The Long Fight to Cancel Student Loans

Those who object to canceling student debt usually point to income quintiles: People with large quantities of debt—i.e., people who went to graduate school—are more likely to earn high incomes. Some critics even argue that cancellation would be “regressive,” that it would give the biggest boost to high earners and […]

Those who object to canceling student debt usually point to income quintiles: People with large quantities of debt—i.e., people who went to graduate school—are more likely to earn high incomes. Some critics even argue that cancellation would be “regressive,” that it would give the biggest boost to high earners and those privileged enough to go to college in the first place. Conservatives often cite the unfairness of forgiveness for those who saved for college or already paid off their debts (a critique that could be levied against all progress)—or the burden on the elusive “taxpayer,” as though student debt isn’t itself a regressive tax (paid with interest) imposed upon those who can’t afford to pay outright.

But what is the taxpayer burden, anyway? Because student loans represent money already spent, forgiving them would have no effect on the national debt, although it would raise the annual budget deficit, which takes into account the expected repayment on those loans. (This amount is already limited by the Education Department’s own estimates that a third of the student loan portfolio is junk—in other words, uncollectible.) To account for this shortfall in their campaign plans, Sanders proposed taxing Wall Street trades, and Warren rolled out an “ultra-millionaire tax.” If Biden decides to test his authority to cancel student debt, it will be up to Congress to recoup the costs with presumably similar tax plans.

Among those who support some amount of cancellation, $10,000 and $50,000 have emerged as headline figures. These numbers are a little bit arbitrary, but not entirely so: Supporters of the $10,000 figure argue that it would benefit the majority of borrowers currently in default (who are disproportionately Black and paradoxically tend to have the lowest balances, often because they never completed their degrees), while sparing wealthy borrowers. They’re countered by researchers who have found that $50,000, with phaseouts for higher earners, would leave about 80 percent of current borrowers debt-free while doing the most to close the racial wealth gap—though, because of Covid, this sweet spot has actually gone up to $75,000. Others, like economist Darrick Hamilton and public health scholar Naomi Zewde, continue to tout full cancellation, focusing on wealth over income and emphasizing “the added burden that a long history of discriminatory policy places on borrowers of color.” Black Americans, who typically start out with one-eighth the family wealth of their white classmates, must take on debt in higher numbers, and they graduate with roughly double the amount of debt. Then, if they wish to overcome persistent racial and gender wage gaps, Black and female borrowers must credentialize to higher levels than their white, male counterparts—perhaps going on to earn an expensive grad degree just to start at a bachelor’s-level salary. In other words, they pay more for their degrees and earn less from them.

What these numbers don’t convey is the extraordinary psychological and emotional toll of debt, as I learned from Biden Jubilee strikers. Anecdotes aren’t data, but the anecdotes are nevertheless compelling.

Take Richelle, a 33-year-old Black woman working as a teacher in South Los Angeles. After years struggling through a series of setbacks—two pregnancies right out of high school, when she was enrolled at a local community college; a nursing degree she discovered was worthless because ongoing legal issues kept her from getting licensed; struggles with rent; moving in with her mom; and all the mundane challenges of being a single working mom and trying to go to school—she emerged in 2018 with a doctorate in education and took a job as a principal at the public charter school where she’d been teaching for three years. She was making $85,000 a year, still not really enough to cover her $3,000 monthly rent, student loans, and other bills, but enough that she no longer had to take out payday loans every month. Then, in 2020, her school’s charter wasn’t renewed, and it closed down. Just before the pandemic, she moved back in with her mom and returned to teaching, working remotely as a STEM teacher in another public charter middle school, which came with a $20,000 pay cut. Meanwhile, with interest, her student loans are now more than $200,000. Instead of creating intergenerational wealth, she’s poised to pass on a legacy of debt to her two children, who both dream of attending Howard University. How will she save for their college educations if she can’t pay off her own loans, and if her debt keeps her from ever being able to build equity through a retirement account or by buying a house of her own?

Or look at Rebekah Valorn, who was homeschooled in rural Wisconsin until the age of 16, then lived at home while going to a state school for environmental science. She graduated without student debt in 2007, but she didn’t manage to find a job in her field before the recession hit and the work dried up altogether. So she decided to go on to grad school, and when that didn’t help her get a leg up either, she returned to school for a law degree, focusing on environmental issues. “I finished my graduate degree in 2010,” she told me. “And the economy had not gotten any better.” By that point, she said, higher-level engineers who had been laid off had flooded the market for the entry-level mechanical drafting and other tech jobs. “So after another year, poverty, and forbearance, I said fuck it. I already had about $30-ish–thousand in student debt. And when I ran the calculations, like, this is just going to be in an income-based payment for however many years it takes. So I might as well go on to more school. Which I know is that dreaded moral hazard.” Critics of cancellation often point to the “moral hazard” risk, by which they usually mean that creating an expectation of eventual forgiveness will leave students with no incentive to control borrowing, nor schools to control tuition. “But how did education become a moral hazard issue? Like, what is immoral about wanting more education?”

The Debt Collective’s perspective on student debt is moral and absolute, which is both clarifying and a little scary. The group starts from a premise that I share: that financing higher education by asking the non-wealthy to take on increasingly unmanageable levels of debt is wrong. Education ought to be a right of citizenship in a wealthy, humane, democratic society. Its effects are not limited to enhancement of the individual receiving it—intellectual, financial, cultural, social, or otherwise—but benefit us all by creating an astute citizenry and a populace whose members are well matched to their interests and labor goals. Therefore, education ought to be provided as a public good. Student debt shouldn’t exist in the first place. So, obviously, we should get rid of it.

Starting from this point neutralizes much of the hand-wringing and arcane number crunching around the idea of debt cancellation. If the whole debt-financing system is regressive, how could it also be regressive to dismantle it? But this simple moral salvo tumbles a house of cards that is at best daunting to address. It isn’t enough to cancel all existing student debt. Although this would be the biggest single welfare provision the government has ever offered, it would also be a onetime stimulus, and tomorrow the debt counter would start ticking up all over again.

The current proposals from the Biden camp and in Congress generally steer clear of this minefield, by tying their cancellation to Covid-relief measures, gesturing not so much at the broken system as at the specific hardships generated by a once-in-a-lifetime calamity. But there have been some interesting glimmers of intrigue. Before the Democrats mounted surprise wins in both Georgia Senate seats in a January runoff election, there was a consensus in Washington that Biden was likely to cancel some, presumably paltry, amount of federal student debt by executive action. But when the Senate flipped after the Georgia results, the calculus changed. Biden had been on the record as dubious about executive cancellation and was known to prefer legislative action. Now such action was possible, if a long shot. Not only had the Senate gone blue, but Bernie Sanders was chair of the Budget Committee, responsible for drafting reconciliation bills, which Biden could use to pass legislation unlikely to surmount the filibuster. The initial $1.9 trillion Covid relief package passed in March didn’t offer student debt relief, but it did stipulate that any future forgiveness—wink, wink, Joe—wouldn’t be taxed as income.

Meanwhile, a coalition of legislators continued to urge executive cancellation of $50,000, while Biden gravitated insistently toward $10,000, preferably via Congress. In early February, Jen Psaki, Biden’s press secretary, tweeted that the president was “reviewing whether there are any steps he can take via executive action.” At a town hall a few weeks later, Biden offered a confusing defense of $10,000, suggesting that he didn’t believe he was able to cancel more, and that canceling “debt for people who have gone to Harvard and Yale and Penn” would come at the expense of early-education programs for poor children. The remarks earned him widespread rebuke on Twitter. “Very wealthy people already have a student loan forgiveness program,” wrote AOC. “It’s called their parents.”

She’s right. Maybe 5 percent of American students attend an elite school, even fewer an Ivy (less than 0.5 percent), and those who do generally aren’t saddled with huge loan balances. Only 7 percent of Harvard undergrads take out any loans at all. The vast majority of America’s college students attend public universities, the kind that used to be free but now find their students squatting in the libraries. The largest single source of federal student debt is the University of Phoenix. And sure, the boomers might shake their fists and shout about government handouts, but then again they might not, since as the fastest-growing demographic with student debt (mostly parent loans), they’re likely to be in debt themselves.

Millennials, on the other hand, having been screwed twice in two decades, might reward the Democrats for taking them out of the red for years to come. Almost half of millennials have student debt, and along with the zoomers and the post-zoomers, they make up half the U.S. population. That’s a lot of future voters. Yes, it would be manifestly unfair to cancel debt for millennials while leaving the coming generations to die on the vine. But that’s also what’s politically brilliant about it: Canceling the debt of one group might impel a one-two punch, accelerating the push for a comprehensive free-college bill that would help lift American higher education to its once-promised glory. It may not win over many hearts on Wall Street, but isn’t that sort of the point?

Biden apparently hasn’t gotten the memo, but his staff may have. The day before Psaki’s tweet, the Biden team had announced nominations to the Education Department of several borrower and pro-cancellation advocates, including Julie Margetta Morgan, the National Consumer Law Center’s Joanna Darcus, and Tariq Habash, of the Student Borrower Protection Center. Biden had already nominated Rohit Chopra to head the Consumer Financial Protection Bureau. Perhaps he will do something big and bold on student debt, Mitch McConnell and gauzy fantasies of bipartisan accord be damned. But only time will tell, and every day, that debt counter just goes up and up.

In the meantime, the leaders, if you can call them that, of the Debt Collective remain tireless, but they are so, so tired. Tired of fighting, tired of reading harrowing emails from sad and broken people, tired of putting their lives on hold for a struggle they just can’t give up. They would like to feel that their work has meant something—and is no longer necessary.

Perhaps something is finally shifting, if slowly. On day 58 of the Biden Jubilee 100 campaign, Secretary of Education Miguel Cardona announced that the department would provide full discharges to about 72,000 borrower defense applicants, mostly former Corinthian and ITT Tech students. It wasn’t the end of student debt, and it certainly underscored the bravado of the 100 days demand, but it struck $1 billion from credit scores and the rolls of debt collectors, and it never would have happened if 15 debt strikers and a handful of organizers hadn’t decided, the better part of a decade ago, that they simply weren’t going to take no for an answer. As Thomas Gokey recently said to me on a Debt Collective campaign call: “We can’t win what we don’t organize for.”

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