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What Biden Administration Can Do To Help Americans Pay Off Student Loans


Renee Allen is a law professor in Brooklyn, and she and her mother have something in common.

RENEE ALLEN: My mother is in her late 50s. She is still paying off her student loans and likely could be for the rest of her life. I am nowhere close to making a dent in mine, and I'm in a position where I will be paying for the rest of my life.

SHAPIRO: Allen still owes more than $250,000 for her undergrad and law school loans.

ALLEN: It's virtually impossible to pay off a quarter million dollars in student loan debts.

SHAPIRO: And just as her mother's debt forced Allen to take out loans...

ALLEN: My ability to help my future children through school are limited. And so the cycle then continues.

SHAPIRO: Allen is one of 44 million people in America with student debt. That debt totals more than $1.6 trillion. And while politicians talk a lot about solutions, they haven't agreed on one yet. Members of Congress and President-elect Joe Biden each have their own preferred approaches. So this hour, we're going to dive into the debate. When Renee Allen heard a few Democratic proposals to forgive some of that debt, she tweeted a screenshot of her loan balance. And the debate flooded into her responses. She was overwhelmed by people telling her what she should have done.

ALLEN: And I did receive some scholarship money. And I received grant money. I worked two jobs most of the time I was in undergrad, and that still wasn't enough to make ends meet. So I am now 11 years out of law school. A significant bit of what you see in that 255 is interest.

SHAPIRO: One big question in this national debate is whether debt forgiveness is the right approach at all. Todd Hagopian in Tulsa, Okla., says he wants to be responsible for paying back his own debt, all $50,000 of it.

TODD HAGOPIAN: You need to take responsibility for your actions. You don't just ask the bank to relieve the debt. I don't think that's really fair that they should get $50,000 of free stuff.

SHAPIRO: Lyndsey Fifield of Montgomery, Ala., says she went to a less expensive school on purpose. And she wonders why other people should be rewarded for taking out loans that they can't afford to repay.

LYNDSEY FIFIELD: I went to a state school. And I only graduated with about 15, $16,000 in student loan debt. I saw that the numbers weren't going down as I was paying them off, and it really freaked me out. So I just really aggressively paid those off, but it did take me about five years.

SHAPIRO: Shauna Costakov-Macomb in Indianapolis took a similar approach to paying off her loans. She was tired of paying $600 every month, with a lot of it going to interest. And so she wiped out her savings to make a final payment of $10,000. That was five years ago.

SHAUNA COSTAKOV-MACOMB: And I remember the day that I paid them off. I sat in the parking lot of my bank, and I cried. That was the hugest weight lifted.

SHAPIRO: And despite or maybe because of that sacrifice, she doesn't want others to go through what she experienced.

COSTAKOV-MACOMB: Just because I struggled doesn't mean I want everybody else to. I don't feel any jealousy or resentment. It leaves me truly elated that there are some people, namely young kids, that aren't going to have to deal with this their whole adult life.

SHAPIRO: Debt can be crushing on a personal level, and it also ripples out to affect the U.S. economy as people postpone buying homes or cars or starting a family.

JUDITH SCOTT-CLAYTON: So this is even before the pandemic, I would say we were really seeing crisis levels of student loan defaults. More than 1 in 4 borrowers prior to the pandemic was experiencing a student loan default within 12 years of starting college.

SHAPIRO: Judith Scott-Clayton is an associate professor of economics and education in the Teachers College at Columbia University. And I asked her how people should understand this number - $1.6 trillion in student debt.

SCOTT-CLAYTON: Well, I think, to me, what doesn't freak me out, it's not that big number. It's not the 1.6 trillion. A lot of that debt is actually good debt. It represents investments in education, an individual's future productivity. And it's not all bad. Where it really concerns me is the number of people who are taking out education debt and not seeing that return and ending up in default. And, in fact, when we look at that, what we see is that the likelihood of default is actually highest for borrowers with relatively small debts - $10,000, $5,000. Five thousand dollars.

SHAPIRO: And is there a way to describe who those people tend to be? Does it disproportionately affect certain groups?

SCOTT-CLAYTON: Absolutely. So it's certainly the case that a lot of borrowers with lower amounts of debt have lower amounts of debt because they never actually finished a degree. So it's sort of the worst of both worlds. You have the debt without a degree. But that's not the only place where we see problems. We also see a very strong racial disparity in student loan outcomes. For a Black college graduate with a bachelor's degree, the likelihood that they will experience a default is actually higher than a white college dropout.

SHAPIRO: And what are the broader economic ripples of that? I could imagine it makes it harder for somebody to buy a house or, you know, get a loan for a car or other economic consequences.

SCOTT-CLAYTON: Absolutely. There's a lot of concern about the general overhang of people carrying a lot of debt and what that does to their ability to borrow for other things, to buy a home, to invest in their own children's education. And there's certainly some reason to worry about that. But I am most worried about the economic consequences of massive numbers of defaults, student loan default, which can have implications for your credit, your ability to borrow, potentially even your ability to rent an apartment or get a license for some professions in some states.

SHAPIRO: You know, every generation, more people go to college. And every generation, college gets more expensive. And every generation, more jobs require a college degree. And so if there is no intervention, is this problem just going to keep getting worse?

SCOTT-CLAYTON: I think we definitely have reached a point where something needs to change. And I think there's a fair amount of consensus about that, actually, that we need to do something differently. So I hope that in the same conversation about student loan cancellation and what we can do to help borrowers who are already in trouble, I hope that those conversations will be paired with what we can do to make sure that we don't get into this problem again.

SHAPIRO: Judith Scott-Clayton is an associate professor of economics and education at Columbia University. Thank you for talking with us.

SCOTT-CLAYTON: Thank you for having me.

SHAPIRO: So that's the scope of the problem. Now let's talk about some of the proposed solutions with NPR's Anya Kamenetz, who has been following this topic for years.

Hi, Anya.


SHAPIRO: What kind of relief proposals are on the table right now?

KAMENETZ: So if you have student loans, you probably have not been paying them because the COVID relief package in the spring included a temporary pause on federal student loan payments that has been extended now through December 31. And one Democratic proposal on the table is simply to continue that extension through next fall. More recently, Democratic Senators Elizabeth Warren and Chuck Schumer introduced a resolution that calls on President-elect Joe Biden to simply forgive the first $50,000 in federal student loan debt for everybody across the board. So that would mean completely erasing student loan debt for more than three quarters of borrowers.

SHAPIRO: But it's interesting that this is not a proposal for Congress to do that. It's a recommendation for the president to do that. Can he just unilaterally make that decision and forgive student loan debt?

KAMENETZ: It seems like he can. So this has not been tested in any court. But the Senate resolution cited a Harvard legal clinics opinion that simply writing off student loans is something that the president can instruct the education secretary to do with no congressional approval. So, in theory, this huge loan forgiveness could be done on Day 1, doesn't depend on the outcome of the two January runoffs, for example, or Senate control.

SHAPIRO: And is forgiving $50,000 per borrower something that President-elect Biden has said he wants to do?

KAMENETZ: Not quite. Here he is at a press conference last week talking about a Democratic House proposal for a little bit less than that.


JOE BIDEN: The legislation passed by the Democratic House calls for immediate $10,000 forgiveness of student loans. It's holding people up. They're in real trouble. They're having to make choices between paying their student loan and paying their rent, those kinds of decisions.

KAMENETZ: But here's the catch. So the House bill limits that $10,000 relief to only private, not federal student loans. It also limits that relief to what he calls economically distressed borrowers. You heard Biden talk about people who were having to choose between paying the rent and paying their loan bill. So that's potentially a much more limited offer, not only than what's in the Senate plan, but actually what's in Biden's own campaign plan.

SHAPIRO: What is in that campaign plan?

KAMENETZ: So in several places in his campaign proposals, Biden talks about immediately canceling a minimum $10,000 in federal loans, not private loans. And there's no mention of a means test. So by saying it's only economically distressed borrowers, that could potentially be many fewer people that get that help.

SHAPIRO: And does it sound like Biden at this point is going to ignore his campaign platform on those broader forgiveness points?

KAMENETZ: I wish I could be more clear on this point, Ari. I asked Biden's team. They simply pointed me to a full range of his ideas to make college cheaper and loans more manageable. He's talked about expanding the income-based repayment program to make repayment easier for everyone, to improve public service loan forgiveness for teachers and doctors and civil servants, things that the Education Department could potentially improve on the margins without legislation. But for major changes, they would definitely need Congress.

SHAPIRO: Taking a step back, Anya, candidates have been talking about forgiving student debt for a long time, and it keeps ballooning. And there haven't been solutions yet. Why is this such a tough knot to untie?

KAMENETZ: You know, I think there's a bunch of reasons. First of all, there's an uneasiness about sort of the moral valence of canceling debt. For one thing, people who have access to higher education in this country, they're relatively privileged. So if you target relief at only student debtors, there's some people who feel like, oh, that would be unfair to those who did not get to go to higher education in the first place. And then there's also people who maybe paid off their student loans, and they look back and say, why should these folks that came up after me get some relief that I never got?

So there's always been a little bit of uneasiness in the debate versus people who say, you know what, this is a great way to stimulate the economy. It would close the racial wealth gap. And by the way, you know, education should be a human right. It should be available to everyone who's able to take advantage of it. And that's how we get a truly democratic society. So, you know, it's a debate that's going to keep going, I would say, probably beyond this election cycle.

SHAPIRO: NPR's Anya Kamenetz, thanks a lot.

KAMENETZ: Thanks, Ari. Transcript provided by NPR, Copyright NPR.

Ari Shapiro has been one of the hosts of All Things Considered, NPR's award-winning afternoon newsmagazine, since 2015. During his first two years on the program, listenership to All Things Considered grew at an unprecedented rate, with more people tuning in during a typical quarter-hour than any other program on the radio.
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