Living in the Red - Main Feature

Living in the Red:

An Examination of Student Debt Relief

Since August 24th, 2022, the Student Debt Relief Package announced by President Biden and his administration has been one of the most highly debated topics in the country. Making headlines across every news outlet, having spotlights on political comedy shows like Last Week Tonight with John Oliver and The Daily Show with Trevor Noah, and widely debated among citizens across all social media platforms; this type of mass forgiveness has never before been seen in this country and could be a monumental shift in how we think about the funding of higher education and in the lives of those approved for the program. As countless individuals have met this initiative with applause, an equal contingent have voiced their dismay for the program and continue to question its potential economic fallout. Somewhere in all this noise there are assuredly answers to the pressing questions posed by both sides of the debate, and while this piece will attempt to bridge that gap—weighing the pros and cons of Student Debt Relief—things will be missed. Allow me to briefly break the fourth wall and address you directly; I am in no way an expert in economics or politics

and will be writing this piece utilizing a couple months of intensive research and by polling those who work in the higher education system to gather opinions on the subject. I am also one of the individuals whose life would be greatly impacted by this program, but my goal and hope is to put all biases aside and create a feature that lives wholly in the facts from all sides. With this issue being so directly linked to the membership of our organization, an investigation and analysis of the information being provided is pertinent to being aware of opinions, feelings, or struggles within our brotherhood.

Before diving into the various ways that student debt relief could be beneficial or harmful to our country and its citizens, it is pertinent to track the route to the announcement. First gaining mainstream attraction following the September 2011 Occupy Wall Street protests, which protested income inequality, the wealthy, and their financial institutions. Led by activists “representing 99 percent of Americans,” this movement sparked the Occupy Student Debt Campaign.

The Debt Collective, a union for debtors, called for the abolition of all student debt, in addition to the implementation of free college when student debt surpassed $1 trillion in April 2012. As the movement dwindled in media coverage, another storm was brewing in the years to come. In 2015, students from Corinthian Colleges went on the nation’s first student debt strike, stemming from A U.S. Department of Education investigation which found that the school falsified its public job placement rates and misrepresented information to students. In June of that year, all Corinthian student debt was cancelled. As the 2020 presidential elections ramped up, the debate of student debt relief gained a level of attention unseen before. Democratic candidates Sen. Elizabeth Warren, D-Mass. and Sen. Bernie Sanders, I-Vt. put the issue at the forefront of their campaigns. Warren's plan called for the U.S. Secretary of Education to immediately cancel up to $50,000 of debt for 95% of all borrowers, while Sander’s demanded the erasure of all outstanding federal student debt and wanted to make two- and four-year public colleges tuition- and debt-free. As we know now, the road ended at the announcement of forgiveness up to $10,000 for individuals making less than $125,000 a year and married couples making less than $250,000 a year. Additionally, the student loans of income-eligible individuals who received Pell grants would be reduced by up to $20,000.

Who will be impacted by Student Debt Relief? There has been much back and forth over who will truly be impacted by this program. Pulling from a September article published by the Census Bureau, we can get a picture of the demographics who will benefit. This study utilizes information based on the Survey of Income and Program Participation (SIPP), which provides statistics about debt balances as of December 31, 2020. Due to the pandemic policies allowing borrowers to temporarily pause payments without interest, this information remains mostly unchanged. The plan to reduce student loans by $10,000 would completely wipe out balances for 29.0% of those with student debt, according to the 2021 SIPP data, benefiting certain demographic groups more than others. The demographic groups which were found to be most impacted are Black and Hispanic individuals, and women as a whole. Typically earning less than men and more likely to have student debt and owe more, women may have a harder time paying off loans. Estimated to have some of the largest reductions in the percentage with any student loans from the $10,000 relief plan: Black and Hispanic women would drop 5.4 and 4.7 percentage points, respectively. Individuals with advanced degrees are expected

to experience some of the smallest reductions, varying from 1.6 to 3.2 percentage points across race and ethnic groups. The most likely reason for this being higher incomes making them ineligible for loan forgiveness. Experiencing some of the smallest reductions, White men are expected to drop roughly 2.4 percentage points.

The first con to examine is the issue of fairness. This is a multifaceted critique that addresses how the purposed relief is unfair for a variety of reasons. First and foremost, this program is unfair to those who have paid off their loans already, receiving no benefit or compensation for the years they spent paying off their loans. Paired with them are all the students taking out loans in the years to come. Because the Biden Administration’s plan only applies to loans taken out prior to 2022, there will be a whole new generation of students with no option to apply for the same opportunity. Stepping away from individualization, transferring this debt from individuals and families to the federal government and ultimately to taxpayers is seen to be a large deterrent for many naysayers. A college education can be seen as a private good, benefiting only the individual holding the degree and earning the degree holder about a million dollars more in annual income over a lifetime; therefore, its cost should also be privately funded. Nathan Ptak, Illinois-Springfield ’21, believes this for himself and others, remarking, “My debt, my problem and we shouldn’t flip it to the taxpayers.” This idea can be unsettling to blue collar workers and families across the country, believing loan forgiveness to be a reward to well-educated, wealthy professionals—doctors, lawyers, and corporate CEOs—who made the chose to pursue a degree, and in some cases, to attend expensive universities.

Acting in opposition to aspects of the fairness critique, the first pro is the enormous benefit relief will have on minority groups and begin chipping away at the racial wealth gap. Women, Black, and Hispanic college students borrow at higher rates and larger amounts than White borrowers, and carry those debt loads much longer. In The Appeal, the economist Marshall Steinbaum argues that student debt exacerbates racial inequalities in four ways: one, the racial wealth gap means minority families have less funds to provide support for their children attending college; two, labor-market discrimination means people of color have to be more credentialed to get the same opportunities as their white counterparts; three, the credit market is more discriminate to people of color; and four, students of color are more likely to attend less-resourced institutions and predatory colleges. While student debt forgiveness doesn’t address the discrimination against minority groups, it does present an opportunity to inch closer to a point of equal footing. With the income cap on those eligible for forgiveness, it’s unlikely that the parties who benefit will be those in an incredibly successful position. The $10,000 reduction in student debt would decrease the amount of total unsecured liabilities owed by 33.0% on average of those who have any student debt, which can be a significant increase in the quality of anyone's life.

Con number two is the impact student loan forgiveness could have on our economy. Specifically, resulting in further increases in inflation. Critics of this plan believe that additional spending created by those who have a drastic increase of income could cause further exacerbation in an economy where businesses are already struggling to keep up with consumer demand. Forty-three million people stand to have

their loan payments reduced, twenty million of those would have their debts forgiven altogether. In an article published for Fox Business, Wes Moss, CFP, partner at Capital Investment Advisors, said, "For borrowers resuming payments next year, new provisions will reduce monthly payment requirements dramatically relative to income. In some cases, the minimum monthly payment could be reduced by more than 50%. This puts more money into the pockets of consumers to spend on discretionary goods and services and will act as a further economic stimulus that could put upward pressure on inflation." The Committee for a Responsible Federal Budget (CRFB) asserts that the forgiveness plan will cost somewhere in the ballpark of $400-$600 billion and has previously estimated that $10,000 in forgiveness would add 0.15% to the personal consumption expenditure price index, commonly used to calculate inflation.

The pro-forgiveness side believes the plan would have little to no effect on the economy. Arguing that the 1.7 trillion-dollar student loan debt, impacting roughly one in every eight Americans (43 million individuals) is slowing the national economy. Forgiveness will boost the economy and benefit everyone. Ali Bustamante, who's with the left-leaning Roosevelt Institute pointedly disagrees with the CFRB’s assessment, believing any inflationary effect would be “small” and offset by the resumption of student loan payments. Mark Zandi, the chief economist at Moody’s Analytics, believes the effect on inflation is “largely a wash.” Estimating that student debt forgiveness will increase inflation by 0.08%, as measured by the consumer price index (CPI), another commonly used gauge of inflation. Zandi expects CPI inflation to be reduced by 0.11% after the payment freeze ends. Unlike the $1,200 relief checks sent to a large swath of Americans during the COVID-19 pandemic, people with student loans would not be issued a $20,000 check or have it transferred to their bank account. The relief would come in the form of reduced loan payments over the course of many years, making their buying power limited to a month-by-month basis.

This piece could likely go on for the entirety of this issue, but with limited space, our analysis will have to stop at those points. Without a clear resolution on this issue, a larger problem comes to the forefront. Regardless of your opinion on the subject of student loan forgiveness, there is no arguing with the rising cost of tuition in our country. The White House shared the following information: “Since 1980, the total cost of both four-year public and four-year private college has nearly tripled, even after accounting for inflation. Federal support has not kept up: Pell Grants once

covered nearly 80 percent of the cost of a four-year public college degree for students from working families, but now only cover a third. That has left many students from lowand middle-income families with no choice but to borrow if they want to get a degree. According to a Department of Education analysis, the typical undergraduate student with loans now graduates with nearly $25,000 in debt.” When asked if the student debt relief plan addressed the issue of the rising cost of tuition in our country, President of Wilson College, Wes Fugate, Ph.D., Centre ’99, responded, “Sadly, this program does not address the cost of post-secondary education in our country,” but went on to provide a list of possible solutions that would help ensure postsecondary education is affordable and attainable:

• Double the Pell Grant to make sure that those students who have the least resources can afford an education.

• States should increase aid that is provided directly to students based on their need.

• We should ensure that laws that encourage philanthropy to post-secondary education institutions continue so that donors are encouraged to give, which provides scholarships.

• We need more education about the FAFSA and the various options for funding postsecondary education.

• We need to more adequately fund public institutions.

Pending solutions like those presented by Fugate, the rising cost of tuition will continue to plague our brothers enrolled at all levels, but the heaviest toll will be paid by our undergraduate brothers around the country. Brothers without the means to have their education paid for will continue to rack up debt from student loans, without the opportunity for loan forgiveness like those who came before. News outlets vary on the average debt undergraduate students in the U.S. accumulate in pursuit of their Bachelor’s, but all

fall within the $30,000-$40,000 range. Our men at private universities, with much higher tuition prices, can leave with upwards of $100,000 in debt—saddling them with monthly payments equivalent to a mortgage, while still needing to live and provide for themselves. Curious as to the opinion of our undergraduate brothers, we put out a poll on the Phi Kappa Tau Instagram page asking, “Are you in favor of student debt relief?” 68% of responders were in favor; 28% opposed; and 13% were indifferent on the matter. Undergraduate student, Gavin Cooper, Kentucky ’21, elaborated on the matter, stating, “Some students, myself included, are first generation. And it’s difficult to afford.”

As an organization built with the goal of fostering the educational experience of young men around the country, ensuring that they continue on the route to becoming men of distinction, we must do all we can to bestow upon them the opportunity to succeed. While we lack the ability to enact nationwide change in this area, we can support our undergraduate brothers with scholarships, networking opportunities to ensure jobs following graduation, and mentoring through the financial hardships that come with debt of this proportion. Our country will continue to navigate the loan forgiveness debate, and the clearest need is one of understanding. Taking the time to read, research, listen to, and understand all sides of a debate. With an issue that has the opportunity to impact so many, whether that be for good or bad, it is important to comprehend the facts of the subject to the fullest extent of one's ability. Take the time to talk to industry professionals. Those with their boots on the ground of campuses across the country, who can provide insight to the experience of students currently living through this issue of rising tuition and how it impacts their lives following graduation. Gather information from multiple sources; this piece stems from articles and information provided by the official White House website, CNBC, Fox Business, NPR, The Atlantic, the Census Bureau, and a number of other credible outlets. The sheer amount of content surrounding this matter is astronomical and requires diligent investigation. As men of distinction, an effort to properly educate yourself on such an important matter before passing judgement feels almost implied, and as an organization tied directly to those affected by student debt, we must consider those within our ranks when passing this judgment.