“A billion here, a billion there, and pretty soon you’re talking real money,” is a quote often attributed to the late Illinois Senator Everett Dirksen. Whether he actually said these words or not, they’re superglued to his legacy. They are also reminders of a present-day legislative struggle that has reached all the way to the U.S. Supreme Court. This time, over the issue of college debt forgiveness.
Across the country, it is estimated that the aggregate college loan debt is somewhere around $1.75 trillion. Forbes also fixes the average college loan debt of an estimated 26 million people at around $29,000. It is also estimated that 92 percent of all student debt is federal.
The Supreme Court listened to arguments put forth last month by six Republican dominated states hoping to block President Biden’s student loan forgiveness plan. The Biden plan, announced last summer, would cancel as much as $20,000 in federal student debt. Millions of students struggling with debt will qualify though not those whose income exceeds the President’s plan. Forgiveness eligibility will be based on adjusted gross income. Those owning student of $125,000 may qualify for relief of up to $10,000. Others receiving financial assistance based on income may qualify for as much as $20,000 in forgiveness. It’s estimated that 60 million people have qualified for some level of debt forgiveness.
Also, only federal student loan debt is eligible. Private loans are not included in the plan.
The idea of college debt forgiveness is not unique. Last June, the Department of Education order more than 150 for-profit colleges and vocational schools, including the University of Phoenix and DeVry University, to repay an estimated 200,000 students $6 billion in federal student debt. The order said that borrowers would be fully forgiven and that any payments they made will be refunded. Most of the schools remain in business but some of them have gone dark.
What is bringing the whole matter of repaying federal student loans to the fore is that the suspension of payments caused by the COVID-19 pandemic has expired. They had been put on pause in March 2020 when the economy was upended by the virus and Trump was President. They were frozen based on a 2003 law enacted to make certain that federal student loan borrowers would not be economically impacted in a national emergency. It was one of a number of laws enacted by Congress in the aftermath of 9/11.
Also, one of President Biden’s promises when he was running for the office was to forgive federal student loans. Opponents of the President argue that he is exceeding his authority in using the pandemic as cover to wipe away the massive debt. They call it a giveaway. But others, like Vermont Senator Bernie Sanders, argue that a giveaway in massive tax breaks—as large or larger than federal student debt relief—to giant corporations and the mega-wealthy, things more often attributed to Republicans.
Kerline Eglaus, Metropolitan State University-Denver’s Executive Director of Aid and Scholarship, estimates that approximately 60 percent of students graduating from MSU-D leave with student debt. “The average federal encumbrance per student for the school year 2020-2021 is $7,235,” said Eglaus. Current undergraduate student enrollment at MSU-D is 15,682, and nearly 60 percent are full time.
Federal student debt, unlike, say, a debt on any other purchase, that is not repaid is never ‘wiped off the books.’ Not even bankruptcy clears the loan. “Student debt stays with you forever,” said Eglaus. There, however, are exceptions, such as a disability that prevents you from earning an income. Others, she said, can have their loans forgiven through some type of public service. Examples might be, a medical student who commits to working in an underserved area for a predetermined amount of time. Others with debt may work off their loans by working for a government agency. The commitment may be as long as ten years. In cases like this, the borrower must continue making payments until they have reached the time commitment they have agreed to.
A common complaint by borrowers is that despite being faithful to their obligation, years later they actually owe more than the original amount of money borrowed. “If you’re paying only the interest, paying nothing more than the minimum, it’s a challenge a lot of borrowers face,” said Eglaus. “I advise students to borrow responsibly, focus on financial literacy.”
For now, those holding federal student debt are not making loan payments and won’t have to until a decision from the high court is rendered. The Department of Education says if the decision goes against the Biden Administration repayments will resume 60 days after the court makes its ruling. But even if the President does not prevail with the Supreme Court, the administration may—and likely will—look for other ways to provide relief. The White House may also work to keep frozen loan repayments until it is ready to present its next plan.
How the Supreme Court will rule is one of the biggest guessing games in Washington. Colorado native and Trump nominee, Justice Neil Gorsuch, raised the question of fairness pitting those who have paid their loans against those seeking relief. “Half a trillion dollars is being diverted to one group of favored persons over others,” he said.
Not surprising, the Court’s three liberal members, Justices Brown, Kagan and Sotomayor, seemed to be supportive of the President. Brown questioned the wisdom of the Court even getting involved in something she believes is the purview of the Congress. Kagan was even more strident in her comments about the laws allowing the President to act unilaterally. “Congress could not have made this much more clear.”
