Biden’s student loan debt relief isn’t an answer to the college crisis – Business Insider | Team Cansler

  • Biden announced a plan to grant federal borrowers a one-time, sweeping student-loan forgiveness.
  • Experts told insiders it’s important to focus on more permanent college affordability reforms.
  • They proposed transparency in pricing, increased the Pell Grant grant, and favored grants over loans.

The one-off student loan forgiveness is a necessary temporary relief — but it’s barely enough to meet the future costs of higher education, experts say.

Biden’s plan to forgive up to $20,000 in student debt for federal borrowers making less than $125,000 a year is currently stalled in court, but it’s not the silver bullet pundits and lawyers are looking for. Regardless of when or if the relief hits borrowers’ accounts, some experts say Biden and lawmakers should look to more permanent reforms to address college affordability.

Mamie Voight, the president and CEO of the Institute for Higher Education Policy (IHEP) — a nonprofit focused on success in higher education — told Insider that “the current discussion about the cost of college is critical to our country meaning is. “

“We need long-term solutions to the systemic affordability challenges faced by today’s students — solutions like doubling the Pell grant, increasing government investment in public colleges, and prioritizing need-based financial aid,” she said.

Along with its announcement of sweeping student-loan forgiveness, the White House also outlined some steps it will take to “protect borrowers and taxpayers from a sharp rise in college costs,” including increasing the maximum Pell grant price and the responsibility of colleges for their contribution to the rise in student debt by publishing an annual watch list of the programs with the highest debt in the country.

And after his proposal for a free community college was removed from Democrats’ business spending bill last year, Biden vowed to “get it done” before his first term ends in 2024.

Phillip Levine, an economics professor at Wellesley University and founder and CEO of MyinTuition Corp, which operates a simplified financial aid calculator, told Insider, “We can think about the pros and cons of debt relief, but in terms of the overall question, what’s really missing is a solution for the future.”

“We really need to find a way to cure the disease and solve the problem,” Levine said. “The issue is transparency and affordability, and both issues need to be addressed going forward.”

University awards should become more transparent

Levine said that one of the key “fundamental issues” with college affordability is the lack of transparency in college pricing. Without the full picture, students may overborrow for an education they think will be more expensive, or underestimate much of what they need to borrow and choose an education they cannot afford.

Tuition and fees at private universities have increased 134% over the past 20 years, according to US News, and state tuition and fees have increased 175% over the same period. But the pandemic has marred the trend of rising tuition in recent years as some schools have frozen tuition, and besides, the sticker price of going to college isn’t necessarily what a student will end up paying, and that could lead to excessive borrowing run loans, Levine said.

“Most people focus on the sticker price, the full cost of attending, when they think about going to college,” Levine said. “It’s the easiest number to find because colleges have to publish this number on their websites. This number is great if you’re a high income individual or family because that’s what you pay, but for everyone else they pay less than that.”

Levine noted that most low-income students receive some form of financial aid to help pay for college, and prospective students often don’t know the total tuition they will have to pay until after they are admitted.

“Once you’re in a position where you want to attend an institution that’s charging you more than you can afford, the simplest ‘fix’ is to take out a loan to bridge the gap,” said Levine. “And that can lead to excessive leverage and so on. If this college isn’t affordable, people will try to find ways to afford it one way or another, and going too deep into debt may be the only solution.”

Replacing loans with grants is a good first step that some colleges are already taking

Some colleges have begun to eliminate this scenario entirely, replacing loans in their financial aid packages with grants that students do not have to repay. As Insider previously reported, Princeton became the first university in the US to replace loans with grants in 2001, with schools like Amherst, Harvard and Yale launching similar initiatives in the following years.

“Grants are a far better tool than loans to improve college access and success because they don’t have to be repaid,” Voight said.

“In order for students to have access to the school that best provides them with the programs, opportunities, and social and economic mobility they desire, that school must be affordable,” she added. “The rising cost of college can put valuable options out of reach for students who need them most. Scholarships, when based on financial need, are an important step toward a more equitable system.”

The benefits of a debt-free degree have been tracked for the past decade — a 2013 study found that switching from grants to loans increased enrollment by about 3 to 6 percentage points among low-income students.

Next up should be strengthening support for low-income students

Levine said that “the best leverage we have available to increase college affordability is to double the Pell Grant.”

According to a White House fact sheet, Biden has increased the maximum Pell award by $400 for the 2022-2023 school year and presented a plan to double the award to nearly $13,000 by 2029. Each year, the Department of Education sets the maximum award, and the grants are available to undergraduate students who demonstrate “extraordinary financial need” based on the information provided on their Free Application for Federal Student Aid (FAFSA) form. specify, according to the ministry.

To prioritize help for the students who need it most, Voight said state-level policymakers should increase investment in public facilities so those schools don’t feel pressure to prioritize high-income students. At the federal level, doubling the Pell grant and simplifying the college grant process are necessary reforms.

“The most important guidelines are those that 1) recognize that the cost of attending college is far more than just tuition; and 2) needs-based and therefore equitable,” said Voight.

“These policies need to take into account the full cost and account for non-school expenses like housing, books, food, child care and transportation, as well as unforeseen costs like a health or family emergency, car repair, etc.,” she continued. “Expenses that exceed a student’s budget — whether it’s a high tuition fee, an unexpected book expense, or an unusually high utility bill — can mean the difference between completing a degree or having to interrupt your studies before earning a certificate.”

Biden noted that his plan was a “one-off” relief effort and borrowers would not see any further sweeping credit forgiveness action during his tenure. Although the impact is significant – the relief would wipe out the entire balances of 20 million borrowers – it is currently blocked. Two federal courts recently ruled that implementation cannot proceed until they make a final decision on the legality of the debt relief. The Ministry of Education is currently no longer accepting applications for further relief.

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