What about all the student loan forgiveness we already have?
President Biden is on the verge of deciding to forgive anywhere from $10,000 to $50,000 for millions of borrowers holding federal student loan debt. Whether it can actually happen will hinge on a U.S. Education Department memo expected to hit the president’s desk any day now, but that feels irrelevant. Public perception is that mass forgiveness in some form is coming, and the only details are by how much and for whom.
Widespread relief for millions of struggling borrowers may make for a great political rallying cry, but it has also been around since at least 2007. According to federally-collected data, around one third of all borrowers in repayment today are currently enrolled in plans that cap their payments based on their income and will eventually forgive any balances at some point. Around 4 out of 5 of these borrowers have also signed up for the government’s Public Service Loan Forgiveness (PSLF) program.
By almost all standards, student loans are the most affordable debt most Americans carry. To suddenly want to up and cancel hundreds of billions of dollars in taxpayer-funded loans is really more a quiet admission that more than a decade of federal policy and billions of dollars already spent on programs that were supposed to do the same thing have largely failed.
If politics is the art of compromise, the price for immediate student loan forgiveness should be scrapping existing similar federal student loan relief programs that are failing both student borrowers and taxpayers. Put those dollars to work in new or existing programs where evidence tells us that they are helping make college more affordable for more people who need it to be.
Critics will say that programs like income-driven repayment or PSLF do work in principle but simply fail in practice. Too many borrowers struggle to complete forms correctly or on-time, or they receive unclear guidance from servicers and end up in the kind of “fine print” morass that’s led so few PSLF loans to actually be forgiven.
These are legitimate concerns, but servicers still work under, and are held accountable by, the U.S. Department of Education. In the end, the federal government still owns the performance of its student loan repayment policies, not the private sector agencies it contracts with to do the processing.
To be clear, there is a place in federal policy for targeted student loan debt forgiveness, and there is probably more bi-partisan support amongst economists and politicos for some kind of forgiveness than people realize.
What there should not be a place for is policy that lets poor-performing federal programs simply continue being funded because they work in principle. If income-driven repayment or PSLF achieved what its proponents said it would, then there would be no need for the discussions being had today.
If the president finds he actually does have the authority to forgive some level of student loan debt, Congress should take any action on his part as permission to scrutinize, and potentially dismantle existing federal programs that are failing to do the same thing. Ad hoc forgiveness should not be a consequence-free substitute for responsible fiscal policies that make paying for college more affordable.