Westside Voice was in favor of canceling all student debt. And though President Biden didn’t get close to doing so, he put together a very strong package in our view as we learned more about what was inside it. We feel everyone should celebrate it as a win for millions of Americans.

 What’s in the package? (which the president executed through executive orders):

For students in the “standard” repayment model, where students pay back the same amount every month until the loan is paid –

• $10,000 in student loan forgiveness for borrowers who earned less than $125,000 and Couples less than $250,000 during the height of the pandemic
• $20,000 loan forgiveness for people who received Pell Grants, which are grants to low-income students
• Borrowers can continue making the same monthly payments but pay off their loans sooner – OR – reduce monthly payments but stick with the same payoff period

For students in the “income-driven” repayment model, where borrowers typically pay 10% of their discretionary income minus living expenses for up to 20 years; remaining debt after that is forgiven (though post-2025, will be taxed as income) –

• Monthly payments are capped at 5 percent of discretionary income instead of the current 10%
• Income considered “discretionary” will be reduced, helping lower monthly payments
• Loans beyond their 10^th year of repayment will be forgiven for those that owe $12,000 or less
• Loan balances will no longer be susceptible to growth from accrued interest; the federal government will pay the difference between a borrower’s monthly payment and the amount of interest owed

In our view, the accrued interest plank of the plan is the biggest news and most helpful aspect of the plan given that it grows so precipitously that it often takes years longer to pay off one’s loan.

All told, the Education Department says the plan will assist some 43 million people, 20 million of whom will see their remaining debt erased completely. It will also mean decreases in the size of monthly payments by an average of $250 if the borrower is on a standard 10-year repayment schedule.

Borrowers have racked up an incredible $1.6 Trillion in debt. Californians own about $28.5 Billion of that according to the L.A. Times, affecting 3.8 Million Californians.

Politically, the move comes with some risk. CNN polled folks leading up to the announcement, and say 60 percent of those polled feared a debt forgiveness move by the president would be inflationary. We don’t think it will be, because a lot of these folks will now simply be able to afford everyday expenses like making rent and buying the right amount of food. They may be able to make debt payments elsewhere that they haven’t been able to pay down. These kinds of moves aren’t inflationary. Well, the groceries could be but only if the borrower turns absolutely gluttonous with their extra $250 a month.

Good News – Republicans are furious. Biden must be doing something right. But seriously, it may also motivate a solid base of younger, diverse voters to turn out in November to send Democrats a “thank you.”

Potential Bad News – This may also be a motivator for Republican voters to turn out on November 8.

But let’s talk about the justice that’s been done here. Student Loan companies and big lenders like banks are corrupt and allowed to play by a ridiculous set of rules. Senator Elizabeth Warren has been asking the following questions for years: Why are student loan companies allowed to charge interest far above the prime rate? Why are banks allowed to pay paltry amounts of interest for our responsible savings accounts? Do they seriously think free checking is enough of a trade-off? We agree that something was needed to throw some power back to borrowers.

Colleges and universities shouldn’t be spared blame here as well. Some fear that loan forgiveness will encourage colleges to jack up the price of tuition. But schools are already charging far too much in tuition given the diminishing return “merely” a bachelor’s degree delivers to graduates’ job pay these days. Now, if you didn’t take on too much debt for college, you’ll certainly have to for that advanced degree the market now says you need to stand out.

In addition, well-endowed universities like the Ivy League schools or Notre Dame can’t keep hiding behind their claims of paying out massive sums of financial aid. They’re not actually lowering tuition, and all they’re doing is paying themselves for the whole lot of it.

Bottom line: President Biden’s student loan forgiveness and affordability measures will help millions breathe just a little easier each month and might be a difference maker in keeping many people housed and nourished. We’ve learned in the early Biden years that we don’t really have a Senate Majority, and we’re not going to get the legislation in full that we would really like to see. But with the stroke of a pen, the president has given Americans, regardless of party affiliation, a victory that upon further reflection may not be as little as the mere dollar amounts imply.

Photo by Romolo Tavani