Editorial: Forgive debt, yes, but increase aid to lower costs

By The Herald Editorial Board

It’s outrageous that U.S. taxpayers would have to foot the bill for — by one early estimate — some $700 billion for a bailout resulting from financial decisions for which taxpayers had no responsibility. Right?

No, not the student loan debt relief program that President Biden announced Thursday.

The $700 billion mentioned above was set aside as part of the Emergency Economic Stabilization Act of 2008, otherwise known as the big bank bailout. In truth, the Troubled Asset Relief Program used about $426 billion to purchase toxic assets from banks to keep them from going under. And in the end, more than $441 billion was recovered, generating a $15.3 billion profit for the U.S. Treasury. Along with that tidy profit, the program kept the Great Recession — as bad as it was — from hitting Americans even harder that it did.

This time the investment that Biden has outlined is not in banks but in 43 million Americans who have amassed about $1.75 trillion in student loan debt, pursuing educations and degrees intended to launch careers, support families, pay taxes and perform the jobs America needs filled now and in coming decades.

The estimated cost for the loan forgiveness program ranges from $373 billion to as much as $600 billion, but would wipe out up to $20,000 in student loan debt for former students who qualified for the Pell Grant financial aid program and up to $10,000 in loan debt for non-Pell students. The program is generously income based, with individuals making up to $125,000 a year and couples making $250,000 annually qualified to participate. Still a U.S. Department of Education analysis estimates that 87 percent of borrowers under the program currently make less than $75,000 a year.

Criticism has flown from left and right that the amount of loan forgiveness is either not enough or too much, which probably should be taken as a hallmark of a good compromise. But there are legitimate concerns, starting with income eligibility; wouldn’t a top income figure of $75,000 — or even $50,000 — have allowed for even greater aid at the same overall price for those who most need it?

Others have warned that the debt relief will further raise inflationary pressures, by allowing former debtors more spending power. But, with an average of nearly $59,000 in individual student loan debt, many still will have substantial balances to repay, with those payments resuming at the start of next year after an extended pandemic grace period.

Many, whose college days are long past, will wonder how so much debt was accumulated in the first place. But — unless they have children headed into or out of college — most are likely hazy on the current costs of higher ed. The days of paying tuition, books, room and board with a part-time job during college are long past.

Between 2008 and 2018, annual tuition costs have risen by $2,708 nationally, a 37 percent increase; students in Washington state, for the same period, saw an increase of $2,457 in annual tuition costs, a 35 percent increase, according to a 2019 report by the Center on Budget and Policy Priorities. State funding for higher education decreased over the same period, 13 percent nationally and 14.4 percent in Washington state. Those changes have meant that students paid about 46 percent of the total costs of higher education as of 2018, compared to about 35 percent in 2008 and 23 percent in 1988.

U.S. Department of Education figures show that the average costs of attending college, as of 2021, have topped more than $22,000 annually, compared to just over $9,000 (adjusted for inflation) in 1980. Meanwhile the adjusted value of Pell grants has barely budged, sticking around $6,000 over the same period. Where Pell grants once covered about 80 percent of a student’s education, they now cover only a third.

Still others — again from left, right and center — say that forgiving debt does nothing for current and future students, especially considering higher education’s increased costs. What’s to keep those students from accumulating debt and creating another crisis?

Digging deeper into the White House’s program, however, reveals at least the start of a response regarding those concerns.

Current and future undergraduate students will see a reduction in monthly payments to 5 percent of discretionary income, from the current 10 percent. As well, undergrad loan balances will be forgiven after 10 years of regular payments, rather than 20 years, allowing most community college borrowers to be debt-free within 10 years.

The Biden administration also says that it has proposed federal rule-making that will reform the existing Public Service Loan Forgiveness program to make it easier to apply for credit toward loan forgiveness for those who work for nonprofits, in the military or in federal, state, local and tribal governments. And the Department of Education has stepped up efforts to increase accountability of institutions, particularly of predatory for-profit colleges and the less-than-scrupulous college accreditation companies that cover for them.

Two other proposals, however, could be the most effective in reducing costs and limiting the need for student loans. The Biden administration has proposed doubling the maximum grant amount for Pell grants to $13,000, and hasn’t yet surrendered on a proposal under the original Build Back Better package that would make tuition free at community colleges.

Both represent a significant increase in spending. Federal spending on Pell grants in 2020-21 was $26 billion. The free community college program in BBB outlined costs of $58 billion in its first year and $800 billion over an 11-year time frame. But even for those who go on to four-year and longer programs, avoiding tuition costs in the first two years of education would significantly lower the overall costs of a degree.

As with the bank bailout in 2008, such spending represents an investment in the future careers and livelihoods of Americans, at a time when skilled positions are going unfilled, resulting in their own unanticipated costs and hardships.

There’s an average of 194,500 nursing job openings each year, and with an average age of 52, an estimated 1.2 million nurses will be needed by 2030. A record high of 449,000 construction jobs were unfilled as of April. As of February, there were 380,000 open teaching positions at schools and universities in the nation, and those vacancies mean fewer training opportunities for other careers are available; more than 80,000 qualified applicants were turned away from nursing schools in 2019.

Forgiving at least a portion of past student loan debt avoids penalizing those who in good faith took on an education in order to secure careers that served themselves, their families and their communities. And taking steps to make college more affordable —avoiding crippling loan debt in the future — will ensure high school students don’t give up and skip training programs or college altogether.