Nearly half of the country’s governors signed a letter to President Joe Biden last week, asking him to withdraw his student loan forgiveness plan, which would cancel up to $20,000 for borrowers. Political bombast aside, the letter presented several salient arguments.
According to an NPR report last week, 22 governors — all Republicans — signed the Sept. 12 letter. Chris Sununu, governor of the state with the highest student loan debt in the country and the lowest level of state funding for higher education, was among them.
According to a Forbes report this month, the average student debt in New Hampshire is $39,928. A U.S. Department of Education analysis shows the typical undergraduate student with loans now graduates with nearly $25,000 in debt.
Paying off that debt is a heavy lift for a new college graduate who makes about $55,000 per year on average, according to NerdWallet, and as any borrower soon learns, interest adds up over time. Recent polls reveal most Americans agree something should be done about crushing student debt, as well as the galloping cost of higher education in general, but they are sharply divided over Biden’s plan.
Delivering on a campaign promise to provide relief, Biden unveiled a plan in August to cancel up to $20,000 of student debt for federal Pell Grant recipients, and up to $10,000 for other borrowers. While those carrying student debt overwhelmingly support it, critics say the plan will exacerbate inflation and prove unfair to borrowers who already paid off their loans.
In their letter, the governors questioned the president’s authority to follow through on the plan. Some experts expect the measure to be challenged in court.
Under Biden’s plan, student loan forgiveness is available to individuals who earn less than $125,000 ($250,000 for married couples). While it’s admirable the administration is attempting to address student debt, these income limits are too generous, and the initial giveaway — which seems like a blatant attempt to win midterm election votes — won’t solve the underlying problem, which is the cost of higher education in this country.
Research from the College Board indicates that New Hampshire has among the highest average public higher education tuition prices in the country. Tuition alone to attend the University of New Hampshire this year accounts for $15,520. The price tag for out-of-state students is significantly higher.
The Wharton School of the University of Pennsylvania estimates Biden’s student loan forgiveness plan will cost taxpayers between $469 billion and $519 billion over 10 years. Many of the taxpayers footing the bill likely repaid their own student loan debt, which raises a question of fairness.
In its quarterly report on earnings of wage and salary workers released in July, the federal Bureau of Labor Statistics says the median weekly earnings of the nation’s nearly 119 million full-time and salaried workers amount to $1,041. This translates into annual pay of roughly $54,000 — less than half the income limit called for in Biden’s loan-forgiveness plan. If the income limit for loan forgiveness were lowered to be closer to the median annual salary, the plan might be more palatable and not leave the impression that lower-income Americans would be “paying the debts of doctors, lawyers and professors,” as the governors’ letter states.
The letter goes on to say, “As governors, we support making higher education more affordable and accessible for students in our states, but we fundamentally oppose your plan to force American taxpayers to pay off the student loan debt of an elite few ....”
Besides the fact that Biden says his plan is aimed at helping the middle class, not the “elite few,” as the letter suggests, the statement may seem a bit disingenuous if those governors haven’t done anything to make public higher education more affordable in their states. Many state legislatures have been spending less and less per student on higher education for the past three decades.
State funding for public higher education in New Hampshire lags behind funding levels in most states, even after recent increases in state support, according to a June 22 article in the N.H. Business Review. Data collected from all 50 states show New Hampshire has the lowest level of state funding for public higher education on a per-capita basis in fiscal year 2022, the article says.
The governors say Biden’s plan, in failing to address rising tuition costs or to lower interest rates for student loans, only “kicks the can down the road.” The cost of attending a four-year college has tripled since 1980, even after adjusting for inflation, according to the federal Department of Education.
Republican governors and other critics of the Biden plan fear that offering federal loan forgiveness will only encourage institutions of higher education to increase their costs.
Reducing the cost of college can be done, with the will and wherewithal. Princeton University recently announced that financial aid covered 100 percent of tuition, room and board for students in the most recent freshman class whose families earn up to $65,000 per year. This income ceiling will be raised to $100,000 starting in fall 2023. The aid comes in the form of grants, which do not need to be repaid. But Princeton can afford to do that; its endowment stands between $35 billion and $40 billion.
In the end, students who feel they need to take out loans to pay for their education should be fully informed of the long-term financial implications before they sign off. Taxpayers should not have to foot the bills for these loans, too.