The May 1 deadline for student-loan payments is weighing on Americans as Biden’s affordable-college promises crumble
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Mr. Loan-ly... President Biden campaigned on promises of student-loan forgiveness and free college — so far, they haven't panned out. Last week, first lady Jill Biden admitted that her push for free community college is over (for now). The plan’s been scrapped from the massive “Build Back Better” spending bill that Dems are struggling to pass. Broad loan forgiveness could be next.
- Biden has forgiven $15B worth of federal student loans for 675K borrowers — or 1% of the $1.7T outstanding student debt owed by 40M+ Americans. Biden’s campaign promise was at least $10K in loan forgiveness for each borrower.
- Biden has extended the pause on loan repayments — initially suspended by Trump in March 2020 — three times. Thanks to the pauses, 40M+ borrowers are saving $5B/month.
- But payments are set to resume May 1 for federal loans, which make up 90% of total student debt.
The price is not right... After a nearly two-year pause, Americans will have to start repaying $400/month, on average, in student loans, while inflation has hit a 40-year high. Rising wages have not kept up with rising prices, and loans could make it even harder to pay the bills. For context: 12% of public-college grads still owe more than $40K. And nearly half of graduates of for-profit schools have defaulted. Meanwhile, two-thirds of community-college grads leave with zero debt.
Loan forgiveness isn’t the underlying problem… the cost of US colleges is. The average cost of a private college is $38K/year; for public colleges, it’s $23K for out-of-staters. Average tuition and fees have nearly doubled since 2010. Broad loan cancellation would cost the US gov’t $60B/year in interest alone, and require big tax hikes to recoup. Since college is so pricey, loans would have to be forgiven all over again in an unsustainable cycle. Last month, Education Secretary Miguel Cardona laid out plans to make college more affordable — but didn’t mention broad forgiveness. Meanwhile, college enrollment keeps sliding.