Government Responds to Student Loan Crisis With Billions in Debt Relief
Student loan crisis has been decades in the making
Students and graduates in the United States have been in a generational student loan crisis that presently ensnares about 40 million Americans in some $1.75 trillion of debt.
Since 1980, the inflation-adjusted cost of four-year public and private college has nearly tripled, but federal support has not kept up. Pell Grants used to cover about 80 percent of public college costs for students from working families. Today, they only cover a third, the White House said in August. That has left many low- and middle-income Americans with college aspirations with no choice but to take out loans.
Advocates argue that mounting student debt is an issue that reverberates through society, and this kind of relief will provide benefits to the economy as a whole, not only those who are in debt. Once former debtors can begin their upward climb towards greater financial security, the rest of the economy will reap the rewards of having more upwardly mobile consumers, the idea goes.
There’s also the issue of which groups are most hurt by historic levels of student debt. Overall, this debt is spread unequally, with the burden being especially heavy for Black and Hispanic borrowers, who often have less family help to lean on due to centuries of racial wealth inequalities.
Government relief plan
In late August, President Biden announced a loan relief plan that had been eagerly awaited since he first announced a version of it during his campaign for the presidency. The plan would forgive $10,000 for federal borrowers. This was the minimum that youth voters and their advocates — a key Democratic constituency — had said they would accept.
Biden set that $10,000 level himself during the 2020 Democratic presidential primary, as he tried to compete with more progressive candidates who wanted to forgive even more. Once in office, his administration made clear it preferred that Congress write legislation on debt forgiveness, which Biden would then sign.
But with Congress deadlocked on the issue, the White House eventually used its executive powers, including the powers delegated to the Department of Education by past legislation, to tackle the issue alone.
To make the relief program more effective for those who needed it most, the plan extended the amount of debt forgiveness to $20,000 for low-income borrowers who went to college on Pell Grants. This also would have more of an effect on minority borrowers, who make up the bulk of Pell grantees.
Another piece of the loan relief program included creating a repayment plan that would keep accumulated interest from rising uncontrollably. This new income-driven repayment plan would also cap monthly payments at 5% of their discretionary income.
To get student loan payments flowing again and counter criticism that loan deferment was no longer necessary, Biden also issued the eighth and final extension of the pandemic-era student loan payment freeze through the end of the year.
The administration’s plans to forgive such large swathes of federal debt have bred opposition among Republican lawmakers, and Americans who feel they are footing the bill for others’ education.
This vocal opposition contributed to the government scaling back some of its plans for debt forgiveness. In the last week of September, it was suddenly announced that debt not held by the Department of Education will not be eligible for relief.
Debt Relief Timing Raises Questions About Political Implications
Biden announced the debt relief program in late August, less than three months before the midterm elections in early November. While it has been discussed for most of his term in the legislative and executive branches, it wasn’t until elections were looming that the administration acted decisively on the issue.
The decision also came after Biden experienced months of low polling numbers. Though this was largely driven by economic issues such as inflation, there was a sense that Biden had failed to live up to key campaign promises, including addressing racial bias in police departments, ending the pandemic, or overseeing an orderly withdrawal from Afghanistan.
Most of these commitments were either already too late to change, such as the chaotic and deadly end to the war in Afghanistan, or were held up in Congress, like policing reform.
All of this made it even more necessary for the White House to boost flagging support among key constituencies by showing it would follow through on its commitments.
In the month after announcing the debt relief plan, Biden saw his overall approval rating rise to 41%, according to a Reuters/Ipsos poll. While other factors are certainly in play, one can’t ignore how widely debt relief will be felt.
The far-reaching nature of the debt relief is expected to fuel enthusiasm among base voters and give independent voters reason to take another look at the party in November.
Although relief is structured to focus on lower-income borrowers, it’s also broad enough to cancel loans for households that make up to $250,000 ($125,000 is the cutoff for individual filers).
This will potentially make it popular both among those least able to repay loans, as well as among millions of other student debtors who may not have needed this kind of relief but will still benefit from it.
Democrats’ base includes beneficiaries of relief program
At the end of the day, young people and minorities make up much of the Democrats’ base. So while various aspects of debt forgiveness will impact voters beyond these groups, these are the constituencies Biden and Democrats need to turn out to have a chance in the midterms.
But debt relief or not, getting young people to the polls is always a challenge.
Historically, younger voters do not turn out to vote in the same numbers during midterm elections as they do during presidential elections. There are of course exceptions, such as in 2018, when overall voter turnout rivaled that of some presidential elections.
This was fueled at least in part by frustration with the Trump administration, which many young voters, racial minorities, and others saw as a threat to the political system and their well-being.
However, Biden has his own issues with younger voters beyond their traditional reluctance to turn out for midterms.
The president has also had trouble getting young voters to support him more generally. Many favored more progressive voices such as Bernie Sanders or younger and more diverse politicians in the presidential primaries over two years ago.
According to a New York Times/Siena College poll taken this summer before the debt relief announcement, only 32% of those aged 18-29 had a very or somewhat favorable view of the president.
Youth Enthusiasm is Higher Than Average, Motivated by Debt and Dobbs, But Still No Guarantees for Democrats
In contrast to the pre-relief survey, a poll from the last week of September conducted by YouGov and American University found that almost 70% of respondents aged 18-34 rated their enthusiasm about the midterms between 5 and 10, with 10 being “extremely enthusiastic.” More than one-third — 35 percent — rated their enthusiasm at an 8 or higher.
This suggests that in the month since the debt relief announcement, young voters have found reason to rally to Democrats, or, less likely, that Biden’s personal approval rating is almost entirely decoupled from voter enthusiasm.
It’s important to note that there’s also enthusiasm among young voters to vote against Biden’s agenda: 21% of respondents ages 18-34 said they want want Republican majorities in the House and Senate.
However, with almost twice as many young voters interested in casting ballots for Democrats as for Republicans, it appears that there will be some political ‘debt relief dividend’ for Biden and his allies.
But student loan relief is only one of many issues that are animating young voters. A major motivator has also been the Supreme Court’s Dobbs decision that struck down the nationwide right to abortion access, according to polling from NexGen, a progressive advocacy group.
The Dobbs decision is also likely to slow or undo many of the gains women have earned in the job market over past decades, according to our analysis. The threat of this backslide makes it a particularly potent tool for motivating voters who disagree with the decision. (Here is our reproductive healthcare guide for college students trying to navigate the new environment.)
These overlapping polls show that while forgiving debt may have been a good political play, there’s no guarantee it will overshadow other issues such as reproductive rights and the economy. There’s also no guarantee that it will certainly lead to Democratic wins, as enthusiasm ratchets up on both sides.
However, overall polling as of end-September generally gives Democrats a stronger chance of favorable results in November than they had before the debt announcement. A lot can happen in the coming month, but so far at least, it seems that debt relief could be both good policy and good politics from the Democrats’ point of view.