The Biden-Harris Debt Relief Plan

Exploring student loan demographics

Sep 11, 2022

In this blog, I address a variety of topics of interest to students and young practitioners of finance, mostly centered around financial institutions and corporate finance and relating to current events reported in the financial press. I also write about what I call “civic financial literacy”, addressing matters of public interest and public policy with a financial angle which seems not to be well understood. Student loan debt is an example of the latter, which also happens to be a subject of great interest to current and recent college graduates and very much in the news. This is my fourth post on the topic of student loan debt; you can find the others here, here and here.

The White House recently announced its much anticipated student loan debt relief plan, The Biden-Harris Student Debt Relief Plan, which has proven to be every bit as controversial as anticipated. The media is full of commentary and just about everyone I have talked to recently seems to have an opinion on the Plan, not always well developed or well informed. As with many other controversial issues of public policy, how we think about student loan relief often seems to turn more on personal experience, partisan political preferences and media-influenced narratives (with a large dose of confirmation bias), than it does on an objective factual understanding of the world in which we live or a considered analysis of the policy pros and cons. Which of course is not surprising, particularly in the current environment. But perhaps we should expect more from an informed citizenry, the media and our elected representatives.

On a personal level my initial reaction to the Biden-Harris Plan has been skeptical, reflecting widely held concerns about inter-generational and cross-sectional fairness, a sense that the Plan attacks symptoms rather than the root causes of a broken US higher education system, and unanswered questions about cost, moral hazard and legal authority. When challenged to explain and support my views, however, I discovered that I really did not know as much about student loans or the Biden-Harris Plan as I thought I did. And so I have spent some time researching this matter, collecting facts and new perspectives which I will share here with all of you.

So here goes:

What exactly is in the Biden-Harris Plan? My guess is that very few people with strong opinions on the Biden-Harris Plan will have actually read the relevant White House and DOE announcements, but this would be a good place to start to help level set the discussion. You can find the press releases here and here.

The most publicized feature of the Biden-Harris Plan is the one-time forgiveness of outstanding student loan debt of up to $20,000 for students from low-income families (Pell grantees) and up to $10,000 for all other eligible borrowers.. The loan forgiveness provision of the Plan applies only to federal (not private) student loans disbursed prior to June 30 of this year. To qualify for loan relief, borrowers must have individual incomes of less than $125,000 ($250,000 for married couples and heads of households), levels that were set at the 95th percentile of the taxpaying population. Federal student loans for all forms of post-secondary education qualify for relief, including loans for education received at community colleges, for-profit vocational training programs, four-year public and private universities and graduate programs. Loan forgiveness is not limited to graduates of these programs; students who did not complete their programs or have not yet done so are also eligible. The amount of loan forgiveness will not be taxable for federal income purposes, but may be taxed at the state level.

Student loan forgiveness (cancellation) is only one aspect of the Biden-Harris Plan, however, and it may or may not turn out to be the most consequential part. Other provisions include an extension of the covid-related payment deferral on federal student loans from September 30 to December 31, 2022; proposed changes to federal Income-Based Repayment Plans (IBRPs), which will significantly reduce monthly payments for many qualified borrowers and cancel all remaining loan balances after 10 instead of 20 years; proposed changes to the Public Service Loan Forgiveness program, making it more broadly available and less burdensome administratively to eligible public service workers; and new regulatory and enforcement actions targeting educational institutions with consistently poor student loan outcomes (high student debt, low completion rates and low graduate incomes). Other ongoing Biden-Harris student debt initiatives not included in the Plan seek to lower the cost of attending two-year community colleges and to increase the maximum size of Pell grants awarded to students from families with low household incomes.

Missing from the initial Biden announcements was a detailed estimate of the Plan’s cost to the federal government, which is expected to be released in the near future. I have included below cost estimates released by various third parties, along with preliminary estimates from the Biden Administration, which vary widely for reasons that I do not yet fully understand.

For answers to more detailed questions about the mechanics of the Biden-Harris Plan, I encourage you to read this NY Times piece, What You Need to Know About Biden’s Student Loan Forgiveness Program.

Please comment further on the Income Based Repayment Plan. The IBRP revisions proposed in the Biden-Harris Plan may over time turn out to be as or more consequential (and costly) than the more widely publicized one-time student loan cancellation program, although the details are still subject to public comment and possible revision. The Biden-Harris Plan propose a number of significant changes to current federal IBRPs, which will significantly reduce the total amount of loan repayments made by low and middle-income borrowers. The proposed rule changes would increase the number of eligible participants and would cut in half—from 10% to 5% of discretionary income—the amount that borrowers have to pay each month on their undergraduate loans. It would also raise the amount of income that is considered ‘non-discretionary’ and therefore excluded from the calculation of required loan repayments. Finally, the rule would forgive any remaining loan balances (including principal and unpaid interest) after 10 years of payments (instead of the current 20 years) for borrowers with original loan balances of $12,000 or less.

In its initial press announcement, the White House gave three examples of ‘typical’ low to moderate income borrowers—a construction worker, a public school teacher and a nurse—who would each have their monthly payments reduced by 70-80% under the proposed revisions to the federal IBRPs, with any remaining loan balance then cancelled after 10 instead of 20 years. And while the dollar amounts involved in these examples were not large in absolute terms, the savings would likely be quite significant (even perhaps transformational) for some of these folks.

The cost estimates associated with the IBRP vary greatly, in part due to uncertainties relating to the number of borrowers who will become eligible for these programs in the future and the amount of money future students will borrow, knowing that their repayment obligations will be limited if things don’t work out for them financially.

How much student loan debt is currently outstanding? As of March 2022, there was about $1.75 trillion of outstanding US student loan debt (principal plus accrued but unpaid interest), of which $1.6 trillion was federal debt. (The balance comes from private student loans.) These are the nominal (face) amounts owed by student loan borrowers, not market values reflecting expected loss on default or the current level of bond yields and credit spreads.

To put the outstanding student loan number in perspective, consider that the total amount of outstanding US consumer credit is around $16 trillion, 70% of which is residential mortgage debt. The balance consists of student loans ($1.7trn), auto loans ($1.5trn), credit card debt ($900bn) and other personal debt ($500bn). And so while student loans are an important part of the overall consumer credit picture they are far from the whole story. Many student loan borrowers are also burdened with other forms of consumer debt, some of which may be even more onerous than their student loan debt. For more on this topic, see my recent post on Consumer Credit.

How many people have outstanding student loans? Our nation’s $1.75 trillion of student loan debt is owed by about 48 million borrowers, representing less than 18% of the total US adult population (260mm). This means that over 82% of the US adult population (aged 18+) does not currently have any outstanding student loan debt, either because they never had any (an estimated 75%) or because they have paid it all back (ca 25%). Keep in mind here that close to 40% of US adults have not received formal education beyond high school, including almost 10% who did not complete high school.

How much money do today’s college students borrow to get an undergraduate degree? The short answer is “a lot”. And the average student loan balance has gone up rapidly in recent decades, as tuition and other educational cost increases have far outpaced the amount of public grant money available. At public 4-year universities, recent graduates with student loans had an average (mean) debt at graduation of around $33,000; at private not-for-profit universities the average was $36,000; and at private for-profit schools the average was $43,000. And the percent of students who graduate with loans is also high: roughly 66% at public universities, 50% at private non-profit universities and 85% or more at for-profit schools. According to DOE estimates, the average undergraduate today will leave school with $25,000 in student loan debt. (This lower number reflects the impact of students who do not incur loan debt.)

The 10% or so difference in average loan amounts for graduates (with loans) at public and private not-for profit universities should not surprise us, as the cost of attendance at private schools is generally higher than at public schools. But this impact is somewhat offset by the larger amounts of grant money available at well-endowed private universities. For qualified students, it may now be cheaper (after grants) to attend some of the most expensive (but well endowed) private universities in the country than it is to attend top ranked (but less well endowed) public universities

Now look again at the average loan balance for recent graduates of private for-profit schools. The ‘for profit’ sector is a particularly shady segment of the US higher education system known more for taking student’s money (funded with federal loans) than for providing students with valuable educational experiences and post-graduation employment skills. At some of these for-profit schools, federal student loan dollars represent 90% of more of total revenues and student graduation rates are as low as 25%. The students at these schools comprise only 10% of total university enrollment but account for one-third or more of all student loan defaults. The story of for-profit universities in this country is a national disgrace which has gone largely unaddressed for decades and has been facilitated in large part by the big growth in federal student loan programs, lax government regulation and of course by the unscrupulous behavior of some of the owners. (Remember Trump University?).

And how much is owed on average by all borrowers with outstanding student loans? This is a very different question that was asked immediately above, as it includes in the debtor pool all former student borrowers who still have loan balances outstanding, not just recent graduates. The pool therefore includes current and former students who attended (but did not necessarily graduate from) community college and vocational training programs as well as students in undergraduate universities and in graduate and professional degree programs. And it includes those who finished school some time ago and have (or have not) paid down some but not all of their initial loan balances over time. Those who have paid back all their loans will have dropped out of the pool.

As noted above, the total US student loan debt of $1.75 trillion is owed by 48 million individuals (45mm of whom have federal loans). And so the average (mean) amount of all student loan debt outstanding is around $36,500 per individual. The average amount of federal debt owed is about $1,000 less, with private borrowers carrying much higher loan balances.

But these are the mean amounts, not the medians, and the distribution of outstanding student loan balances is highly skewed, with most student borrowers owing relatively little and a minority owing quite a lot. The median student loan balance for all borrowers is around $20,000—45% below the mean. This means that half of the borrower pool (24mm) owes less than $20,000 and in fact one third of borrowers (16mm) owe less than $10,000. At the higher end of the distribution, roughly 25% of student loan borrowers owe between $40,000 and $100,000 and another 7% owe more than $100,000, some of whom have been out of school for quite some time.

To put these numbers in perspective, recall that the maximum amount of loan cancellation under the Biden-Harris Plan is capped at $20,000 for Pell grantees and $10,000 for all others. The number of Pell grantees is estimated at 27 million, constituting 60% of the total number of federal student loan borrowers, with another 16 million borrowers subject to the $10k cap. Note also that an estimated 20 million borrowers (45% of the pool) owe less than the cap amounts and will qualify to have 100% of their loan balances cancelled.

What else do we know about the demographics of student loan debt? We know that student loan debt balances vary significantly by type of educational institution attended and degree received. In a cohort of recent graduates, the average amount of student loan debt incurred by the holders of associate degrees was $14,000 compared to $23,000 for bachelor’s degree recipients, $40,000 for those with master’s degrees, $70,000 for those with doctoral degrees, and $140,000 for those with professional degrees. In dollar terms, about half of all student loan debt outstanding is owed by those who attended graduate school. The number of students enrolled in these various programs also differs greatly, with about 60% of the total (11mm students) enrolled in 4-year universities, 30% (6mm) in community colleges and less than 10% (under 2mm) in grad school. The number of students who earn graduate degrees each year (1mm) is about half that who earn bachelor’s degrees (2mm), due I suspect to the proliferation of one-year masters programs (and the relatively low on-time completion rates for undergraduates).

Outstanding student loan debt also varies with the age of the borrower, reflecting a variety of factors. If we look first at the age distribution by number of borrowers, we see that 21% of today’s borrowers (including current students) are aged 25 or less, 44% are between the ages of 26 and 39, and over 33% are aged 40+ (including 5% of borrowers over the age of 65). The age distribution weighted by outstanding loan amounts is somewhat different (as is the presentation of the data, unfortunately), reflecting changing loan incurrence and repayment patterns over time. Only 16% of the currently outstanding student loan debt is owed by recent graduates (excluding current students) under the age of 25. The vast majority of student loan debt is owed by older individuals: 33% of the total by those aged 25-34, 32% by those aged 35-49, and 20% by those aged 50+ (including many senior citizens).

Women constitute about 58% of student loan borrowers, broadly in line with their share of university enrollments. But female student borrowers have an average student loan debt that is roughly 10% higher than their male peers and they take an additional two years on average to pay off their student loans, reflecting significant continuing gender differences in chosen career paths and lifetime incomes.

Among recent college graduates, fewer than 45% of Asian students took out any federal student loans, much lower than for Whites (68%), Hispanics (70%) and Blacks (85%). Looking at the total population, over 30% of Black families currently hold some amount of student loan debt, compared to just 20% for White families and less than 15% for Hispanic families. The amount of money borrowed and the loan amounts currently outstanding also differs by race, with Black families owing a median student loan debt of $30,000, compared to $23,000 among White families and $18,000 among Hispanic families.

Of the total federal student loan borrower population, about 60% (27mm) are Pell grant recipients from low-income families. Two-thirds of these students come from families with annual household incomes of less than $30,000 and half come from families with incomes below $20,000. (In comparison, the median US household income is around $65,000 and the mean is closer to $100,000.). Pell Grants once covered nearly 80 percent of the cost of a four-year public college degree but now only cover only a third, with increased federal student loans making up much of the difference.

How much student loan debt is currently in default? Historically, the percentage of all student loan debt in default at any given time has varied widely with the economic environment (and other factors), but until very recently seems generally to have been in the range of 10-20% of the total outstanding. At the mid-point of this historical range (15%), the amount of student loan debt in default today would equate to $265 billion. Because the US government has issued covid-related moratoriums on federal student loan payments in effect for much of the past two years, the total amount of student loan debt in default today is only half or so of the historical average, about $125 billion owed by more than 7 million borrowers representing about 15% of the total borrower pool. But of course this number would have been expected to increase over the coming years after expiration of the covid-related payment moratoriums (now extended to December 31), absent the impact of the Biden-Harris loan forgiveness plan.

Even in a more normal environment, however, we expect cumulative default rates to grow over time as more people miss payments, as ‘delinquent’ loans turn into ‘defaulted’ loans, and as the balances due on unpaid loans grows with compounding interest. Typically, 10% or so of new graduates default in the first 12 months of repayment and 25% default within their first five years of repayment, although many students eventually resume payment of at least some amount on previously defaulted (perhaps restructured) loans.

Default rates are highest for students who attended private for-profit universities, community college or vocational training programs. Default rates are lower for those who attended public university and lowest for those who attended private non-profit universities. And default rates are much lower for students who graduate than for those who drop out. About one-third of all student loan borrowers did not complete their course of education, leaving school with ‘debt but no degree’.

In evaluating default rates by borrower cohort, we should keep in mind that not all students are equally likely to borrow or to borrow similar amounts. For example, for-profit university borrowers default at twice the rate of community college borrowers (52% versus 26%), but because for-profit students are more likely to borrow, the rate of default among all for-profit university students (including non-borrowers) is nearly four times that at community colleges (47% vs 13%). And as noted above, the average amounts owed by student borrowers at for-profit universities is much higher than at community colleges.

In thinking about the financial impact of student loan defaults, we should distinguish between the related concepts of loan ‘delinquency’ (one missed payment), loan ‘default’ (continued delinquency) and realized or expected loss on default (what % of the face loan amount remains uncollected over time). Unfortunately, I have not been able to find much data on historical or expected loss on default (as opposed to default rates), but this is really important information which would be helpful to have in evaluating the cost and impact of the Biden-Harris Plan. Keep in mind here that lenders have no recourse to collateral on student loans (unlike residential mortgages and auto loans) and so collection or recovery rates are likely pretty low on many defaulted loans.

Under the Biden-Harris Plan, how much debt will actually be forgiven and what will be the ultimate cost to the US Treasury? Ah, now we come to the heart of the matter for some critics of the Biden-Harris Plan. As I write, the Biden Administration has not released its detailed cost estimates for the Plan, and we simply do not know with any degree of certainty what the Plan will ultimately cost the US Treasury. The Biden Administration has put out initial cost estimates of $240 billion for loan forgiveness and another $120 billion for the balance of the Plan (primarily the IBRP). Third party estimates are higher, at $360 billion ($500bn including the IBRP) from the Committee for a Responsible Federal Budget (CRFB) and $500 billion (up to $1,000bn) from the keepers of the Penn Wharton Budget Model. (See links here, here and here).

But why the wide disparity in estimates? What is it we don’t know? What are the X factors?

Let’s address just the loan cancellation cost estimates, leaving the IBRP for another time. Under the announced Biden-Harris Plan, we know the maximum amount of debt that will be forgiven for each eligible individual participant: $20,000 for 27mm Pell grantees and $10,000 for the 16mm others. But these are the maximum individual loan cancellation amounts, and many eligible borrowers in each category have much smaller loan balances outstanding. In fact, one-third of the total (15mm borrowers) owe less than $10,000 and in many cases much less. We do not know how many eligible borrowers will actually participate in the loan cancelation program, or which ones, although it would seem reasonable to assume high participation rates at least among those with large debt balances. And finally, we do not know what the net cost of loan cancellation will be once we factor in some counter-factual assumption for expected loss on default. (If we cancel the balance owed on a loan in default, with a low probability of any future payments, one can argue that the ‘cost’ of this particular loan cancellation is very low.)

But let’s play with some numbers and see where we get to, acknowledging that we are making assumptions which may well prove to be wrong along with our cost estimates. First let’s assume 100% participation among the 43mm eligible borrowers. Let’s also assume that the average (mean) loan amount cancelled is $10,000. In this case, the total face amount of forgiven debt would be $430 million, representing just over 25% of the $1.6 trillion of total outstanding federal debt. If we incorporate a 10% haircut for expected loss on default (nonpayment), the net cost to the US Treasury of cancelling this $430mm of debt would be $387 million, which is broadly in line with the CRFB estimate.

If however we assume that only 75% of the eligible borrowers participate, reduce the average loan cancelation amount to $9,000 and increase our loss on default estimate to 15%, we come up with a net cost of $247 billions, in line with the initial White House (DOE) cost estimate.

At $500 billion, the Penn Wharton estimates of the cost of loan cancellation are much higher than either the CRFB or Biden estimates. I have no idea how they came up with this number, but note that if we assume 100% participation and take no haircut for expected loss on default, the average implied loan cancelation amount is over $11,600 which is well above our previous assumptions (which may have been wrong). But once we incorporate a 10% haircut for loss on default, the implied loan cancelation amount rises to almost $13,000 which seems hard to reconcile with the data on outstanding loan balances. And this is assuming 100% participation, which may be unrealistic.

Numbers and narratives. I am aware that much of this post may read like one big data dump, with all those confusing numbers on outstanding loan balances, total borrowers, graduation and default rates, and demographic differences between and among various student borrower cohorts. My purpose in collecting this information was initially to educate myself on the basic facts underlying the student loan situation in this country and see how these facts comported with what I thought I already knew. And having done this, and discovered much that I did not know, I thought the data was interesting enough to share it with all of you. (Lucky you!)

I am aware, however, that raw numbers and ‘facts’ rarely move people to reconsider firmly held personal views on controversial social and political matters like student loan debt relief. But sometimes stories do, regardless of how well grounded they are in fact. And so let me present you with two simple (even simplistic) student loan narratives and invite you to consider how focusing on one narrative vs the other might (or might not) impact your views of the Biden-Harris Plan.

In narrative one, let’s focus on the sorry state of the Columbia University MFA Film graduates highlighted in a recent WSJ article, Financially Hobbled for Life (which I wrote about in a prior post). As you may recall, a recent cohort of students at this prestigious university spent five years pursing their graduate film degrees only to complete their studies with a median (not mean) debt of $180,000, median incomes (two years post-graduation) of only $30,000 and very little prospect of ever repaying off their student loans or even making full interest payments on their loans. And while the number of MFA film graduates in this country is quite small, a similar narrative can be crafted around the millions of undergraduate (and some graduate) students who leave school with huge debts, not much in the way of employment-related human capital, and the prospect of decades of debt repayment difficulties to come.

In narrative two, let’s look instead at the two million or so single mothers enrolled in various post-secondary educational programs. These women are far more likely to be poor (and persons of color) than the overall pool of students and they are far more likely to attend community colleges or for-profit universities. These single mothers have to borrow heavily to finance their educations, while also taking care of their children and finding work (generally poorly paying). And while these single mothers generally borrow relatively small amounts of money in absolute $ terms, this is in large part because their drop-out rates are so high (75% in some studies). Not surprisingly, these single mothers tend to have very low incomes even when they do graduate and they default on their student loan debts at extraordinarily high rates (over 50% in some cohorts). And while 2mm single mothers is only 10% or so of he total student population (hardly a small number), we can create a similar narrative for many of the 7+mm students who attend community college (over 30% of the total), particularly those who do not graduate.

Both of these narratives are ‘true’ in the sense that they describe significant numbers of real people with real problems, and both narratives highlight clear (but different) failings in the market for (and financing of) US higher education. Of course neither narrative accurately describes the totality of the US student loan debtor population, or the US student loan debt ‘problem’, but neither does any other single narrative I can think of.

But how does focusing on one or the other narrative influence our thinking about the merits of the Biden-Harris Plan?

The Biden-Harris Plan is clearly targeted much more to the single mother/community college cohort than it is to the MFA Film or similar graduate student cohorts. It is designed to cancel on a one-time basis (?) relatively small amounts of debt for very large numbers of borrowers, concentrated at the lower end of the US economic distribution. But it also provides at least some much needed relief for 95% of the total student loan borrower pool, with 100% loan forgiveness for ca 20mm individuals, even if it only cancels a relatively small amount of the total debt currently owed by those with the largest personal loans. But keep in mind that many current and future low to moderate income borrowers will also benefit significantly from the proposed revisions to the federal Income Based Repayment Plans, which will cut their monthly and total loan repayments significantly

Final thoughts. I have been working on this post for a few days now, and my head is truly spinning, as most likely is yours if you got this far in your reading. (Congratulations if you did!) And after all this work, I can say with some confidence that I now have a better understanding of the demographics of US student loan debt, more empathy with the financial plight of millions of financially stressed student loan borrowers, and a greater appreciation of why this issue is so important to those on the ‘progressive left’. But I still have significant concerns about aspects of the Biden-Harris Plan, as I suspect do many of you.

So what do I like and dislike about the Biden-Harris Plan?

Let’s start with the ‘likes’, or at least those parts of the Plan that I am prepared to let slide. I do not have a strong view on extending the covid moratorium on student loan payments for another three months, which strikes me as perhaps unnecessary but also relatively inconsequential. I have larger concerns about some aspects of the proposed revisions to the federal Income Based Repayment Plans, but as a philosophical matter I am more supportive of the social insurance impact of IBRPs than I am of wholesale retroactive debt forgiveness programs. (Further comments below). I am intrigued by the efforts of the Biden Administration to lower the cost of community college for all, and I would like to see more students encouraged to pursue this option in lieu of or in preparation for a 4-year university degree program. And I whole-heartedly agree that large portions of the for-profit segment of the US ‘higher’ education industry are a national disgrace which warrants much tougher and more consistently applied regulatory and enforcement actions, perhaps even jail time for some of the worst offenders. (I won’t name names here, but I understand that at least one of these for-profit sponsors is already in some legal jeopardy, and I don’t mean Betsy DeVos.)

But I do have serious concerns about the loan cancellation portion of the Biden-Harris Plan, as I suspect do many of you. No, I don’t like the optics of yet another government bailout of borrowers who got themselves too deeply into debt. And no, I don’t love the idea of cancelling hundreds of billions of dollars of one particular form of debt (federal student loans) for a select minority of the US adult population, those who went to college. And no, I don’t like the legal precedent set by this sort of bold executive action taken under the pretext of a purported ‘national emergency’ (covid) which has now largely passed and in any event had very little to do with our current student loan problem. (The payment moratoriums largely dealt with that matter, and I think rightly so.)

No, what really troubles me about the Biden-Harris Plan is its underlying premise, which seems to be that our national student loan problem is simply a matter of too many people leaving school with too much student loan debt, most notably those who leave school with ‘debt but no degree’. And that this problem can be easily fixed if the federal government simply cancels the currently outstanding debt and perhaps in the future replaces some portion of student loan debt with bigger public subsidies, more federal grants and/or periodic debt cancellations. But is this really what is wrong with the US higher education system—a simple matter of too much student loan debt and not enough grant money or other forms of public subsidy?

No, I don’t think so. It seems to me that the US higher education system has failed millions of students over several generations and that this problem has in recent years gotten worse not better, exacerbated by the increased availability of subsidized federal student loan financing. Each year many young people make what appear to be unwise and even imprudent financial decisions to spend (invest) several years of their lives and thousands or tens of thousands of dollars of mostly other people’s money on educational programs of questionable quality or from which the students themselves are ill prepared to benefit or even complete.

But why do so many students do this?

They do this in large part because of the widely touted but largely misunderstood financial benefits of a college eduction, which are real but which accrue disproportionately to certain segments of the overall college population and prove to be largely illusory for large numbers of college students. Yes, a college degree is still a financially worthwhile investment ‘on average’ (and even for the median college graduate), but millions of students experience quite different outcomes, most notably those who fail to graduate, who go to low performance schools or who select the wrong majors even at top quality (and very expensive) institutions. Many college students (and their parents) seem not to understand these basic facts, and neither the universities, our government nor the providers of public student loan financing seem keen to explain it to them.

I am concerned that until we begin to address this fundamental problem of misaligned expectations and excess investment in uneconomic educational programs, then even well-intentioned ‘solutions’ like the Biden-Harris Plan may run the risk not only of failing to fix the underlying problems in our higher educations system but also of making the problems worse for future generations of students and taxpayers.

And that would truly be a shame.

Links:

The Biden-Harris Student Debt Relief Plan Explained, US Department of Education, August 2022

Fact Sheet: The Biden-Harris Plan, White House Publication, August 2022

Biden’s Student Loan Forgiveness Plans: What You Need to Know, NY Times, August 26, 2022

Student Loan Debt Statistics 2022, Education Data Initiative, June 2022

The Looming Student Default Crisis is Worse than we Thought, Brookings, January 2018

Student Loan Default Rates, Educational Data Initiative, December 2021

A Demographic Look at Who has Student Loan Debt, Lending Tree, June 2022

Educational Attainment Data, US Census Bureau, February 2022

Two Big Questions About Student Debt Relief, Krugman, NY Times, August 25, 2022

Biden’s Half-Trillion Dollar Student Loan Forgiveness Coup, WSJ Editorial, 8.25.22