College Uncovered: The Borrowers’ Lament

More than 40 million Americans have student loan debt. But should the government forgive all or even or part of it?

This story also appeared in GBH News

That debate has become a surprising source of political division.

Opponents say student loan forgiveness is effectively a transfer of wealth from the bottom of the socioeconomic ladder to the top. Supporters say forgiveness gives some breathing room to graduates who are being crushed by the costs of repayment, in some cases without ever even having graduated.

Meanwhile, the cost of college is forcing people to put off getting married, starting families, buying houses and doing the other things that fuel the American economy.

We debate the pros and cons, hear from student loan holders and provide advice on how to avoid going into debt in the first place.

Scroll to the end of this transcript to find out more about these topics.

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TRANSCRIPT

(Voice of news host)

It’s Morning Edition from NPR News. I’m Leila Fadel. More than 40 million federal student loan borrowers had an eventful year. It began with a promise of forgiveness. Then they were unforgiven. And now some may be forgiven again. …

Jon: Yeah, it’s been way more than an eventful year for people who have student loans. The roller-coaster ride of student loan debt has been going on for decades.

Kirk: There have been promises of loan forgiveness, lawsuits, more promises of loan relief, more lawsuits.

Jon: Right. The idea of forgiving even part of those loans — it’s a political minefield. And there’s the crux of the matter. People who didn’t go to college or already paid back their loans, they don’t get why they should have to pay for other people who did borrow money and haven’t paid it back yet. That’s a kind of class divide that’s easy for politicians to exploit.

Virginia Foxx: There’s no such thing as forgiveness.

Jon: This is Virginia Foxx. She’s the Republican chair of the House Committee on Education and the Workforce and an outspoken opponent of forgiving student loan debt.

Virginia Foxx: This entire scheme is nothing more than a transfer of wealth from those who willingly took on debt to those who did not or had the grit to pay off their loans. It’s about sticking hardworking taxpayers with the tab and those who owe it walking away from it scot free.

Kirk: This is College Uncovered from GBH News and The Hechinger Report, a podcast pulling back the Ivy to reveal how colleges really work. I’m Kirk Carapezza with GBH News …

Jon: … and I’m Jon Marcus of the Hechinger Report.

Kirk: Colleges don’t want you to know how they operate, so GBH News …

Jon: … in collaboration with The Hechinger Report, is here to show you.

In this election season, we’ve been exploring how deeply politicized higher education has become. And one of those perhaps surprising flashpoints is student loans. So today, we’ll talk about how student loans work, and why there’s so much disagreement about them. More importantly, before we’re done, we’ll share some ways that you can avoid going into debt to pay for college in the first place.

Today on the podcast: “The Borrowers’ Lament.”

Arti Sharma is one of the 44 million Americans with student loan debt.

Arti Sharma: My family didn’t have the funds to send me to college and I also didn’t have enough scholarship money.

Jon: She remembers when she started to borrow for college. Sharma says that after borrowing and trying to pay off the loans, with interest, she’s lost track of the total she owes. But it’s in the tens of thousands of dollars.

Arti Sharma: I’m a first-generation child of immigrants, working-class immigrants. I just wanted to get my education and sign at the dotted line. And I wasn’t concerned about loans, because I thought I was going to get a job that would help me pay off the loans to begin with. And so those are kind of the things that, you know, I wish I would have had somebody who could have talked to me about this.

Jon: Sharma borrowed even more to go to law school. Now she works for a public service nonprofit in Texas. She loves her job, but she doesn’t make the kind of money she needs to repay what she owes.

Arti Sharma: I want to pay off my loans. I don’t want to sit here and, like, you know, somebody just lets me get by scot free, right? It would have been great if I would have had enough income to pay off my loans. But it’s just, you feel kind of like a hamster on a wheel, chasing after something that never really happens, you know, going nowhere. With this interest compounding.

Kirk: At least Sharma got a degree. Forty percent of the people who borrow for college never even graduate. That means they have to repay their loans without the bump in earnings they’d expected. More than seven million people in their 50s are still paying off their student loans.

Jon: Right. The average debt for people when they get their bachelor’s degree is about $26,000. But by the time they’ve finished paying it off, decades later, that comes to more than $43,000, with interest. And all of that debt means people are putting off getting married, having kids, buying houses, starting businesses and all the other things that keep the economy running.

Arti Sharma: My parents don’t have any loans, you know, and they came from nothing. And they came to this country and they were able to have a house and a family on, you know, working-class income. And I have all these degrees, yet I don’t have even a net worth comparable to them.

Jon: Wow. Listen to what she’s saying there. That’s one of the reasons so many Americans are questioning the value of college.

Kirk: Okay, so all of this seems a pretty compelling argument for forgiving loans like Arti Sharma’s, right?

Jon: But there’s a surprising political divide. A poll by NPR found that only a narrow majority of Americans think that student loan holders should have their loans forgiven. Not surprisingly, people who don’t have student loan debt are much less likely to think it should be forgiven.

Kirk: Jon, when I was reporting in North Carolina for our episode about the backlash to DEI, I heard this sentiment again and again. Here’s Carollyn Lloyd. She’s a waitress at a diner in Pittsboro, North Carolina.

Carollyn Lloyd: I don’t think my tax dollars should pay for an education that’s not going to earn them enough to pay for their student loan when they get out.

Kirk: So in this election year, we’re going to have our own sort of mini debate about all of this. We’ll be taking a measure of the pros and cons of forgiving student loan debt.

Jon: As we heard, people like Congresswoman Virginia Foxx say it isn’t fair for taxpayers to have to repay the money other people took out in college loans.

Andrew Gillen: I would love for somebody to come and pay my mortgage, right? But that doesn’t mean there’s a good public policy reason to do that. I was the one who took on the debt. I’m the one responsible for repaying it.

Jon: That’s Andrew Gillen, a research fellow at the libertarian Cato Institute. Today in our mini debate, he’ll be arguing against the sort of blanket student loan forgiveness. President Joe Biden repeatedly proposed.

Andrew Gillen: There are, you know, for people who can’t pay their mortgages, there are consequences for that. Your house can get repossessed. You can get evicted. There’s actually less danger of that in the student loan area because nobody’s going to take your college degree away.

Kirk: On the other side of the issue is Persis Yu. She’s with the Student Borrower Protection Center, which advocates for student loan holders. And she says student loans have failed in helping students afford college.

Persis Yu: In some ways, we have broken the promise of the federal student loan system. And so I do think it is fair for the federal government at this point to then cancel those loans.

Kirk: Okay, we’re going to hear more from our debaters in a moment, Jon. But this is a good place to just pause and talk about how we even ended up with this system in the first place — using loans to pay for college.

The idea goes back to the 1960s. That’s when the federal government provided subsidies to banks for low-interest loans to students. But the amounts were very low, and so were the interest rates.

Jon: Then, in the 1990s, the government started giving out loans directly. This coincided with big increases in the cost of college.

Sameer Gadkaree: So, Jon, this is a story that spans decades.

Jon: That’s Sameer Gadkaree. He’s president of The Institute for College Access and Success. It’s a nonprofit that works to make college more affordable.

Sameer Gadkaree: The first piece of the puzzle is the growing use of student loans as far more and more and more people started going to college in order to improve their lives.

Jon: Back then, government grants for college still covered two thirds of the cost. So the loans were small. But as tuition kept rising, Pell Grants didn’t keep up, and the loans got bigger.

Sameer Gadkaree: The second piece of the puzzle I’ll offer you is something that played out over decades in state houses across the country, which is that whenever there was a recession, they would look at their budget and say, where can we meet our balanced budget requirement while also meeting these great needs that we have? And they would look at higher education and say, these public colleges and universities are really important, but they can raise some tuition.

Jon: Some colleges also have encouraged students to take out loans. Researchers at Cornell say for-profit colleges lead their students to borrow. There’s also evidence that the more money the government makes available to students, the more colleges of all kinds jack up their tuition. But in spite of calls from both Republicans and Democrats that colleges share some of the risk for students who default on their loans, that idea has gone nowhere.

Kirk: So students borrowed more and more. And now we’re closing in on $2 trillion of outstanding student loan debt.

Jon: Yeah, that’s more than Americans owe on their car loans or credit cards.

Okay, so let’s get back to our debate. Should some of those loans be forgiven? Persis Yu says yes.

Persis Yu: Right now, what we have is we have a system that is incredibly broken. The student loan system is in crisis. We have over 40 million student loan borrowers who are being crushed by $1.7 trillion of student loan debt. And this debt for many people is just not going away. It is a huge barrier, especially for young folks, to homeownership, to starting new businesses, to saving for retirement. It is also impacting older Americans as well. In fact, older Americans are the fastest-growing population of student debtors, and this is dramatically impeding their ability to save to retire and to, you know, live out their golden years.

Kirk: The golden years. Jon, most of my friends joke that we’ll never retire and enjoy our golden years.

Jon: Kirk, working with me, these are your golden years.

Kirk: I’m doomed.

But Andrew Gillen, like Virginia Foxx, says forgiving student loan debt is a regressive policy idea.

Andrew Gillen: College graduates tend to earn more than non-college graduates. And so if you’re giving college graduates a bunch of money, which is essentially what student loan forgiveness is, that’s going to be a regressive policy, that you’re benefiting the rich at the expense of the poor.

Persis Yu: Forty million people with student debt are also taxpayers, right? So it is not other people paying for their debt. Student loan borrowers are taxpayers, too. It is not an us-versus-them type of dynamic. It is a helping a subset of student of taxpayers relieve them of some of their burdens. Student loan borrowers don’t exist in a vacuum, right? Student loan borrowers exist in families and in communities. And it is good for communities when people in their community are doing financially well.

Jon: Persis Yu says it isn’t necessary to forgive all student loan debt.

Persis Yu: And, of course, you know, I do have the view that, you know, the more you cancel, the more good you will do for more people. But I do think it’s worth thinking about the different levels, right? Like, even at President Biden’s proposal to cancel, you know, up to $10,000 for everybody and, you know, $20,000 for folks who got Pell Grants, there was an income cap on that. But, you know, even that proposal would have canceled half of all student loan balances and would have disproportionately benefited borrowers who are in default and struggling on those student loans. So even debt cancellation at that level would have been hugely beneficial for millions and millions of people.

Kirk: But Andrew Gillen says that not all those millions need the help.

Andrew Gillen: There are people who struggle out there, but this is a very small minority of students. And the way a lot of student loan forgiveness advocates have approached the problem is to focus on these the small subset and act like that’s everybody and then try to forgive all of that. And so I think one of my fundamental problems is it’s just badly targeted.

Jon: Okay, back to you, Persis Yu: Are we overstating the problem?

Persis Yu: We’re not overstating the problem. The assertion that people are doing just fine with their debt is just not supported by the data. I mean, first of all, just look at the raw data. We have 40 million people holding this debt, $1.7 trillion of debt. Before the pandemic, we saw one in four student loan borrowers was behind on their loans. One in five had defaulted on their loans. And, you know, the statistics go on and on. A borrower defaulted every 26 seconds. More than one million people defaulted every single year on their student loans. So we see a lot more distress in the student loan market than we see necessarily in other markets. And the consequences are also just much more devastating as well.

Kirk: But Andrew Gillen says that there are also consequences to forgiving student loan debt.

Andrew Gillen: If I know as a borrower that I’m not going to have to repay it, I’m going to borrow as much as I can, right? And you can see this in any sector. Like, if we did mortgage forgiveness, everybody would just start buying bigger houses, right? Because they read about, yeah, the government’s going to going to pay my mortgage. So you would borrow as much as you possibly could, if you know that you don’t have to repay it. But it gets worse than that because then you have to consider, okay, what’s the school going to respond to in a situation where students completely don’t care about the price at all because somebody else is paying? The schools are going to start raising their tuition.

Jon: And Kirk, like we said before, there’s actually evidence of this — that the more money the government makes available to students, the faster colleges increase their prices.

On this point, Andrew Gillen and Persis Yu seem to agree: Colleges should be held more to account for this hugely expensive problem.

Andrew Gillen: I think you could fix the student loan problem, the overborrowing problem to the extent it exists, in a day, if you said, okay, if the student hasn’t repaid the loan, the school has to. And you’d weed out a lot of programs that shouldn’t be in existence. You’d clear the field. You’d free up those resources to grow programs that are serving their students well, that are serving the economy.

Persis Yu: There is no question. I mean, the cost of college has just grown so astronomically. And I think the question is, should students and borrowers be the ones to bear that responsibility? Right? So we absolutely need to ensure that colleges are not ripping off students. We need to ensure that colleges are charging fair prices. But we also need to make sure that we’re taking care of the borrowers and the folks who have been saddled by this out-of-control cost of college for the last several decades.

Jon: Both of our experts say there are already safety nets for student borrowers, though many people slip through. One is income-driven repayment, which ties your loan repayments to the amount you’re earning.

Andrew Gillen: So rather than a mortgage where you pay, you know, $1,000 a month for 30 years, if your income’s, you know, $30,000, you’re going to pay $200. If your income goes down to zero, you pay nothing.

Kirk: And the government is trying to make it easier to use income-dependent repayment that at least keeps monthly bills a little smaller. And it’s one of the tips you can use to avoid crushing student loan payments.

Jon: Or if you work for the government or a nonprofit like Arti, Sharma does, you can get your loans forgiven after 10 years. That’s under the public service loan forgiveness program.

Kirk: And while this won’t apply to everyone, or even most students, if you went to a college that was proven to have misled its students, you definitely need to talk to the Department of Education. Because there’s a special loan forgiveness program for people just like you.

Jon: Look, all of these programs can be complicated and frustrating. We’ll link on our landing page to some guides that can help. But the best way to avoid student loan debt is to not borrow in the first place. And while that might sound obvious, so many families don’t take these basic steps. Here’s Sameer Gadkaree again, from The Institute for College Access and Success.

Sameer Gadkaree: It’s really crucial to think carefully at the moment of enrollment about what college program are you signing up for? What’s the college that you are signing up for? Unfortunately, one of the other facets of this higher education ecosystem is that oftentimes the programs that are least liable to leave you in a good place are the ones that do a lot of advertising and spend more money on advertising than instruction.

Kirk: So start in high school. Take Advanced Placement or dual enrollment courses to knock off some credits and then avoid having to pay for them in college.

Jon: Also, fill out the dreaded FAFSA. That’s the federal form that dictates how much financial aid you’ll get. And, yeah, the recent overhaul of the form has been a fiasco. But the payoff is getting the highest possible amount of aid, without needing to borrow.

Kirk: Next, find a college or university with the lowest price, that offers the best deal. That’s because research shows that your major matters more than the name of the college you go to. And you can save a lot of money this way and then avoid more debt.

Jon: Once you get in, remember that you can negotiate for more financial aid. It’s a buyer’s market out there right now. We covered that in Season 1. Go back to the college and ask for more help if you need to.

Kirk: It’s very important that you check and see how much money graduates from those majors make at those schools. This information is available on the government’s College Scorecard website. But a surprising number of prospective students never even check it out. Will you make enough to pay back your loans? In many cases, it isn’t even close. Here’s Sameer Gadkaree again.

Sameer Gadkaree: There’s lots of data available in the form of the College Scorecard and other publicly available data sets. And it’s important to look into those and figure out what have graduates from this program been getting? How does that compare to the amount of debt I’m taking on?

Jon: A few schools promise that you won’t have to take out any loans at all. These tend to be the colleges with big endowments that are also among the toughest to get into. Like Stanford, Princeton, Amherst and Williams. So for these, you’re going to need to study extra hard and a few are going to require you to work toward part of your tuition.

Kirk: Remember Arti Sharma, who we heard from earlier in the episode? Well, she’s carrying tens of thousands of dollars while working at a nonprofit. She has applied for public service loan forgiveness, but she’s still waiting to hear if she’ll get it. Her loans have become a years-long frustration.

Arti Sharma: I really saw it as just a means to an end and not this thing that would haunt me for all these years. So that’s kind of like I’m in a holding pattern right now.

Jon: And what does she think of the student loan system? It pretty much sums up what most Americans seem to say about it.

Arti Sharma: I think it’s a hot mess. I think it’s punitive. You end up feeling bamboozled at the end, which is kind of a yucky feeling. Like, you know, when somebody tells you you’re getting this great deal, but you trust the government, you know, when you’re young. Or at least I did.

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