Campus reacts to student loan forgiveness proposal

By Andrew Cormack     9/13/22 11:14pm

Last month, President Joe Biden’s administration announced a major federal student loan forgiveness plan expected to provide loan relief to 43 million people. It will also be one of the costliest new federal programs of the administration.

The proposal comes as university tuition skyrockets, and Americans become increasingly indebted after graduating college. Since 1980, the average annual cost to attend a four-year college has increased ninefold. Over the past year, Rice increased tuition and fees 3.5% to $69,963.

As part of the proposal, the U.S. Department of Education will cancel up to $20,000 of debt for Americans with Pell Grants and up to $10,000 of federal student debt for non-Pell recipients. To have their loans forgiven, borrowers must annually earn less than $125,000 ($250,000 if married). It is not necessary to have earned a degree to be eligible. In addition to forgiving debt, the proposal also extends the pandemic pause on loan payments through December 2022.

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According to the 2023 U.S. News and World Report, the median federal loan debt from Rice borrowers after graduation for their undergraduate degree is $12,000, and 4% of students take out private loans.

Current Rice undergraduate, graduate and alumni with federal student loans could be eligible under the program for forgiveness. Rice alumna Sierra Beckstrom (McMurtry ‘20) will see the remainder of their $10,851 in student loan debt forgiven in the plan, they said. Beckstrom is now working as a high school English teacher, who said that while Biden’s plan isn’t as robust as they would have hoped, they are happy to see that something is being done.

“I earned about $250,000 in scholarships and financial aid during my four years at Rice, but, of course, that was not quite enough to cover everything,” Beckstrom said. “As a [first generation, low income] graduate, I am so entirely grateful that I am eligible for student loan forgiveness.” 

The New York Federal Reserve Bank calculated that the dollar value of the plan’s forgiveness component will have a price tag of over $320 billion. If all eligible borrowers apply, the true cost experienced by the Federal government will be significantly higher. Estimates that include the $20,000 forgiveness for Pell Grant recipients and the tax-exempt status of the forgiven loans put the total cost closer to $1 trillion dollars. 

Some students and graduates celebrate the plan as a step to decrease the burdens of paying for college. However, in recent weeks a small but growing group has expressed concern for the ramifications of the sweeping proposal. It comes at a time when total student loan debt has surpassed $1.7 trillion, and the Biden administration has already canceled $32 billion in federal student loans. The recent proposal is significantly larger – and costlier – than previous forgiveness programs. Some doubt debt forgiveness’s effectiveness and question the impact on the federal deficit and the long-run economic consequences. 

Zach Bethune, a professor of economics at Rice, is concerned about the potential unintended consequences of the forgiveness plan and believes that it would have been more efficient to improve one of the Department of Education’s current policies.

“It makes more sense to work within existing programs and improve than one-time debt forgiveness,” Bethune said.

This most recent forgiveness proposal is not entirely novel; the Department of Education currently administers an existing debt forgiveness program through Income Driven Repayment. However, the IDR is widely viewed as a policy failure and has been mismanaged according to a March Government Accountability Office report. 

According to Bethune, it is still too early to determine whether the policies are effective.

“The bigger concern is that the current debt forgiveness policy does not seem to correct the inefficiencies associated with government subsidized student loans,” Bethune said. “More work has to be done for anyone to claim that the current plan is a net positive or negative.”

Grace Kneidel, a Brown College senior, said that while loan forgiveness doesn’t encourage responsible repayment, she appreciates that the proposal provides the most help to lower-income people. 

“I understand the argument that people who make a certain amount of money, say, more than $80k, should be more responsible in paying off their debt and therefore the government shouldn’t forgive their loans,” Kneidel said. “That said, I also think we should just be happy that the majority of people with their debt canceled by this proposal make under $80k.”

Other students are more concerned about the long term economic implications of the proposal. Joseph Barbour, a McMurtry College senior, believes that the proposal will lead to more tuition increases in the future. 

“I am against student loan forgiveness,” Barbour said. “[Because] it signals that any tuition increase will be covered by forgiveness and will cause universities to raise their rates to even more insane degrees, making university less accessible.” 

Ben Murdoch, a Lovett College senior, sees the already excessive costs of higher education as a reason to forgive loans right now.

“I think student loan forgiveness is a great idea given that the cost of higher education is so high right now and acts as a barrier to many working and middle class families,” Murdoch said. “The upper income cutoff for loan forgiveness of $125,000 a year per individual may be a bit high, but overall I think that loan forgiveness is a good idea and will benefit a lot of people who could use the help.”

The Office of Financial Aid could not be reached for comment.

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