By Ernest Gurulé
In a surprise, though not unexpected move last week, President Biden announced that he plans to authorize the forgiveness of up to $20,000 in student debt loans. It’s a decision that may potentially affect millions of people. His announcement was greeted in one corner with unbridled glee, in another with immediate scorn and derision. But—and this is important—if any- one reading this is feeling a great weight lifted off your shoulders, before too much celebrating, it might be wise to do your home- work. There is still plenty of time.
While details of the plan are still being formulated, what is known is that as many as 770,000 student loan borrowers live in Colorado. Also, those making less than $125,000 would be eligible for $10,000 in relief; those with a combined income of $250.000 the amount would double. But there’s a lot of unknown.
For the moment, those who may benefit from the Biden plan will have to be patient until all the details come into focus. But, as far as Vita Torigoe, a labor and delivery nurse as well as a nursing instructor, is concerned, the President’s move to offer relief to students is just fine with her. Torigoe’s not going to benefit from the plan. She’s already paid off her student loans. But she thinks the President’s plan is the right thing to do.
“It was a huge weight (the loan) lifted off of me,” she said during a weekend interview. “I spent ten years fulfilling my obligation.” Torigoe’s loan was no small amount, either. She took out loans both as an undergraduate and graduate student.
“I have a BA in microbiology and crossed over into nursing in graduate school,” she said. “My loan total was $148,000.” But for her and many like her, the loan amount and the payback are two different things. Torigo and millions of other borrowers signed agreements that include compound interest.
Among those agreeing with Torigoe are scores of college and university officers, including Metropolitan State University-Denver’s Janine Davidson. “Student loan forgiveness isn’t a handout,” Davidson said. Previous generations, she said, “benefitted from state investment in public higher ed, helping these generations climb the ladder to the American dream.” More importantly, said the MSU-D President, “It worked.”
Very simply, compound interest is calculated on the initial principal, the amount of the loan at the beginning. It also includes the interest rate, the number of times interest is paid during the life of the loan and the time periods covered by the agreement. Frequently, the ultimate cost of the interest ends up being higher than the original loan as was the case in Torigoe’s plan. “From the original loan amount,” she said, “it (the loan) was almost doubled.”
While the President’s announcement was a godsend for millions, it was exactly the opposite for a lot of former borrowers who’d already paid off their student debts. A common refrain among them was that ‘it wasn’t fair to suddenly wipe away $10,000-$20,000 dollars for some borrowers while they faithfully completed their obligation and repaid what they had borrowed.’
Senate Majority Leader Mitch McConnell called Biden’s plan “a scheme” to get more Democratic votes from young borrowers in November and “a slap in the face to working Americans.” He also said the plan reeked of “socialism… and a redistribution of wealth.”
Torigoe said she has no problem with the loan forgiveness plan even though she will not benefit from it. “There was a quote from some news anchor that, ‘My family paid for my education. They worked hard and saved.” The Los Angeles-based nurse said those words struck her as “tone deaf.”
Torigoe said she never once considered asking her parents sign for her loan. “Both my parents worked hard and could have paid for some of my college,” she said. “But it would have left them in debt to the bone.” Her thinking, she said, was simple. “I need to take the loans out for myself and not burden anyone else.”
Since the beginning of the pandemic, student loan payments have been frozen. But beginning on January 1st, payments resume. For anyone holding a note, it would be wise to contact lenders to find out payments, schedules and anything else connected to the loan.
It is estimated that as many as 45 million people hold some degree of student debt that now totals an estimated $1.6 trillion. Also, about 60 percent of those holding debt are Pell Grant borrowers.
Pell Grants are loans given to students whose family incomes are below $30,000. There are an estimated 27 million people who fall into this category and a majority are Black and Latino students.
There are also some preliminary guidelines to the President’s plan. One interesting one covers students who have paid back on the original schedule they got when they agreed to the loan. The government says that if you have paid regularly and are current with your loan, the government will pay the interest on the loan. Another provision for 10-20-year repayment plans says that loan payments will be tied to earnings. Monthly payments will be no more than five percent of discretionary income.
For those students owing less than $10,000 dollars, President Biden’s plan sparked immediate celebration for one Broomfield family whose daughter is attending a prestigious college in the East. Their daughter, now a graduate student, owes “around $6,500,” said her mother. Under the President’s plan, she would automatically be debt free.
Of course, when politics plays a role in a plan like Biden’s, there are always disagreements. While the President’s staff is confident that Congress cannot block his plan which was done in the form of an Executive Order, a group of Republican senators has already drafted a bill that would restrict Biden’s authority to cancel student debt. Those signing on to it include Senators Burr, Braun, Cassidy, Marshall and Thune.
Their measure, which they call fiscally responsible, may not have a long life say veteran Congress watchers. ‘It’s not a popular thing to do, blocking free money around election time.’
