Many people on both sides of the debate are awaiting the oral arguments before the Supreme Court next Tuesday about whether President Biden’s student loan forgiveness plan is constitutional.
Last August, Biden announced that a student loan borrower whose income was low enough to receive a Pell grant while in college would be eligible for up to $20,000 in debt cancellation, as long as their current income was less than $125,000 (or less than $250,000 in the case of married couples or heads of households). Borrowers whose income fell within those limits but who did not receive a Pell grant in college qualified for up to $10,000 of debt relief.
But legal challenges to the President’s student loan forgiveness action quickly followed, putting the plan on pause, and leaving the financial fate of millions of borrowers in the hands of the Court.
We interviewed three experts to get their take on the debate and what it means for the future of college cost and college debt.
Their answers have been edited for length and clarity.
The Hechinger Report: What is at stake in these oral arguments?
Sandy Baum (senior fellow in the Center for Education Data and Policy at the Urban Institute): On one hand there are millions of former students who were told to expect that a significant fraction of their student debt would be forgiven and they’re counting on it. And if it doesn’t happen, they’re going to all be disappointed and some of them are going to really struggle with that. That’s the most obvious.
But of course, the case is about more than that because it’s about whether the president has the authority to do that. The question of whether the chief executive can do something that expensive, spend that much money in the way that he chooses, without Congress, is a bigger question and I think we don’t want to lose track of that either.
Michael Brickman (adjunct fellow at the American Enterprise Institute): There’s a lot at stake because this is not only going to determine the future of the Biden Administration’s broad loan forgiveness plans, but it’s also getting to this question of whether an executive agency can suddenly discover some vast new power that no one realized they had before.
Brian Kennedy II (senior policy analyst of workforce policy at the Joint Center for Political and Economic Studies): I used to teach history and social studies, so it’s really hard for me to start without rooting it in context…We have to recognize that there’s a massive racial wealth gap that exists.
I think there are two levels of disparities – one on issues of affordability and the ability to access higher education and Black students taking out more debt and riskier types of debt. And the other of not being rewarded for the same degree in terms of income.
In a typical household with an associate degree holder, the median annual income was just over $68,000, for Black households it was just over $48,000 and for White households it was just under $74,000.
THR: What will the national picture of college cost and student debt look like five years from now if the court upholds the loan forgiveness plan?
SB: It’s not helping anybody pay for college in the future, so it isn’t going to make the conversation about paying for college any easier. If the student debt forgiveness holds, it may be that people will be more comfortable borrowing money because they’ll just assume they never have to pay it back. Obviously, we can debate whether that’s a good thing or a bad thing. But people are going to still think college is too expensive. College is going to get more expensive over this period of time. People are going to continue to borrow money.
MB: If the loan forgiveness program is upheld, you’re going to see a green light to the Biden Administration to continue on its quest to forgive as many loans as possible, which in turn gives colleges and universities a green light to more or less charge whatever they want. There’s already sufficient evidence that for every dollar that’s used to subsidize students, a large portion of that disappears through tuition and fees and other increases.
BK: We’ll see folk better able to afford basic things like food, like rent. People are going to better be able to afford childcare, because those costs are not going down.
While wages are increasing, they’re not increasing at the same rate as basic costs. So I think the first impact is that people are going to have more money in their pockets to be able to afford the basics. People are going to be able to put money into retirement accounts and to save for things like college.”
THR: What about if the Supreme Court overturns it?
SB: The impact will be on people who currently hold debt, not on future students.
MB: If the Court strikes down loan forgiveness, attention will then turn to the Administration’s changes to the loan program [such as the income-driven repayment plan], because those also have a limited authority granted by Congress, but that authority is now being used for purposes that no one envisioned when the law was originally passed.
Let’s remember that just a few months ago very few people thought there was a realistic chance of the loan forgiveness program being struck down.
And so, if the Supreme Court strikes this down, and especially if they do so in a broader way versus a more limited decision, I think it would open the door to further challenges of this type of executive overreach.
BK: We’ll continue to see federal student debt accumulate. People attend college for lots of reasons, but it’s a pretty heavily shared value, so people will continue to take out student loans to attend college to try to get higher paying jobs or to advance their training. What I could imagine is that we’ll continue to see the racial wealth gap widen, and we’ll continue to see folk have a more difficult time paying for basics.
It’s fair to look at inequities in student debt hand in hand with the same trends we’re seeing in the racial wealth gap. What we’ve seen is that the racial wealth gap has grown exponentially, and I would assume that we can expect to see similar trends in the student debt field as well.
THR: Some people say if loan forgiveness is upheld, taxpayers would be footing the bill. Is that fair or not?
SB: People think that because it’s debt owed to the federal government, somehow we can just erase it and it has no impact. But it obviously increases the federal debt by a fairly significant amount. There’s already a lot of pressure to decrease the debt and cut government spending. This could only add to that pressure. There’s just reporting that Republicans are putting pressure on SNAP, on the food program for low-income households. That pressure might increase and maybe those people will bear the burden. But there will be either, long-run, increased taxes or lower spending on other things, because this is a lot of money.
MB: There are people who did not go to college or maybe went for a little bit of time or are working in a field that does not require a college degree, who are trying to support their family and are likely going to see taxes go up or a reduction in other government benefits, because this money has to come from somewhere. I think there are people who just want to say, ‘Oh no, it’s just on the credit card, it’s fine, don’t worry about it.’ But the money has to come from somewhere.
BK: That line of reasoning is a typical line of reasoning, but it is often only applied when talking about specific groups of folks. In the last administration, we saw a wide range of tax relief bills and legislation aimed towards higher earners and that same line of argument wasn’t made for those policies.
Last February, the Joint Center did a survey and 76 percent of Black Americans said the President should cancel all student debt, and that was regardless of whether those individuals had student loan debt themselves.
They understand the inequities that exist within the system. Also, people understand the larger economic benefits of canceling $1.7 billion of student debt. There are larger benefits to the overall economy when people aren’t burdened with this kind of debt.
There’s a larger macroeconomic argument to be made for this kind of relief. And the second argument, which in my opinion is just as strong, is that it’s recognizing that there are inequities present within the current student loan system. It’s recognizing that there are inequities within the student loan system. It’s not as simple as, ‘People made a choice and people should be made to uphold that choice.’ People made an investment in their education and they’re not seeing the benefits that a lot of them were promised, and those are systemic issues that require systemic solutions.
This story about student loan forgiveness action was produced by The Hechinger Report, an independent, nonprofit news organization focused on inequality and innovation in education. Sign up for our Higher Ed Newsletter!
Sarah Butrymowicz and Meredith Kolodner
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