Student loan forgiveness is totally unfair to these student borrowers.
Here’s what you need to know – and what it means for your student loans.
Student loan forgiveness will have clear winners and losers. If President Joe Biden proceeds with large-scale cancellations of student loans, the most likely beneficiaries could be federal student loan borrowers, earning as much as $150,000 annually. The White House says the president hasn’t made a final decision on whether to forego student loans, so that framework could change. That is, if there is a student loan waiver, Here’s who might be excluded. Simply put, forgiving student loans is completely unfair to these people.
1. People who don’t have student loans
If you don’t have student loans, you might be wondering why the federal government spends money to subsidize student loan borrowers. Without student loan debt, student loan forgiveness may not make much sense. You might have a mortgage and be wondering, “Will the government pay my mortgage?” For this group of Americans, you might also be wondering if large-scale foreclosures on student loans is the best use of government money — especially with the prospect of a recession . Proponents of widespread student loan forgiveness argue that these policies will boost the economy, increase home purchases and encourage the creation of new businesses.
2. People who never went to college
If you never went to college, you may be wondering why you subsidize Americans who were lucky enough to go to college. For many, the large-scale student loan forgiveness feels not only like a wealth distribution, but also a slap in the face to working Americans who are also struggling financially. For others, they understand purposeful student loan forgiveness, including canceling student loans in exchange for public service work. (Biden has foregone more than $17 billion worth of student loans through targeted student loan forgiveness). The latest student loan debt statistics show that 45 million student loan recipients collectively owe $1.7 trillion in student loan debt. Since there are approximately 250 million adult Americans, this means that approximately 80% of borrowers have no student loans or have never had student loans. Some Americans who didn’t go to college just couldn’t afford it. As such, they view sweeping student loan forgiveness as a gift to wealthier Americans.
3. People who have paid off their student loans
When you’ve paid off your student loans, it must be overwhelmingly frustrating to learn that the student loan debt could be canceled. It’s akin to buying a Christmas present only to find out later that you could have gotten the same gift at a huge discount. However, there are no returns, credits, or price adjustments. Of those Americans who have paid off student loans, many have also struggled financially. They worked three jobs, sacrificed their savings for retirement, didn’t buy a house and skipped vacations. They fulfilled their financial obligations – even if they “couldn’t afford it”. Now these Americans are wondering if they will get a refund, credit, or compensation. The short answer: Neither the President nor members of Congress have given any indication that past borrowers of student loans will be compensated. Even if you repaid student loans last week and Biden announces student loan forgiveness next week, you’re out of luck.
4. Individuals who chose to attend community college
Some Americans chose community college over more expensive public or private colleges and universities. Like many student loan borrowers, these community college students and grads are struggling financially. While the latter group may not have significant student loan debt, they too want some financial relief. Had they known about the possibility of comprehensive student loan forgiveness, they might have gone to a four-year college or university.
5. People with private student debt
If you have private student debt, you probably don’t qualify for Biden’s student loan forgiveness. Why? Student loan forgiveness will likely be limited to federal student loan debt owned by the US Department of Education. This includes direct loans, for example, but not most FFELP or Perkins loans. Student loan borrowers with private student debt were also unable to access the temporary Covid-19 student loan relief, including the student loan payment pause. They also do not have access to income-based repayment plans through the federal government.
6. Individuals with significant student loan debt
If you have significant student loan debt, comprehensive student loan forgiveness might have minimal impact on your student loan balance. Biden has backed $10,000 in student loan forgiveness for student loan borrowers. Additionally, the President has said he is not considering a plan to forgive $50,000 in student loan debt. If you have a relatively low student loan balance, a $10,000 student loan forgiveness could eliminate most or all of your student loans. However, if you have $100,000 in student loan debt, forgiving $10,000 in student loans would have less of an impact. When these student loan borrowers run into financial difficulties, the best they can hope for is a fresh start for their student loans.
7. Future student loan borrowers
Widespread student loan forgiveness could be unfair to future student loan borrowers. Why? First, Biden’s student loan forgiveness will likely be a one-time cancellation of the student loan. Simply put, if you have student loan debt on the day the student loans are called, you’re in luck. If you borrow student loans the day after, you are ineligible for student loan forgiveness. Second, prospective student loan borrowers who are expecting but not receiving student loan forgiveness are also at risk. These student loan borrowers could take on more student loan debt and then hope that future policymakers will cancel student debt. However, if there is a wholesale student loan forgiveness, there is no guarantee that there will be a future student loan foreclosure.
Unfairness is a term often thrown around in education, public policy, and politics. Advocates also say student loans are unfair, trap young people, create inequalities that limit financial freedom and are prohibitively expensive. After years of inaction, proponents say large-scale student loan forgiveness is the most important policy initiative Biden can implement at this point in history. Regardless of where you stand on student loan waivers, it’s important to know that the temporary student loan waiver ends on August 31, 2022. You should be prepared to resume student loan payments. Here are some helpful ways to save money and pay off student loans faster: