances.pdf">second largest</a> form of debt in the U.S. after mortgages. </p>
<p>This explosion in student debt raises two significant moral concerns, as my student <a href="https://link.springer.com/article/10.1007/s10790-020-09770-1?wt_mc=Internal.Event.1.SEM.ArticleAuthorOnlineFirst&utm_source=ArticleAuthorOnlineFirst&utm_medium=email&utm_content=AA_en_06082018&ArticleAuthorOnlineFirst_20201001">Justin Lewiston and I argue in an article</a> published last month by The Journal of Value Inquiry. </p>
<p>The first concern is that the distribution of costs and benefits is very unequal. Fairness requires equal opportunity, as the philosopher <a href="https://plato.stanford.edu/entries/rawls/">John Rawls</a> argued. Yet, while borrowing for education is supposed to create opportunities for students from disadvantaged backgrounds, those opportunities often fail to materialize due to educational challenges and wage gaps in the labor market.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/372084/original/file-20201130-17-1pnwm7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/372084/original/file-20201130-17-1pnwm7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372084/original/file-20201130-17-1pnwm7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372084/original/file-20201130-17-1pnwm7f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372084/original/file-20201130-17-1pnwm7f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372084/original/file-20201130-17-1pnwm7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372084/original/file-20201130-17-1pnwm7f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372084/original/file-20201130-17-1pnwm7f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Students hold a demonstration in New York to protest against ballooning student loan debt.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/students-hold-placards-as-they-stage-a-demonstration-at-the-news-photo/496932252?adppopup=true">Photo by Cem Ozdel/Anadolu Agency/Getty Images</a></span>
</figcaption>
</figure>
<p>Data show that low-income students, first-generation students and Black students face much greater struggles in repaying their loans. About 70% of those in <a href="https://www.americanprogress.org/issues/education-postsecondary/reports/2017/12/14/444011/student-loan-defaulters/">default</a> are first-generation students, and 40% come from low-income backgrounds. Twenty years after college, when white borrowers have repaid 94% of their loans, the typical Black student has been able to <a href="https://heller.brandeis.edu/iasp/pdfs/racial-wealth-equity/racial-wealth-gap/stallingdreams-how-student-debt-is-disrupting-lifechances.pdf">repay only 5%</a>. </p>
<p>These repayment and default rates reflect significantly lower <a href="https://nscresearchcenter.org/signaturereport16/">graduation rates</a> for students in those groups, who typically need to work long hours while also in school and hence <a href="https://journals.sagepub.com/doi/full/10.1177/2378023116664351">engage</a> less with both the academic and nonacademic aspects of college.</p>
<p>But they also reflect significantly lower post-graduation incomes for such students, due in no small part to continuing social and racial wage gaps in the labor market. Black men with a bachelor’s degree make, on average, more than <a href="https://www.frbsf.org/economic-research/files/el2017-26.pdf?mod=article_inline">20% less than white men</a> with the same education and experience, though that wage gap is smaller for women. And first-generation graduates typically make <a href="https://link.springer.com/article/10.1007/s11162-018-9523-1">10% less than students whose parents graduated</a> from college.</p>
<p>A second moral concern is that student debt is increasingly causing widespread distress and constraining life choices in significant ways. Consider that even before the pandemic, <a href="https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-student-loans-and-other-education-debt.htm">20% of student borrowers</a> were behind on their payments, and first-generation borrowers and borrowers of color are struggling even more. </p>
<p>The financial distress indicated by this high rate of delinquency is undermining both the <a href="https://ideas.repec.org/a/kap/jfamec/v40y2019i1d10.1007_s10834-018-9594-3.html">physical</a> and <a href="https://www.sciencedirect.com/science/article/abs/pii/S0277953614007503">mental</a> health of young adults. It prevents young adults from starting <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2968250">families</a>, purchasing cars, renting or buying their own <a href="https://www.sciencedirect.com/science/article/abs/pii/S0927537117303317">homes</a> and even starting new <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2633951">businesses</a>. </p>
<p>Unsurprisingly, these negative effects are <a href="https://journals.sagepub.com/stoken/default+domain/10.1177%2F2167696819879252/full">disproportionately</a> experienced by first-generation, low-income and Black student borrowers, whose life choices are especially restricted by the need to make loan payments. </p>
<p>[<em>Deep knowledge, daily.</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=deepknowledge">Sign up for The Conversation’s newsletter</a>.]</p>
<h2>Avoiding moral hazard</h2>
<p><a href="https://www.forbes.com/sites/prestoncooper2/2019/10/28/the-massive-moral-hazard-problem-in-mass-student-loan-forgiveness/?sh=73667707e927">Some analysts</a> have argued, however, that canceling student debt will create a problem of moral hazard. A moral hazard arises when people no longer feel the need to make careful choices because they expect others to cover the risk for them.</p>
<p>For example, a bank that expects to be bailed out by the government in the event of a financial crisis thereby has an incentive to engage in riskier behavior. </p>
<p>Moral hazard can be avoided by combining student debt cancellation with programs that reduce the need for future borrowing, especially for first-generation students, low-income students and students of color. </p>
<p>One success story is the Tennessee Promise, a program enacted in 2015 to make tuition and fees at community and technical colleges free to state residents. This program has <a href="https://comptroller.tn.gov/content/dam/cot/orea/advanced-search/2020/TNPromiseMo4Final720.pdf">increased enrollment</a>, retention and completion rates, <a href="https://www.academia.edu/39369076/Do_Promise_Programs_Reduce_Student_Loans_Evidence_from_Tennessee_Promise">while reducing borrowing by over 25%</a>. </p>
<p>Ultimately, morality requires a forward-looking as well as a backward-looking approach to debt cancellation. </p>
<p>Looking backward at initial promises to repay can explain why people are generally required to pay their debts. But looking forward will enable policymakers to imagine how canceling student debt could help create a fairer society.</p><img src="https://counter.theconversation.com/content/150606/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Padgett Walsh does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
President-elect Joe Biden promised to forgive some part of student debt. An ethicist considers what’s fair.
Kate Padgett Walsh, Associate Professor of Philosophy, Iowa State University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/131363
2020-10-18T12:43:24Z
2020-10-18T12:43:24Z
Low funding for universities puts students at risk for cycles of poverty, especially in the wake of COVID-19
<figure><img src="https://images.theconversation.com/files/362706/original/file-20201009-15-wacpgy.jpg?ixlib=rb-1.1.0&rect=65%2C234%2C8583%2C5306&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Particularly during an economic crisis, graduating from university should not sentence students to a lifetime of debt. </span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Post-secondary education has consistently been linked to the promise of a better life. Graduating from post-secondary study has been identified as the <a href="https://www.aeaweb.org/articles?id=10.1257/jep.27.3.79">single most important factor affecting intergenerational mobility</a>. Yet, several factors at play today show how this function of post-secondary education <a href="https://cwp-csp.ca/2017/09/the-cycle-of-student-debt-and-poverty-and-how-we-arent-ending-it">is in crisis in Canada</a>. </p>
<p>Shrinking government funding is behind higher university tuition fees. Government funding of Canadian universities in <a href="https://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2017/03/Case_for_Renewal_in_PSE.pdf">1982 comprised 82.7 per cent of university operating revenues; by 2012, that percentage went down to 54.9 per cent</a>. By 2019, in Ontario, <a href="https://academicmatters.ca/the-university-of-toronto-explores-alternative-funding-sources/">universities’ receipt of government grants represented a paltry 24 per cent of total university revenues</a>. Many college and university students <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/141114/dq141114b-eng.htm">face significant debt</a> with no guarantee of a decent job.</p>
<p>Universities have adopted labour practices in common with the private sphere that result in a rise of precarious work in universities. In 2016, <a href="https://www.oise.utoronto.ca/hec/UserFiles/File/Sessional_Faculty_-_OHCRIF_Final_Report_-_July_2016.pdf">one-third of part-time professors, many of them women, did not make enough money to raise them above the poverty line</a>.</p>
<p>In the COVID-19 context, <a href="https://www.theglobeandmail.com/business/article-with-degree-in-hand-new-graduates-face-tough-odds-in-brutal-job">young people have reason to be concerned</a> as the entry-level job market has <a href="https://www.cbc.ca/news/business/covid-19-jobs-1.5680550">significantly “dried up,” and employers are now revoking job offers or cutting back their graduate recruitment plans</a>. </p>
<p>As our society endures a second wave of COVID-19, now is the time to take stock of what is important for our collective future. With little fanfare, <a href="https://www.postsecondarybc.ca/knowledgebase/the-history-of-post-secondary-education-in-canada-part-vii-since-2003/">our publicly funded post-secondary education system has been eroded</a> over time, diminishing the promise it once held. We should demand change.</p>
<figure class="align-center ">
<img alt="People walk in front of a Ryerson University building." src="https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/363047/original/file-20201012-21-iw66kb.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Post-secondary education is essential for shaping people’s socio-economic standing. People are seen at Ryerson University in Toronto in September 2020.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Cole Burston</span></span>
</figcaption>
</figure>
<h2>Determinant of well-being</h2>
<p>Post-secondary education is not only essential for shaping people’s career development and future socio-economic standing, but it’s vital in developing their skills in <a href="http://canada2020.ca/wp-content/uploads/2014/05/2014_Canada2020_Paper-Series_Education_FINAL.pdf">critical thinking, problem-solving, social and emotional regulation, collaboration and civic engagement</a>. </p>
<p>Education is a <a href="https://www.cpha.ca/what-are-social-determinants-health">key social determinant of health</a> and well-being. But post-secondary education faces increasing <a href="https://cupe.ca/corporatization-post-secondary-education">demands for greater corporatization</a>, <a href="https://ottawacitizen.com/opinion/columnists/anne-marie-roy-fords-funding-overhaul-will-be-detrimental-to-colleges-and-universities">privatization</a> and compliance with <a href="https://pressprogress.ca/canadas-universities-and-colleges-are-being-taken-over-by-big-corporations-and-wealthy-donors/">externally imposed</a> (government or donor) priorities. This neoliberal turn has indeed created important shifts in Canadian universities that should give us pause. </p>
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<p>
<em>
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Read more:
<a href="https://theconversation.com/what-exactly-is-neoliberalism-84755">What exactly is neoliberalism?</a>
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<p>Ontario, which <a href="https://www.statista.com/statistics/447802/enrollment-of-postsecondary-students-in-canada-by-province/">educates roughly 40 per cent of all post-secondary students in Canada</a>, has perhaps the highest stake in the future of higher education. Currently, Ontario university students have <a href="https://ocufa.on.ca/assets/2019-OCUFA-Pre-Budget-Submission.pdf">the highest student-to-faculty ratio (31:1) in Canada, compared to a national average of 22:1</a>.</p>
<p>This means that Ontario students are paying more money for their education, while also being subjected to higher-than-average class sizes relative to universities outside the province. </p>
<p>Ontario students also now have to pay as much to learn in their own virtual classrooms during the pandemic as they did for on-campus education. <a href="https://ottawa.ctvnews.ca/students-want-tuition-slashed-as-universities-and-colleges-go-online-during-pandemic-1.5013139">Many have protested</a>, but for universities to make cuts to tuition fees would also likely mean cuts to services and instructors.</p>
<h2>Reliance on international tuition</h2>
<p>Universities have endeavoured to replace absent government funding with tuition raises, so tuition rates have skyrocketed, particularly for international students, whose fees have made up the shortfall. Higher Education Strategy Associates (HESA), a research and consulting firm, notes in a 2020 report, <a href="https://higheredstrategy.com/wp-content/uploads/2020/09/HESA-SPEC-2020-revised.pdf">The State of Postsecondary Education in Canada</a>: </p>
<blockquote>
<p>“Since the start of the 2008 recession, international student numbers have more than tripled; and at the university level, the gap between domestic and international student fees has risen inexorably as well … Since 2012-13, funds from international students have covered slightly more than 100 per cent of the collective increase in [universities’] operating budgets.” </p>
</blockquote>
<p>Alex Usher, president of HESA, noted in 2018 that “<a href="https://policyoptions.irpp.org/magazines/august-2018/canadas-growing-reliance-on-international-students/">… some major institutions … are receiving more money from international students than they get in operating grants from their provincial governments.”</a> </p>
<h2>Shrinking government funding</h2>
<p>Ontario has <a href="https://www.theglobeandmail.com/canada/article-ontario-government-expected-to-cut-tuition-fees-for-canadian-students/">among the lowest funding levels per student in Canada at the post-secondary level</a>. In 2002, <a href="https://www.policyalternatives.ca/sites/default/files/uploads/publications/National_Office_Pubs/mp4.pdf">it was the lowest in North America, with the exception of Alabama</a>. In 2017-18, the province’s funding per university student was <a href="https://ocufa.on.ca/assets/2020-Pre-Budget-Submission.pdf">37 per cent lower than the average for the rest of Canada, according to the Ontario Confederation of Faculty Associations</a>. </p>
<p>As the <a href="https://www.canada.ca/en/revenue-agency/services/benefits/emergency-student-benefit.html">Student Emergency Student Benefit</a> has ended, many students, bereft of jobs they once filled to support their education pre-COVID, are now in poor financial shape to pay for their fall classes. Deprived of <a href="https://www.cbc.ca/news/canada/toronto/osap-debt-stress-students-1.5267350">government-funded grants and loans</a>, students are taking on ever-increasing loads of debt to fund their educations: almost half of <a href="https://www.casa-acae.com/students_are_still_worried_covid19">students surveyed by the Canadian Alliance of Student Associations say they will need to rely more on government loans owing to the fallout from COVID-19</a>, with <a href="https://www.theglobeandmail.com/report-on-business/graduates-face-an-unwelcoming-job-market-when-they-get-out-of-school/article31703528/">little assurance of obtaining a stable, good-quality job to pay off the debt</a>.</p>
<p>Indeed, <a href="https://www.cbc.ca/news/business/post-secondary-student-debt-1.4295476">the average student is saddled with $26,000 in loans after completing university</a>.</p>
<h2>Labour precarity</h2>
<p>The <a href="http://ofl.ca/doug-ford-fails-ontario-workers-with-the-passage-of-bill-47-say-leaders-in-the-fight-for-15-and-fairness-movement-ontario-federation-of-labour-and-workers-action-centre/">weakening of labour laws in Ontario</a> has certainly not helped in eschewing the growing trend of labour precarity for young people. In this competitive work environment (one in which <a href="https://www.amo.on.ca/AMO-PDFs/Reports/2019/Fixing-Housing-Affordability-Crisis-2019-08-14-RPT.aspx">housing</a> and <a href="https://academic.oup.com/jhrp/article-abstract/9/1/29/3074696">social resources are scarce</a>), the inability of students to find gainful employment after college or university may affect the mobility of generations into the future.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/precarious-employment-in-education-impacts-workers-families-and-students-115766">Precarious employment in education impacts workers, families and students</a>
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</em>
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<p>The future of PhD students is also not as promising as it once was. After years of study, and the debt associated with it, many graduates interested in academic life now face an <a href="https://academicmatters.ca/assets/AcademicMatters_November2013.pdf">uncertain and insecure career</a>, often as contract faculty. Sessional faculty now comprise <a href="https://behindthenumbers.ca/2019/08/15/contract-faculty-so-much-more-to-know/">53 per cent of the faculty complement in Ontario universities</a>. Half of them <a href="https://academicmatters.ca/understanding-the-role-of-universities-in-the-rise-of-contract-academic-work/">don’t make more than $50,000 a year</a>. </p>
<p>Due to COVID-19, Ontario has <a href="https://www.theglobeandmail.com/canada/article-ontario-shelves-plan-for-performance-based-postsecondary-funding/">temporarily shelved its plans to impose performance metrics</a> to hold universities responsible for the future of their graduates, and the precarious labour market they must compete in. One indicator tied government funding to universities’ graduate earnings, expecting that, irrespective of labour and economic conditions, students would land jobs immediately following graduation — but the pandemic has revealed the <a href="https://theconversation.com/covid-19-reveals-the-folly-of-performance-based-funding-for-universities-138575">capriciousness of trying to tie post-secondary education closely to the labour market</a>.</p>
<h2>Impacts of privatization</h2>
<p>The decline of publicly funded universities has led down the slippery path of privatization. </p>
<p>When universities rely on private funding from donors, whose names feature prominently on innumerable university buildings or who sit on university governance boards, places of learning are subject to <a href="https://www.theglobeandmail.com/news/national/time-to-lead/the-tricky-business-of-funding-a-university/article4619883/">corporate values and practices</a> (efficiency, secrecy of institutional budgets and operations, the erosion of collegialism), <a href="https://www.universityaffairs.ca/news/news-article/university-autonomy-is-shrinking-in-canada-study-finds/">threatening university autonomy</a>. </p>
<p>Privatization erodes human rights and leads to greater marginalization: as Philip Alston, UN Special Rapporteur on extreme poverty and human rights, has concluded, <a href="http://undocs.org/A/73/396">people living in poverty are more likely to go without privatized services or be forced to pay higher prices for them</a>.</p>
<p>It doesn’t need to be this way <a href="https://www.theglobeandmail.com/canada/article-canada-trails-most-other-wealthy-countries-in-caring-for-children">in a wealthy country</a>. People in Ontario and across Canada must demand better.</p><img src="https://counter.theconversation.com/content/131363/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tracy Smith-Carrier is an Associate Professor in the School of Social Work at King's University College at Western University and an Adjunct Research Professor in the Arthur Labatt Family School of Nursing at Western University</span></em></p>
Canadians’ publicly funded post-secondary education system has been eroded over time, diminishing the promise it once held to protect people from poverty. We should demand change.
Tracy Smith-Carrier, Associate Professor, King's School of Social Work, Western University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/145027
2020-09-02T05:45:31Z
2020-09-02T05:45:31Z
Let working graduates claim a tax deduction for their HECS-HELP debt
<figure><img src="https://images.theconversation.com/files/355730/original/file-20200901-18-hxohb8.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4902%2C3258&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-attractive-desperate-woman-suffering-stress-435542989">Shutterstock</a></span></figcaption></figure><p>Most graduates leaving university today do so with a massive debt hanging over their heads. They will take many years to repay their accrued HECS-HELP debt through the taxation system. There will be little relief for these graduates as the government has slammed the door shut on the tax deductibility of their tuition costs against the income they earn as a result. </p>
<p>The government also intends, for new students from 2021, to increase the amount many students pay towards their education. Popular courses such as humanities, commerce and law will <a href="https://www.dese.gov.au/document/better-university-funding-arrangements-reducing-complexity-and-targeting-job-ready">cost them A$14,500 a year</a>. A combined commerce/law or arts/law course, which are the most popular study choices for aspiring lawyers, will cost them over A$70,000.</p>
<p>The government constantly reminds us government-supported students’ <a href="https://www.studyassist.gov.au/help-loans/hecs-help">HECS-HELP</a> debts are deferred. Only when they reach the annual income threshold (<a href="https://www.studyassist.gov.au/paying-back-your-loan/loan-repayment#:%7E:text=The%20compulsory%20repayment%20threshold%20is,(ATO)%20at%20any%20time.">A$45,881 for 2019-20</a>) do they start repaying their debt. </p>
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<p>
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<strong>
Read more:
<a href="https://theconversation.com/lowering-the-help-repayment-threshold-is-an-easy-target-but-not-the-one-we-should-aim-for-94910">Lowering the HELP repayment threshold is an easy target, but not the one we should aim for</a>
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</em>
</p>
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<p>The underlying rationale is that students are receiving an interest-free loan, as the HECS-HELP debt is only <a href="https://www.studyassist.gov.au/paying-back-your-loan/loan-indexation#:%7E:text=There%20is%20no%20interest%20charged,they%20are%2011%20months%20old.">indexed to inflation</a> (CPI, which measures cost-of-living increases). HECS-HELP provides eligible students with a loan to pay their student contribution for a Commonwealth-supported place in their chosen course. </p>
<p>Another scheme exists for those students not eligible for a Commonwealth-supported place. This is called FEE-HELP. These students receive a loan to pay tuition fees for units of study in their chosen course. A FEE-HELP debt is also indexed each year. </p>
<p>Graduates repay these HELP debts if and when their earnings rise above the threshold. </p>
<p>However, as explained below, postgraduate students with a FEE-HELP loan can claim a tax deduction for their tuition fees.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/students-low-financial-literacy-makes-understanding-fees-loans-debt-difficult-45088">Students' low financial literacy makes understanding fees, loans, debt difficult</a>
</strong>
</em>
</p>
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<h2>Two student loan schemes, two different rules</h2>
<p>The usual rule for taxpayers is that expenses incurred in earning assessable income are deductible. Taxpayers can <a href="https://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Education-and-study/">claim self-education expenses</a>, which includes undertaking university courses, where they are able to show the study is connected with their income-earning activity. These deductible expenses include tuition fees which can be paid through the <a href="https://www.studyassist.gov.au/help-loans/fee-help">FEE-HELP</a> scheme. </p>
<p>In contrast to <a href="https://www.education.gov.au/higher-education-administrative-information-providers-march-2020/31-fee-help#:%7E:text=Students%20may%20be%20eligible%20for,tuition%20fees%2C%20contact%20the%20ATO.">FEE-HELP tuition costs being deductible</a>, student debt under the HECS-HELP scheme has specifically been rejected as a tax deduction under <a href="http://classic.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s26.20.html">section 26-20 of the Income Tax Assessment Act 1997</a>. These students are unable to claim a tax deduction for their university fees regardless of whether they are earning relevant income during their course or when they get a job as a graduate after completing their course. </p>
<p>Graduates start paying income tax on amounts above the normal tax-free threshold of A$18,200 but may not actually earn above the HECS-HELP threshold amount. On this basis graduates may be paying their fair share of tax on their income, but their HECS-HELP debt continues to grow over time. When graduates reach the threshold, they start paying both income tax and repayments of their HECS-HELP debt. In short, there is no tax relief for graduates.</p>
<p>The inequity between graduates and other taxpayers becomes clearer when you consider the additional self-education expenses these other taxpayers can claim. If already working within their chosen job and studying part-time, but not confined by the HECS-HELP tag, they can claim for textbooks, student union fees, computer expenses, internet costs for online learning and stationery. </p>
<p>Crucially, FEE-HELP recipients can also claim for the cost of their tuition fees. Once they reach an income threshold, their debt is also <a href="https://www.studyassist.gov.au/paying-back-your-loan/loan-repayment">repaid through the taxation system</a>. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/five-things-senators-and-everyone-else-should-know-about-changes-to-help-debts-84843">Five things senators (and everyone else) should know about changes to HELP debts</a>
</strong>
</em>
</p>
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<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/355732/original/file-20200901-22-194dyuv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Young woman with calculator smiling as she looks at laptop screen." src="https://images.theconversation.com/files/355732/original/file-20200901-22-194dyuv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/355732/original/file-20200901-22-194dyuv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=430&fit=crop&dpr=1 600w, https://images.theconversation.com/files/355732/original/file-20200901-22-194dyuv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=430&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/355732/original/file-20200901-22-194dyuv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=430&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/355732/original/file-20200901-22-194dyuv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=540&fit=crop&dpr=1 754w, https://images.theconversation.com/files/355732/original/file-20200901-22-194dyuv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=540&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/355732/original/file-20200901-22-194dyuv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=540&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Come tax time, students with FEE-HELP debts are smiling compared to those with HECS-HELP debts.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/portrait-smiling-young-woman-calculating-finance-166290524">Shutterstock</a></span>
</figcaption>
</figure>
<h2>Treat all self-education expenses equally</h2>
<p>It is time to revisit the tax deductibility of HECS-HELP repayments. The current regime is complex, difficult to comprehend and has inbuilt inequities. The basic rule of tax deductibility should apply across the board, regardless of what type of support the government is providing to university students. </p>
<p>If we accept the arguments from the government that full-time students are receiving interest-free loans for their education and that the debt is deferred until they earn above the threshold, then there is an equally strong argument that graduates should then be able to defer, until that time, a tax deduction for the payment.</p>
<p>The general rule that a tax deduction is allowed to a taxpayer for expenses directly incurred in deriving income should apply to all relevant taxpayers. All taxpayers should be treated equally when spending on self-education. There should be no distinction between students receiving different types of HELP from the government.</p>
<p>At the moment undergraduate students tend to receive HECS-HELP while postgraduate students tend to receive FEE-HELP. These postgraduate students can immediately claim the cost of their tuition fees as a tax deduction even when this is funded through the FEE-HELP loan. This is because postgraduates are normally working in their chosen field and satisfy the necessary link between expense and income earned.</p>
<p>Undergraduate students tend to be studying full-time and working in casual jobs, which are not relevant to their studies. Students in this situation would not be able to claim their fees as a tax deduction regardless of the HECS-HELP tag. It would be equitable to amend the Tax Act to allow graduates to claim deductions for their tuition costs later when they are working in their chosen field.</p>
<hr>
<p><em>Correction: This article has been corrected to clarify that FEE-HELP recipients can claim a tax deduction on tuition fees even when this cost is funded through FEE-HELP, but not on repayments of the loan.</em></p><img src="https://counter.theconversation.com/content/145027/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael William Blissenden does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Taxpayers, including those paying tuition fees with FEE-HELP loans, can claim a deduction for self-education expenses that relate to the work they do. But graduates with a HECS-HELP debt can’t claim.
Michael William Blissenden, Professor of Law, University of New England
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/144563
2020-08-20T20:16:55Z
2020-08-20T20:16:55Z
When students fail, many do nothing about it. Here’s how unis can help them get back on track
<figure><img src="https://images.theconversation.com/files/353506/original/file-20200818-24671-trkm1c.jpg?ixlib=rb-1.1.0&rect=29%2C7%2C4954%2C3310&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/teenage-student-classroom-tutor-71162902">Shutterstock</a></span></figcaption></figure><p>Students failing at university is not a problem of “extremes”, as federal Education Minister Dan Tehan <a href="https://ministers.dese.gov.au/tehan/putting-students-interests-first">would have it</a>. A large proportion of students fail units of study. And, surprisingly, <a href="https://studentsuccessjournal.org/article/view/1403">our research</a> found about a third do nothing about it. However, students who received targeted help from their university on average halved their failure rate. </p>
<p>The government is right to be concerned about high rates of failure among students who accrue HECS-HELP debt even if they don’t graduate. Its <a href="https://www.dese.gov.au/job-ready/job-ready-graduates-package-draft-legislation-consultation">proposed amendments</a> to the Higher Education Support Act mean students who fail half their subjects across two semesters would lose Commonwealth support. </p>
<p>The changes would extend conditions applying to non-university providers to universities. They would also increase the powers of the regulator, the Tertiary Education Quality and Standards Agency (TEQSA), and the Department of Education to enforce those rules. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/uni-student-failure-rate-is-a-worry-but-the-government-response-is-too-heavy-handed-144414">Uni student failure rate is a worry, but the government response is too heavy-handed</a>
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</p>
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<p>The question is: will the treatment cure the disease? And is it reasonable in terms of its consequences for universities and their students?</p>
<h2>Failure is common</h2>
<p>Our <a href="https://www.tandfonline.com/doi/full/10.1080/07294360.2019.1664999">large study</a> of the prevalence and reasons for academic failure of undergraduate students at an Australian university found 40% failed at least one unit. These students were four times more likely to drop out. And 58% of those who persisted with their studies failed again.</p>
<p>All universities have procedures to identify students who fail multiple units in a semester or fail the same unit multiple times. These processes would pick up students who fail half their units, especially in their first year.</p>
<p>The question is what happens next? A university would ordinarily develop a plan to support the student to improve their performance. This may include advice to attend the language and learning skills centre, to seek support for mental well-being and/or to reduce study load if possible. Universities differ in how much practical assistance they give students to recover from failure and complete their course.</p>
<h2>Targeted help makes a difference</h2>
<p>Swinburne University of Technology has a comparatively comprehensive process to support students identified as being at risk. This includes students who have to “show cause” why they should not be excluded from their course. </p>
<p>Highly trained academic development advisers (ADAs) reach out to the students individually. Students are asked to attend a one-on-one session to work through the reasons that led to unit failure and discuss how they will respond to these challenges. They can see the ADA multiple times.</p>
<p>The ADAs also run a facilitated peer support program, called Back on Track, over the semester. It’s aimed at changing behaviour and developing new study habits as well as building a personal support network. </p>
<p>The outcomes of the Back on Track program are impressive. The 213 participants in the second semester of 2019 almost halved their fail rate from the first semester. Some students did not fail any units. </p>
<p>Dropping study load to improve pass rates was an important strategy. Almost half of the cohort did this.</p>
<p>Supporting students after academic failure is resource-intensive because of the numbers involved. The Swinburne ADA team works with about 2,000 students a year. This is in addition to the administrative staff who identify students and the academic staff involved in the “show cause” process. </p>
<p>While Swinburne leads in proactive support of students, all universities have robust processes for dealing with poor academic progress.</p>
<h2>Students must learn to help themselves</h2>
<p>Offering support is only part of the story. Students must also adapt their behaviour following academic failure. At Swinburne, many “at risk” students don’t engage with the ADA support system.</p>
<p>In our study, we asked students what they did in <a href="https://studentsuccessjournal.org/article/view/1403">response to failing</a>. One-third of respondents who had failed but persisted with their study answered: “Nothing”. </p>
<figure class="align-center ">
<img alt="Student with coffee staring in confusion at laptop screen." src="https://images.theconversation.com/files/353514/original/file-20200819-25043-6ftsxr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/353514/original/file-20200819-25043-6ftsxr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/353514/original/file-20200819-25043-6ftsxr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/353514/original/file-20200819-25043-6ftsxr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/353514/original/file-20200819-25043-6ftsxr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/353514/original/file-20200819-25043-6ftsxr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/353514/original/file-20200819-25043-6ftsxr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A third of students continuing with study after failing units said they did ‘nothing’ in response to their failure.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bored-university-student-584141923">Shutterstock</a></span>
</figcaption>
</figure>
<p>This is obviously of concern, especially for students who have failed multiple units. Of those who had failed repeatedly but did “nothing”, 43% were international students and 26% were online students. They struggled with exam anxiety and exam situations, especially the international students, and reported problems with workload and time management. </p>
<p>These students had not yet worked out how to help themselves, or where to go for help.</p>
<p>Most students named multiple and compounding reasons for failing, including financial struggles, disability, and care or work responsibilities. These underlying issues cannot be resolved quickly, by students or universities.</p>
<h2>Everyone has a role to play</h2>
<p>Universities could do more to help students in practical ways to get back on track. Combined use of predictive learning analytics (drawing on multiple data points to identify students at risk) and learning advisers who intervene early is <a href="https://success.gsu.edu/initiatives/gps-advising/">showing promise</a> and could be rolled out across the sector. The government, through the <a href="https://www.teqsa.gov.au/contextual-overview-hes-framework-2015">Higher Education Standards Framework</a>, could encourage this.</p>
<p>Reducing study load is an effective strategy but can have negative consequences for Centrelink support and, in many cases, scholarships. The government could help improve pass rates by further relaxing the <a href="https://www.studyassist.gov.au/support-while-you-study/student-payments">Centrelink requirement</a> that students must study full-time to receive benefits.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/353513/original/file-20200819-14-94ilok.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Illustration of university student dragging a debt ball and chain" src="https://images.theconversation.com/files/353513/original/file-20200819-14-94ilok.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/353513/original/file-20200819-14-94ilok.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=350&fit=crop&dpr=1 600w, https://images.theconversation.com/files/353513/original/file-20200819-14-94ilok.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=350&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/353513/original/file-20200819-14-94ilok.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=350&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/353513/original/file-20200819-14-94ilok.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=440&fit=crop&dpr=1 754w, https://images.theconversation.com/files/353513/original/file-20200819-14-94ilok.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=440&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/353513/original/file-20200819-14-94ilok.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=440&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">If the debt burden on failing students is the issue, relaxing Centrelink rules so they can reduce study loads and pass would make sense.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/2016-graduate-student-loan-icons-crippling-413825836">Shutterstock</a></span>
</figcaption>
</figure>
<p>The proposed 50% fail rule for Commonwealth-supported places seems an overreaction to some extreme cases. The solution to these extremes could be found in the Commonwealth Higher Education Student Support Number (<a href="https://www.studyassist.gov.au/help-loans/your-chessn">CHESSN</a>) and <a href="https://andrewnorton.net.au/2020/08/13/checking-that-students-are-on-track-to-pass-the-governments-proposal/">a better IT system</a>. The Education Department could then police the issue of students enrolling in multiple courses at multiple institutions behind the scenes.</p>
<p>We know students who fail 50% of their units in a semester are a significant minority. If institutions had to justify to the department why they are not excluding these students, the administrative burden would be substantial.</p>
<p>The more serious concern is what such a process would teach students about their ability to recover from failure and make changes in response to feedback and advice. The proposed policy risks adding stress for students who are already struggling with their life load and is likely to punish those who are already disadvantaged.</p><img src="https://counter.theconversation.com/content/144563/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Students who fail units are highly likely to fail again without targeted assistance. But when universities intervene early to support these students, their rate of failure has been nearly halved.
Nadine Zacharias, Director, Student Engagement, Swinburne University of Technology
Rola Ajjawi, Associate Professor, Centre for Research in Assessment and Digital Learning, Deakin University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/144414
2020-08-17T20:12:59Z
2020-08-17T20:12:59Z
Uni student failure rate is a worry, but the government response is too heavy-handed
<figure><img src="https://images.theconversation.com/files/353073/original/file-20200817-16-1vvm3m3.jpg?ixlib=rb-1.1.0&rect=46%2C0%2C5227%2C3372&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/single-sad-student-checking-failed-exam-644598994">Antonio Guillem/Shutterstock</a></span></figcaption></figure><p>In a surprise move, the government has revealed <a href="https://andrewnorton.net.au/2020/08/13/checking-that-students-are-on-track-to-pass-the-governments-proposal/">several new policies</a> to reduce rates of failure in university subjects. If the <a href="https://www.dese.gov.au/job-ready/job-ready-graduates-package-draft-legislation-consultation">legislation</a> passes, it will require universities to:</p>
<ul>
<li>monitor student academic performance more closely</li>
<li>prevent students enrolling in too many subjects</li>
<li>exclude students who <a href="https://andrewnorton.net.au/2020/08/14/should-students-lose-commonwealth-support-for-failing-too-many-subjects/">fail more than half their subjects</a>, except in special circumstances. </li>
</ul>
<p>The problem with the new laws, which include withdrawal of funding for students who fail too many subjects, is they will push universities towards faster, and possibly premature, termination of student enrolments. </p>
<h2>Failing is expensive</h2>
<p>In 2018, <a href="https://app.powerbi.com/view?r=eyJrIjoiYWM2NjRkYTktZGJkNC00MGVkLWJlYjItMGRjNTc3Y2FkNmVkIiwidCI6ImRkMGNmZDE1LTQ1NTgtNGIxMi04YmFkLWVhMjY5ODRmYzQxNyJ9">nearly 17% of subjects</a> taken by Commonwealth-supported students were not successfully completed. The students either failed or withdrew after the census date when they incur a HELP debt. </p>
<p>This lack of subject success is expensive. Exact costs are not published, but taken as a proportion of <a href="https://app.heims.education.gov.au/HeimsOnline/IPInfo/Determination">Commonwealth payments</a> the fail-or-withdraw rate translates into nearly A$800 million in HELP debt and almost A$1.2 billion in subsidies to universities. </p>
<h2>Some fails are avoidable</h2>
<p>Some students fail subjects because, despite their best efforts and those of their teachers, their academic work is not satisfactory. We would worry about academic standards if the pass rate was 100%. But other failed subjects are potentially avoidable. </p>
<p>Sometimes students fail due to academic factors universities can do something about, such as by improving teaching or helping students who are falling behind. </p>
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<strong>
Read more:
<a href="https://theconversation.com/failing-a-subject-isnt-just-the-students-fault-universities-can-and-should-help-126195">Failing a subject isn't just the student's fault. Universities can and should help</a>
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<p>Universities cannot control student life issues such as health, work and family matters. All of these are <a href="https://www.tandfonline.com/doi/full/10.1080/07294360.2019.1664999">reasons students give</a> for failing subjects. But universities can judge whether these issues are temporary or manageable. If so, they are not fundamental obstacles to future academic success.</p>
<p>Other students fail because they are not going to class, handing in essays or sitting tests. They have effectively dropped subjects or their course, but have not officially notified their university. The system then automatically registers HELP debts and fails. </p>
<p>When <a href="https://www.timeshighereducation.com/opinion/universities-must-exorcise-their-ghost-students">La Trobe University examined its records</a>, it estimated a quarter of all fails were by “ghost students” who did not submit the work needed to pass. If these students can be encouraged to formally withdraw earlier, subject fails and HELP debts will decrease.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/more-students-are-going-to-university-than-before-but-those-at-risk-of-dropping-out-need-more-help-118764">More students are going to university than before, but those at risk of dropping out need more help</a>
</strong>
</em>
</p>
<hr>
<h2>The government’s measures to reduce fails</h2>
<p>The legislation has several measures intended to limit ghost enrolments and failed subjects. </p>
<p>Students would not be allowed to enrol in more than double the subjects a full-time student normally takes in a year, unless they had a demonstrated capacity to do so. University policies already prevent major subject overloads, as taking on too much increases the risk of failure. </p>
<p>But some students – <a href="https://www.theage.com.au/politics/federal/no-help-uni-students-who-fail-half-their-subjects-to-lose-taxpayer-support-20200812-p55l18.html">about 2,500 on the government’s figures</a> – enrol in more than one university at once. <a href="https://heimshelp.education.gov.au/resources/TCSI">Upgrading the government’s enrolment IT</a> should help identify and regulate these students.</p>
<p><a href="https://www.legislation.gov.au/Details/F2015L01639/Download">By law</a>, universities must check before enrolment that each prospective student is academically suited to their course. The new law would extend this requirement to the subject level. </p>
<p>How this would work in practice is unclear. With more than eight million subject enrolments a year, checking every one would be a massive exercise. </p>
<p>Focusing on students with prior fails may be sufficient. It would be in line with <a href="https://www.deakin.edu.au/students/studying/assessment-and-results/academic-progress">existing</a> <a href="https://www.uts.edu.au/current-students/managing-your-course/classes-and-assessment/academic-progression/international-student-requirements/academic-progress-and-early-intervention">university</a> <a href="https://my.uq.edu.au/information-and-services/manage-my-program/academic-progress-and-final-results/academic-warnings-and-showing-cause">policies</a> on students who fail half or more of their subjects in a semester. </p>
<p>A <a href="https://grattan.edu.au/report/dropping-out/">2018 Grattan Institute report</a> I co-authored found that, of the 7% of commencing bachelor-degree students who failed all their first-semester subjects, a quarter continued and also failed all second-semester subjects. Future outcomes like that may signal non-compliance with the academic suitability law.</p>
<p>Finally, the legislation would give the government power to deprive universities of funding for students it deems not “genuine”. Genuineness indicators already <a href="https://www.legislation.gov.au/Details/F2019L01699">used in private higher education institutions</a> include whether students are reasonably engaged in the course, whether they have satisfied course requirements and, if the course is online, how many times they have logged on. These provisions target ghost students.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/universities-need-to-train-lecturers-in-online-delivery-or-they-risk-students-dropping-out-133921">Universities need to train lecturers in online delivery, or they risk students dropping out</a>
</strong>
</em>
</p>
<hr>
<h2>Consequences for students</h2>
<p>As general themes, the ideas in the legislation are not inherently bad. Many reflect standard or common practices in higher education. </p>
<p>The problem is that universities have to balance the risks of further fails and HELP debt against the benefits of giving students a second chance. </p>
<p>If the legislation passes, universities will be nervous about being fined for breaching the academic suitability rule and losing funding for non-genuine students. This creates an incentive to end enrolments, possibly prematurely, after one bad semester. </p>
<p>Students who fail more than half their subjects, after taking at least eight in a bachelor degree, <a href="https://andrewnorton.net.au/2020/08/14/should-students-lose-commonwealth-support-for-failing-too-many-subjects/">already face exclusion from their course</a>. But the legislation would limit which factors universities can consider in making this decision. </p>
<p>Universities could take into account failures due to reasons <a href="https://www.legislation.gov.au/Details/F2013C00782/Download">beyond a student’s control</a>, such as their own or a family member’s illness. But universities could not consider general difficulties adapting to university life, or other reasons a student could plausibly have controlled. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/353071/original/file-20200817-14-1gb1gj0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="University lecturer discusses a student's work with them." src="https://images.theconversation.com/files/353071/original/file-20200817-14-1gb1gj0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/353071/original/file-20200817-14-1gb1gj0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/353071/original/file-20200817-14-1gb1gj0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/353071/original/file-20200817-14-1gb1gj0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/353071/original/file-20200817-14-1gb1gj0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/353071/original/file-20200817-14-1gb1gj0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/353071/original/file-20200817-14-1gb1gj0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The provisions of the current bill could lead to students who could succeed with proper support being denied a second chance.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/professor-gives-bad-grade-after-oral-150629666">Adam Gregor/Shutterstock</a></span>
</figcaption>
</figure>
<h2>A different approach</h2>
<p>Patterns of subject failure are worth investigating, to protect students put at unacceptably high risk of further fails and debt. But this task should be handled not by the Department of Education, which would implement these laws, but the <a href="https://www.teqsa.gov.au/">Tertiary Education Quality and Standard Agency</a>. Many subject fails are linked to the course admission, teaching quality and course retention matters that TEQSA already regulates. </p>
<p>TEQSA operates under a “regulatory necessity, risk and proportionality” principle, which lets it take a nuanced approach. Universities that put failing students at high risk of continued poor performance would have to improve their practices. But universities would still be free to consider the complex trade-offs of each individual case, without inflexible rules driving them to one conclusion. </p>
<p>Students should also be made more aware of the census date’s importance. <a href="https://andrewnorton.net.au/2020/08/13/disengaged-and-failing-students-are-an-issue-worth-policy-attention/">A small Grattan Institute survey</a> showed many students did not know what the census date was, or thought they did but gave an incorrect answer. A name change that highlights its significance, such as “payment date”, would encourage students to drop subjects sooner to avoid HELP debt and fails.</p>
<p>Although the government has identified a real problem, its heavy-handed regulation would create unnecessary red tape for universities and exclude students who should get a second chance.</p><img src="https://counter.theconversation.com/content/144414/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Norton works for the Australian National University, which would be affected by the policies discussed in the article. </span></em></p>
Although the government has identified a real problem, its heavy-handed regulation would create unnecessary red tape for universities and exclude students who should get a second chance.
Andrew Norton, Professor in the Practice of Higher Education Policy, Australian National University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/130995
2020-02-20T12:18:00Z
2020-02-20T12:18:00Z
Can you get rid of your student loans by filing for bankruptcy?
<figure><img src="https://images.theconversation.com/files/315570/original/file-20200215-10995-46n5i8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Borrowers looking to eliminate student loan debt through bankruptcy have to clear a series of high hurdles.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/grad-cap-on-cash-royalty-free-image/518338000?adppopup=true">zimmytws/Getty Images</a></span></figcaption></figure><p>Paying back student loans is not an easy thing to do. <a href="https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-student-loans-and-other-education-debt.htm">One out of every 5</a> borrowers with outstanding student loan debt has fallen behind their payments.</p>
<p>There are several ways borrowers can get help to deal with their debt burden. Bankruptcy is the most extreme. In general, the law does not allow you to get rid of student loans through bankruptcy. One exception to the rule is if a borrower can prove that paying back the loans “<a href="https://codes.findlaw.com/us/title-11-bankruptcy/11-usc-sect-523.html">would impose an undue hardship on [them] and [their] dependents</a>.” The threshold for proving that is pretty high. Plus, there’s not a lot of legal guidance on what precisely an undue hardship is.</p>
<p>Not many people try to get rid of student loans through bankruptcy. It could be because they either don’t know its an option or don’t think they will prevail. One study found that <a href="http://dx.doi.org/10.2139/ssrn.1894445">only 0.1%</a> of student loan borrowers who have filed for bankruptcy tried to discharge their student loans. Among those who do try, the success rates are high. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1894445">Nearly 40%</a> of borrowers who challenge their student debt receive at least a partial discharge.</p>
<p>The U.S. Supreme Court has not yet weighed in on what exactly makes for an “undue hardship.” However, most federal courts follow the 1987 Second Circuit decision, <a href="https://scholar.google.com/scholar_case?case=5270362258430051298&q=brunner+v.+new+york&hl=en&as_sdt=3,43">Brunner v. New York</a>.</p>
<p>Under Brunner, borrowers can meet the “undue hardship” exception by showing three things. First, borrowers must show that they can’t – based on their current income and bills – maintain a <a href="https://scholar.google.com/scholar_case?case=5270362258430051298&q=brunner+v.+new+york&hl=en&as_sdt=3,43">“minimal”</a> standard of living if forced to repay. Second, they must show that they will not be able to repay for a “significant portion of the repayment period.” Third, they must show that they’ve made good faith efforts to repay the debt.</p>
<h2>Proving hardship</h2>
<p>Of these three prongs, the first is the most important. Typically, a borrower has to show they have both maximized their income and reduced their expenses to cover only basic needs. </p>
<p>As an example of failure to maximize income, consider the case in which a bankruptcy court ruled against a borrower who had taken on <a href="https://scholar.google.com/scholar_case?case=11052127559752056935&q=in+re+Perkins+2004&hl=en&as_sdt=3,43">debt to attend law school</a>. Although she provided evidence that her mental health made it unlikely that she would ever become a licensed attorney, the court found that, considering her education, she had not pursued other gainful employment, like paralegal work, to earn as much as she could.</p>
<p>Borrowers may find it difficult to prove that they’ve done everything to minimize expenses. Courts have found even a <a href="https://scholar.google.com/scholar_case?case=11592824822440516788&q=318+B.R.+300&hl=en&as_sdt=6,43">monthly cable TV bill as low as US$35 to be excessive</a> in light of unpaid student loans.</p>
<p>A borrower’s age and disability status are also factors a court would consider as influencing a borrower’s expected earning capacity. At the same time, borrowers who <a href="https://scholar.google.com/scholar_case?case=1106211503141415666&q=in+re+little&hl=en&as_sdt=3,43">obtain loans later in life</a> cannot rely on their age as “additional circumstances.” But, if a borrower becomes <a href="https://scholar.google.com/scholar_case?case=8539061308319439307&q=higgins+v.+spellings+2009&hl=en&as_sdt=3,43">“totally and permanently disabled,”</a> the Department of Education must discharge their federal student loans upon application without resorting to bankruptcy.</p>
<p>If borrowers meet the first undue hardship criterion, then they must show that the hardship condition is likely to last for the rest of the repayment period. As a judge explained in a case known as <a href="https://law.justia.com/cases/federal/appellate-courts/ca6/17-8041/17-8041-2019-05-30.html">In re Roberson</a>, because student-loan agreements rely on the borrower’s future income, discharge requires a <a href="https://scholar.google.com/scholar_case?case=12243411048382222886&q=in+re+roberson+%22certainty+of+hopelessness%22&hl=en&as_sdt=3,43">“certainty of hopelessness</a>, not simply a present inability to fulfill financial commitment.”</p>
<p>Finally, the court must evaluate a borrower’s “<a href="https://scholar.google.com/scholar_case?case=5270362258430051298&q=brunner+v.+new+york&hl=en&as_sdt=3,43">good faith</a>” efforts to pay their student-loan debt. Good faith efforts include showing that you’ve been in regular contact with the loan servicer or tried to get your payments suspended for a brief period. Good faith efforts could also include having tried different repayment plans and making some payments on the loan, even if those payments were below the amount owed.</p>
<p>If a court finds you have met all three Brunner criteria, it may grant a full or partial discharge of the student loan. A court could also decide to just <a href="https://scholar.google.com/scholar_case?case=3139218858537953814&q=in+re+miller+2000&hl=en&as_sdt=3,43">relieve a borrower from paying interests or fees</a>. Or, a court could <a href="https://scholar.google.com/scholar_case?case=18176318203022930024&q=in+re+kapinos&hl=en&as_sdt=3,43">let the borrower pay small payments now and bigger payments later</a> with the idea that the borrower will be making more money in the future. </p>
<h2>Other options</h2>
<p>Satisfying all three conditions may be challenging. Other, more accessible forms of relief exist. If the financial strain is temporary, a borrower may be eligible for options known as “deferment” or “forbearance.” Both deferment and forbearance suspend the required student-loan payment for a limited time period but do not get rid of the debt.</p>
<p>In order to qualify for a <a href="https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief/deferment">deferment</a>, you need to meet certain criteria, such as having enrolled in college or being unemployed. <a href="https://studentaid.gov/manage-loans/lower-payments/get-temporary-relief/forbearance">Forbearance</a>, on the other hand, can be requested for a broader range of financial difficulties. Deferments last for as long as the qualifying situation, but a forbearance is limited to 12 months. Deferments must be granted, but a forbearance request can be denied by the loan servicer.</p>
<p>Another option to reduce the monthly payment amount is pursuing an <a href="https://studentaid.gov/manage-loans/repayment/plans/income-driven">income-driven repayment plan</a>. These are typically only available for federal student loans.</p>
<p>Although eligibility differs across <a href="https://studentaid.gov/manage-loans/repayment/plans/income-driven">four different plans</a>, most borrowers are eligible to enter the <a href="https://edfinancial.com/Help-Center/Lower-Payment-Options/Income-Driven-Repayment-Information-Center/Revised-Pay-As-You-Earn-(REPAYE)">REPAYE</a> plan. Each plan bases the monthly payment on income and can lower payments, even to zero dollars in some cases. Under REPAYE, the monthly payment is defined as 10% of discretionary monthly income. Forgiveness for all four plans is offered after making payments for 20-25 years, although borrowers working in the public sector, such as a teacher, or employee at a not-for-profit organization, may qualify for <a href="https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service">forgiveness after 10 years of payments</a>.</p>
<p>You may have heard that most people who apply for public service loan forgiveness <a href="https://www.cnn.com/2019/09/05/politics/rejection-rates-public-student-loan-forgiveness-fix-trnd/index.html">are rejected</a>. While this is technically true, <a href="https://studentaid.gov/data-center/student/loan-forgiveness/pslf-data">government data</a> show that the majority of applicants had not yet completed the required 10 years of repayment, and another quarter of applicants did not correctly file the application. Regardless of the loan forgiveness options, an income-driven repayment plan could lower the monthly repayment amount.</p>
<p>Finally, borrowers may also want to try to negotiate directly with the loan servicer. This may not always prove successful, but lenders can voluntarily accept reduced monthly payments, lower interest rates, or lower lump sum payments up front instead of having borrowers repay the full balance of the loan over time. So it’s worth a shot to call your loan servicer if you are having trouble making payments.</p>
<p>[<em>Insight, in your inbox each day.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=insight">You can get it with The Conversation’s email newsletter</a>.]</p><img src="https://counter.theconversation.com/content/130995/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Brent Evans has previously received funding from the Lumina Foundation to study student borrowing decisions.</span></em></p><p class="fine-print"><em><span>Matthew Patrick Shaw does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Two experts in higher education policy explain the high hurdles that must be cleared to use bankruptcy to escape crushing student loan debt.
Brent Evans, Assistant Professor of Public Policy & Higher Education, Vanderbilt University
Matthew Patrick Shaw, Assistant Professor of Public Policy, Education, and Law, Vanderbilt University, Vanderbilt University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/129859
2020-02-10T13:58:18Z
2020-02-10T13:58:18Z
A college president’s advice to college students of the future: Don’t borrow
<figure><img src="https://images.theconversation.com/files/313402/original/file-20200203-41532-em8htt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">West Texas A&M University Walter V. Wendler stands alongside the SUV he drove on a speaking tour to urge Texas high school students not to borrow too much for college.</span> <span class="attribution"><span class="license">Author provided</span></span></figcaption></figure><p>Back in 2017, I started regularly leaving my office at West Texas A&M University in Canyon, Texas, to speak to high school students in the Texas Panhandle. This past fall, I did the same thing in the South Plains. These two areas are the northern most 46 counties in the state of Texas.</p>
<p>Driving a silver SUV owned by the university, I logged a total of 14,000 miles throughout these two regions over a total of 10 months. I visited 132 high schools with student populations of all sizes.</p>
<p>For instance, in the South Plains tour this past fall, I visited 66 schools that ranged in size from <a href="https://www.lubbockisd.org/lhs">Lubbock High School</a>, where I spoke to 975 juniors and seniors, to <a href="https://www.dawsonisd.net/">Dawson High School</a>, where I spoke with all 12 high school students in ninth through 12th grades.</p>
<p>No matter where I went – and no matter if I spoke with students and families that had a concrete plan for college and others that were less certain – I heard concerns about the cost of higher education.</p>
<p>And my message and response was always the same: “Do not borrow money to attend West Texas A&M University (or any university) for the first two years. If you must borrow, attend community college, but don’t borrow a penny for community college either. Pay as you go.” And I should have added: Live with your parents rent-free as long as possible.</p>
<h2>Planning for the future</h2>
<p>You might think I was simply on a recruiting tour for the university where I serve as president. Yes, of course, I hoped that my visits helped make the university more appealing. My primary purpose, however, was not recruiting students, but helping them determine a long-range plan to enable them to become what I call “<a href="http://walterwendler.com/?s=noble&submit=Search">noble citizens</a>” ready to work, engage, think and vote.</p>
<p>Of course, you can still be a noble citizen and have a lot of debt. It’s just a lot more difficult. If you are saddled with debt, you’re less able to contribute to the community, at least financially, or purchase a home. As I spoke with students, I shared a few statistics to help illustrate the point.</p>
<p><a href="https://www.marketplace.org/2019/09/30/70-of-college-students-graduate-with-debt-how-did-we-get-here/">Seventy percent of college students</a> graduated with debt in 2019 — on <a href="https://www.marketplace.org/2019/09/30/70-of-college-students-graduate-with-debt-how-did-we-get-here/">average, US$30,000</a>.</p>
<p>Some of those graduates will still be paying off their student loans decades later, when they get Social Security checks – either voluntarily or by having those checks garnished. Of <a href="https://www.aarp.org/money/credit-loans-debt/info-2017/student-loans-debt-repayment-retirement.html">Americans</a> over 60, 2.8 million have student loans. While 73% of those are cosigners paying for children or grandchildren, the rest are students paying off their own education loans.</p>
<p>Additionally, a growing number of <a href="https://www.cbsnews.com/news/student-loan-debt-seniors-owe-billions-in-student-loan-debt-this-will-follow-me-to-the-grave/">aging Americans</a> have college debt that they will not pay back before dying. </p>
<p>Default rates for borrowers over 65 are nearly 40%, according to the <a href="https://www.cnbc.com/2018/11/14/more-older-people-are-bringing-student-debt-into-their-retirement.html">Consumer Financial Protection Bureau</a>.</p>
<p>Pell Grants, which are federal grants to help low-income students to pay for college, once <a href="https://www.marketplace.org/2019/09/30/70-of-college-students-graduate-with-debt-how-did-we-get-here/">covered 79% of tuition and fees in 1975 but only covered 29% by 2017</a> — a downhill slide caused by escalating costs and easy loans.</p>
<h2>Mixed results on borrowing</h2>
<p><a href="https://www.educationnext.org/benefits-of-borrowing-evidence-student-loan-debt-community-college-attainment/">Some studies</a> suggest borrowing yields an increase in credits earned and academic performance. Despite those benefits, other research shows that student loan debt can have a negative, long-term effect on people <a href="https://hbr.org/2019/04/student-debt-is-stopping-u-s-millennials-from-becoming-entrepreneurs">financially</a> and <a href="https://academic.oup.com/ej/article-abstract/122/563/1094/5079467?redirectedFrom=fulltext">emotionally</a>.</p>
<p>I told the students if they must borrow, to never borrow more than 60% of their anticipated starting salary of the first job. This is consistent with what I call the “<a href="http://www.thecb.state.tx.us/about-us/60x30tx/">60% Rule</a>,” which a state higher education agency developed to make sure students don’t borrow more than their degree is worth.</p>
<p>For example, if someone wanted to teach in a small Texas community with a $40,000 starting salary, they should not borrow more than $24,000 to attain a bachelor’s degree. Similar – although more lenient – advice can be found in <a href="https://www.forbes.com/sites/lawrencelight/2019/10/04/when-does-student-debt-make-sense-and-when-doesnt-it/#4e596bb71370">Forbes</a>, which urged borrowers to never borrow more than their expected first year salary. (For information about the expected salary for a particular job, check the <a href="https://www.bls.gov/ooh/">U.S. Bureau of Labor Statistics</a>.)</p>
<p>In urging students not to take on too much student debt, I also highlighted other paths – aside from college – to <a href="http://walterwendler.com/2018/05/noble-citizenship/">noble citizenship</a>: military service, certification programs or family businesses.</p>
<h2>A duty to inform</h2>
<p>I recognize the responsibility of university leadership to point out the challenges for students and families when borrowing for education. It is difficult for middle-income families to pay the increasing costs of a college education. Informed borrowing is the key issue for students. The need is highlighted for students who are first in their family to attend college and may accept the advice that any college degree is worth whatever it costs. It is not true. And, it is an unfair burden for university leadership to place on students.</p>
<p>But if students borrow for college, in my view, they should be aware that they are possibly being sucked into what I like to call a troubling triangle of treachery.</p>
<p>One side of the triangle is represented by elected officials who <a href="https://www.insidehighered.com/news/2018/09/26/growing-number-democrats-run-free-college-pushing-issue-mainstream">encourage everyone to go to college</a>.</p>
<p>The second side is represented by lenders, who – in my view – do little to assess an individual’s ability to repay a student loan. If a student borrows to enroll in a program, limits placed on amounts borrowed are <a href="https://www.nerdwallet.com/blog/loans/student-loans/much-borrow-college/">quite high</a> when federal and private loans are combined. And they tend to treat all college degrees, and by inference, employment opportunities as equal. Yet, the employment marketplace reveals that is not the case.</p>
<p>The third side is represented by university leadership, which – in my view – has not done enough to let students know the pitfalls of borrowing.</p>
<p>A student’s indebtedness is eventually their own responsibility. Debt responsibility will not disappear for the student – or for parents who are helping them. It’s their responsibility too.</p>
<p>Just ask the 44 million Americans, many of whom <a href="https://www.npr.org/2019/03/13/681621047/college-completion-rates-are-up-but-the-numbers-will-still-surprise-you">did not graduate</a>, who owe <a href="https://www.forbes.com/sites/zackfriedman/2019/02/25/student-loan-debt-statistics-2019/#30f6f067133f">$1.5 trillion in student loan debt</a>.</p>
<p>The tour was a learning experience. The value proposition of American higher education is changing. I saw it in the eyes of 20,000 students across 14,000 miles. </p>
<p>[ <em>You’re smart and curious about the world. So are The Conversation’s authors and editors.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=youresmart">You can read us daily by subscribing to our newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/129859/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Walter V. Wendler does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
West Texas A&M University President Walter Wendler set out to visit high school students throughout the Texas Panhandle and the South Plains with a simple message about student loans.
Walter V. Wendler, President, West Texas A&M University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/123571
2019-10-11T13:04:15Z
2019-10-11T13:04:15Z
Income-based repayment becoming a costly solution to student loan debt
<figure><img src="https://images.theconversation.com/files/296569/original/file-20191010-188792-1exzvfx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Student loan debt is approaching the $1.5 trillion mark.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/mini-graduation-cap-on-us-money-101980843?src=rkIOXz08QvTfQTaA-CwD4Q-1-1">zimmytws/Shutterstock.com</a></span></figcaption></figure><p>When Congress established the income-driven repayment for federal student loans back in 2007, it was touted as a way to <a href="https://www.congress.gov/congressional-record/2007/09/07/senate-section/article/S11241-7">help student loan borrowers save money</a> by capping monthly payments at a certain percentage of a borrower’s income.</p>
<p>Since then, student loan debt has risen from US$500 billion to where it is now <a href="https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2019Q2.pdf">approaching the $1.5 trillion threshold</a>. The federal government expects to <a href="https://www.budget.senate.gov/download/fact-sheet-gao-student-loan-investigation">forgive over $100 billion</a> of the $350 billion in loans under income-driven repayment as of 2015. That means taxpayers are picking up the bill.</p>
<p>This has put the entire income-driven repayment system in jeopardy as there have been proposals by congressional Republicans and the Trump administration to <a href="https://www.urban.org/urban-wire/prosper-act-changes-math-student-loan-borrowers">reduce the amount of loans forgiven</a> and <a href="https://www.cnbc.com/2019/03/11/trumps-budget-proposal-would-cancel-public-service-loan-forgiveness.html">end the Public Service Loan Forgiveness program</a>, which is <a href="https://theconversation.com/what-is-public-service-loan-forgiveness-and-how-do-i-qualify-to-get-it-106138">a special repayment option</a> for people in public service fields. So far, these proposals have failed to become law, but expect to see them put forth again in the future as concerns about program costs continue to grow.</p>
<p>As a <a href="https://scholar.google.com/citations?user=qrYZ8cwAAAAJ&hl=en&oi=ao">researcher</a> who specializes in higher education policy and financial aid, here are some of my insights on how income-driven repayment works, why its future is now in jeopardy and some potential options that can protect the most vulnerable borrowers while also helping taxpayers.</p>
<h2>How it works</h2>
<p>Six months after they leave college, students who took out a federal student loan are automatically <a href="https://studentaid.ed.gov/sa/repay-loans/understand/plans/standard">put into a repayment plan</a> with fixed monthly payments over 10 years. This is similar to how mortgages and car loans work. However, repayment can often be a major burden for student loan borrowers who take low-paying jobs or struggle to find employment after college.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/296570/original/file-20191010-188783-1e09e1q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The pressure is on for federal student loan borrowers to pay back their loans shortly after they leave college.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/concentrated-young-african-american-female-student-1100063891?src=0RfHdGHAyV0QJbMrf_D_pg-1-95">Damir Khabirov/Shutterstock.com</a></span>
</figcaption>
</figure>
<p>To address this issue, Congress and the Department of Education created <a href="https://studentaid.ed.gov/sa/repay-loans/understand/plans/standard">a number of options</a> during the George W. Bush and Barack Obama presidencies that tied student loan borrowers’ payments to their <a href="https://www.nerdwallet.com/blog/loans/student-loans/discretionary-income-calculator/">discretionary income</a>, that is, how much money they have left after meeting their basic needs. </p>
<p>Most students who take out federal loans today qualify for a plan called <a href="https://www.consumerfinance.gov/ask-cfpb/what-is-pay-as-you-earn-paye-how-do-i-know-if-i-qualify-en-1555/">Pay As You Earn</a>. This plan – known as PAYE – limits monthly payments to 10% of a student loan borrower’s discretionary income for up to 20 years. </p>
<p>There are two requirements. First, student loan borrowers must <a href="https://studentloans.gov/myDirectLoan/ibrInstructions.action">fill out paperwork each year</a> with their income to be eligible for income-driven repayment. In recent years, <a href="https://www.chronicle.com/article/Thousands-Fall-Out-of/229031/">more than half of federal student loan borrowers</a> have failed to complete the paperwork on time, putting them back into the standard plan. Second, if any part of the loan is not repaid within 20 years, the remaining balance is forgiven. But this forgiveness counts as income and taxes must be paid on it in that year. </p>
<p>Borrowers who work for government agencies and certain nonprofit organizations can qualify for <a href="https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service">Public Service Loan Forgiveness</a>, which limits payments to 10% of discretionary income for as little as ten years with no income tax penalty. So far, just <a href="https://www.nasfaa.org/news-item/19700/Education_Department_Releases_New_Data_on_Public_Service_Loan_Forgiveness_Program">1% of borrowers who applied for forgiveness</a> have had their loans forgiven, but this rate will likely increase over time as the Department of Education gets better at managing the forgiveness process.</p>
<h2>Problems abound</h2>
<p>In some respects, the biggest problem with income-driven repayment is that too many people are taking advantage of it.</p>
<p>The share of students who reduced their loan balances by even one dollar within five years of leaving college <a href="https://robertkelchen.com/2018/11/01/some-good-news-on-student-loan-repayment-rates/">has fallen from 67% to 51% over the last five years</a> as low monthly payments under income-driven repayment mean that many borrowers’ balances are growing instead of shrinking. This has <a href="http://www.gao.gov/assets/690/681064.pdf">increased the projected price tag of these programs</a> to the federal government well beyond expectations.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/296542/original/file-20191010-188802-ktwytp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Students with $100,000 or more in student debt are the biggest users of income-based repayment.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/college-graduate-large-tuition-bill-vertical-151974746?src=FFCNkXMJlfRZfNasg_Mfwg-1-45">Burlingham/Shutterstock.com</a></span>
</figcaption>
</figure>
<p>These programs tend to be used more frequently by borrowers with large debt burdens – especially those who have more than $100,000 in debt. <a href="https://studentaid.ed.gov/sa/about/data-center/student/portfolio">Data from the Department of Education</a> show that students who owe $100,000 or more make up just over one-third of all outstanding student debt but nearly half of all borrowers in income-driven repayment.</p>
<p>Trying to pay back $100,000 in student loans is certainly not easy, and I can speak from experience thanks to my wife’s law school debt. But most of the borrowers with large student debt burdens tend to be <a href="https://www.urban.org/urban-wire/which-households-hold-most-student-debt">professionals with graduate degrees and reasonably high incomes</a>. Many of the borrowers who have the greatest difficulty repaying their loans <a href="https://www.usnews.com/news/data-mine/articles/2017-11-07/federal-data-show-39-million-students-dropped-out-of-college-with-debt-in-2015-and-2016">never earned a college degree</a> and thus did not see substantial financial benefits from their investment.</p>
<h2>What can be done?</h2>
<p>As a researcher of student financial aid, my concern is that policymakers might throw the proverbial baby out with the bathwater and get rid of the entire income-driven repayment system.</p>
<p>In my view, a better way to stop borrowers with $100,000 in debt from getting most of the benefits is to limit the amount forgiven. This can be done by capping the amount of loans that can be repaid through income-based repayment or extending the repayment term.</p>
<p>President Obama proposed limiting Public Service Loan Forgiveness <a href="https://www.brookings.edu/research/the-coming-public-service-loan-forgiveness-bonanza/">to the first $57,500 in loans</a>, although this did not pass Congress. His administration also implemented a program that required graduate students to <a href="https://www.insidehighered.com/news/2015/05/01/federal-rule-making-panel-oks-plan-expand-income-based-repayment-program">pay for five more years than undergraduate students</a>.</p>
<p>The savings from requiring higher-income borrowers with large loans to repay more of their loans can then be used to help the most vulnerable borrowers. Students who dropped out of college after a semester or two could see their debt forgiven more quickly and without having to pay additional income taxes. This may be a tough political sell, but this could also encourage students – especially those who are the first in their families to attend college – to give college a shot.</p>
<p>Some of the money could also be used to support larger Pell Grants to reduce the need for borrowing in the first place. Cutting the total amount of loans forgiven in half would allow for an increase of about 20%, or $1,200 per year, in the maximum Pell Grant, which is <a href="https://studentaid.ed.gov/sa/about/announcements/pell-2019-20">$6,195</a> for the 2019-2020 academic year. This would help cover much of the tuition increases over the last decade and reduce student loan debt.</p>
<p>[ <em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/123571/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert Kelchen does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
The income-based repayment plan that lets borrowers pay back student loans based on their salaries is in jeopardy. The problem? The program proved too popular.
Robert Kelchen, Associate Professor of Higher Education, Seton Hall University
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/121724
2019-08-28T12:57:15Z
2019-08-28T12:57:15Z
5 things to consider before taking out a student loan
<figure><img src="https://images.theconversation.com/files/289488/original/file-20190826-8874-1ezxo22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">About 1 in 10 student loan borrowers default on their student loans.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sad-desperate-man-empty-wallet-being-538636882?src=2xgH4sTaA9KBQ1TxyWVfFQ-3-58">pathdoc/Shutterstock.com</a></span></figcaption></figure><p><a href="https://nces.ed.gov/fastfacts/display.asp?id=372">16.9 million</a>.</p>
<p>That’s how many students are going to college at the undergraduate level this fall. Of that number, roughly half – <a href="https://nces.ed.gov/pubs2019/At_a_Glance_508C.pdf">46%</a> – will take out federal student loans. It’s a decision that could bring certain rewards – not the least of which is a well-paying job – but it can also come with serious economic consequences. </p>
<p>The average debt for the class of 2017 was an estimated <a href="https://ticas.org/wp-content/uploads/legacy-files/pub_files/student_debt_and_the_class_of_2017_nr.pdf">US$28,650</a>. And not everyone is able to make steady payments on their student loans. The federal government reports that <a href="https://archive.org/stream/studyofamericani00briguoft/studyofamericani00briguoft_djvu.txt">10.8%</a> of student loan borrowers who entered repayment in 2015 have since defaulted.</p>
<p>As <a href="https://scholar.google.com/citations?user=Ng3rnu4AAAAJ&hl=en&oi=sra">researchers</a> who specialize in how money shapes the way people <a href="https://scholar.google.com/citations?user=FCdKIxsAAAAJ&hl=en&oi=sra">make education decisions</a>, here are five tips for students and families thinking about how to pay for college.</p>
<h2>1. File for federal aid early using old tax returns</h2>
<p>Even though this seems like a routine thing to do, <a href="https://www.savingforcollege.com/article/millions-of-students-still-fail-to-file-the-fafsa-each-year">more than 2 million</a> people do not file a Free Application for Federal Student Aid, better known as the <a href="https://studentaid.ed.gov/sa/fafsa">FAFSA</a>. Sometimes parents and students don’t know about this form. Some parents may be unwilling to provide their tax return information, which is used to determine eligibility for student aid. </p>
<p>Filing the FAFSA can be particularly important for students whose families have little or no money to pay for college. In these cases, students may be eligible for the federal <a href="https://studentaid.ed.gov/sa/types/grants-scholarships/pell">Pell Grant program</a>, which is awarded to students with significant financial need and does not have to be paid back. Filing the FAFSA may also be required for other financial aid that students get from the state or the college they plan to attend.</p>
<p>As of 2015, students can use their <a href="https://www.nasfaa.org/ppy_toolkit">“prior-prior year” tax return</a> to complete their FAFSA. For instance, a student filing a FAFSA in 2019 can use information from their 2017 federal tax return. This allows students to complete the FAFSA as early as possible to understand and compare aid packages and financial options, instead of having to wait on more recent tax returns. FAFSAs for the 2020-2021 school year can be filed in October 2019, giving students more time to understand and compare financial aid packages and options.</p>
<h2>2. Understand different types of loans</h2>
<p>Different loan options include <a href="https://studentaid.ed.gov/sa/types/loans">federal loans</a>, private loans from banks or credit cards.</p>
<p><a href="https://studentaid.ed.gov/sa/types/loans/federal-vs-private">Federal loans</a> are typically your best option. This is because federal loans often have low fixed rates. Federal loans also have provisions for <a href="https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance">deferment</a>, a time period where your loans do not accrue interest. They offer a grace period before the repayment period begins and <a href="https://studentaid.ed.gov/sa/repay-loans/deferment-forbearance#forbearance-eligibility">forbearance,</a> which is a time period where you might be allowed to postpone paying if you’re having trouble making payments. However, during forbearance, your student loan monthly balance continues to accrue interest. Federal loans also come with <a href="https://studentaid.ed.gov/sa/repay-loans/understand/plans">various repayment programs</a>, such as income-based repayment.</p>
<p>You may see options for subsidized and unsubsidized loans. Subsidized loans are funded by the government and offer better terms. They are based on need and do not accrue interest while you are still in school. Unsubsidized loans may be available regardless of your financial need, but they accrue interest as soon as the loan is distributed to you.</p>
<p>Private loans tend to have higher interest rates, although rates for these loans and credit cards can fluctuate. Private loans also do not allow for participation in government repayment programs.</p>
<h2>3. Contact your financial aid adviser</h2>
<p>Call the financial aid office to figure out who is your assigned financial aid adviser at the school you plan to attend. This person will be able to help you better understand your institutional aid package.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/289284/original/file-20190823-170946-7k5hsm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/289284/original/file-20190823-170946-7k5hsm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/289284/original/file-20190823-170946-7k5hsm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/289284/original/file-20190823-170946-7k5hsm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/289284/original/file-20190823-170946-7k5hsm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/289284/original/file-20190823-170946-7k5hsm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/289284/original/file-20190823-170946-7k5hsm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/289284/original/file-20190823-170946-7k5hsm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Meeting with a financial aid adviser is key.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/middle-aged-experienced-businesswoman-company-ceo-1285131160?src=CezXJitVWXxIxUCLsclJBw-1-4">fizkes/Shutterstock.com</a></span>
</figcaption>
</figure>
<p>Review the different sources of aid listed in your financial aid award letter. Some sources of aid may be institutional grant aid, which is essentially financial aid offered from the college you plan to attend.</p>
<p>Other sources include federal loans and federal work-study. Federal work-study is neither a grant nor a loan. Instead, <a href="https://studentaid.ed.gov/sa/types/work-study">this program allows students to defray education expenses by working on campus</a>. </p>
<p>Some schools package loans, such as Parent PLUS loans, directly in the award letter to you and your family.</p>
<h2>4. Understand the impact of debt</h2>
<p>Taking out loans for college can be an investment in your future, especially when loan money allows you to work less and to focus more on coursework to complete your degree in a timely manner. Research consistently shows that a college degree is <a href="https://cew.georgetown.edu/cew-reports/3pathways/">worth the cost</a>. On average, college graduates <a href="https://trends.collegeboard.org/sites/default/files/education-pays-2016-full-report.pdf">earn far more</a> over the course of their professional career than peers who didn’t get a college degree.</p>
<p>However, students taking out loans should be conscious of how much they are borrowing. Unfortunately, <a href="https://ir.library.louisville.edu/jsfa/vol44/iss2/3/">many students do not know how much they owe</a> or <a href="https://muse.jhu.edu/article/558257/summary?casa_token=23rVjnUrQMoAAAAA:b0ddrK3mrz_dEd-csu6hUvJP_LwpGE6ik7_rf4liNwjJbjQKvRcDSZz8xqLXNjPa98gNh0M2-A">how student loan debt works</a>. </p>
<p>Access the <a href="https://nslds.ed.gov/nslds/nslds_SA/">National Student Loan Data System</a> to learn more about your personal federal loans. <a href="https://studentaid.ed.gov/sa/sites/default/files/fsawg/datacenter/library/DLPortfoliobyDelinquencyStatus.xls">Over 1 million borrowers</a> in the U.S. are currently in default on their student loans after they failed to make monthly payments for a period of about nine months. Defaulting on student loans can have serious consequences that hurt your credit and prevent you from receiving financial aid in the future. The federal government may also garnish a portion of your wages or withhold your tax refund. You can also lose eligibility for loan deferment and forbearance and ruin your credit score.</p>
<p>Additionally, taking on a significant amount of debt can have other long-term implications. For instance, debt can hurt your ability to <a href="https://www.journals.uchicago.edu/doi/abs/10.1086/684587">purchase a home</a> or <a href="https://journals.sagepub.com/doi/abs/10.1177/0038040716685873?journalCode=soea">move out of your parents’ home</a>.</p>
<h2>5. Know your repayment options</h2>
<p>In thinking about your repayment options, there are many factors that may influence how much money you might make after college, <a href="https://www.luminafoundation.org/resources/the-economic-value-of-college-majors">including your major and career path</a>. Since your future salary can <a href="https://journals.sagepub.com/doi/abs/10.1177/0002716217703969">influence your ability to pay back loans</a>, it is important for borrowers to have a sense of earnings across different fields and industries. Yet, many college students <a href="https://www.sciencedirect.com/science/article/pii/S0304407611001151">do not have an accurate idea</a> of how much money they can expect to earn in the careers they are considering, although this information can be found in the federal government’s <a href="https://www.bls.gov/ooh/">Occupational Outlook Handbook</a>.</p>
<p>There are several options designed to help borrowers repay their loans, including plans based on income level and loan forgiveness programs.</p>
<p>To make loan payments more manageable based on your income, consider an <a href="https://studentloans.gov/myDirectLoan/ibrInstructions.action">income-driven repayment plan</a> based on your loan and financial situation. Borrowers need to <a href="https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven">apply for income-driven repayment plans</a>. <a href="https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven">Income-driven repayment plans</a> allow borrowers to pay somewhere between 10% and 20% of their discretionary income toward their student loans each month, rather than the predetermined payment based on loan size.</p>
<p>Borrowers might also research loan forgiveness programs offered by their state or for certain professions. These types of programs may be available that provide students funding while in college, or that forgive a portion of loans if graduates enter jobs where qualified individuals are needed, such as the <a href="http://www.ncpublicschools.org/program-monitoring/loan-forgiveness/">teaching profession</a>.</p>
<p>Another option might be the Public Service Loan Forgiveness program offered by the federal government to students working in public service jobs, such as teaching or not-for-profit organizations. However, the <a href="https://www.politico.com/story/2019/07/11/teachers-union-sues-betsy-devos-1583187">vast majority</a> of people who apply for Public Service Loan Forgiveness have been denied.</p>
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<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Roughly 1 in 10 student loan borrowers end up in default on their loans. A scholar of higher education offers tips on how to make that less likely.
David J. Nguyen, Assistant Professor of Higher Education and Student Affairs, Ohio University, Ohio University
Katie N. Smith, Assistant Professor, Seton Hall University
Monnica Chan, Ph.D. Candidate, Harvard University
Licensed as Creative Commons – attribution, no derivatives.