Auto dealership employees want to return to community college with a clean slate. The operations manager wonders if he can afford to buy a home. And customer service representatives face the bitter reality that they may never get away from decades of debt.
They are among the millions of people across the country who borrowed money for college but failed to complete a four-year degree, many from low-income families. Some of the balance could be written off if the debt forgiveness plan announced by the Biden administration last week goes into effect.
While that relief could change the lives of some borrowers, it may do little to address the intractable problem of soaring college costs.
In the United States, higher education has long been promoted as an important step on the road to economic stability. But for tens of millions of people, that promise has been elusive.
They may have dropped out of school for a variety of overlapping reasons, including medical and family emergencies, but financial barriers are cited as the most common obstacle. Even students who were prepared for tuition can be caught off guard by other costs such as tuition, housing, and textbooks.
“No one goes to college thinking they’re going to fail,” said educational economist Carlo Salerno.
Some borrowers expressed relief at Mr. Biden’s plan. Others skeptically noted the vague details and possible legal challenges. And some have begun to see the future through the lens of hard-won experience. And is higher education worth the cost?
“Is it worth it? Yes! Absolutely, Absolutely — if you’re going to use it,” said 39-year-old Shantoya Smith. He’s his Pell grantee in Detroit, tens of thousands of dollars in debt, and plans to get a bachelor’s degree.
“But if not, go to vocational school. It’s cheap.”
In this year’s report, Dr. Salerno used data from the U.S. Department of Education to determine that about 15% of federal loan debt currently outstanding is held by people with no degrees — about 12 million people. Did. There were also racial disparities. Of those who started college but didn’t graduate, about 66% of black borrowers were still in debt when they graduated, compared to 47% of white borrowers.
The Forgiveness Plan writes off $10,000 of student loan debt for those earning less than $125,000 a year and $20,000 for students receiving Pell grants for low-income families. It covers most or all of the many balances held by non-degree borrowers who average less than $15,000.
What You Need to Know About Student Loan Debt Relief
What You Need to Know About Student Loan Debt Relief
Many people will benefit. President Biden’s executive order means millions of federal student loan balances could be reduced by up to $20,000. Below are answers to frequently asked questions about how this works. is shown.
This could make a big difference for those in debt trying to realize the American Dream, said Yolanda Watson-Spiva, president of the advocacy group Complete College America.
“I hope this is the first step, not the last step,” said Dr. Watson-Spiva, adding that loan forgiveness is a great way to help those just starting out amid persistent inequalities and rising tuition fees. added that it was of little use.
When Hannah Jacob, 23, entered State University of New York in Fredonia in 2017, she received financial aid and state grants, but no financial support from her family. she said. She borrowed about $10,000 in federal loans.
Jacob made friends, fell in love with his political science class and took up rugby. However, when she returned for the spring semester of her freshman year, she found that she could not enroll because her tuition outstanding balance was $4,000.
“I had no clue,” she said. “Of course, at 18, I didn’t have her $4, nor did my parents. So I had to leave.”
After attending community college, she started working full time at a car dealership. Although she paid off some of her debts, it still haunted her and ruined her credit score early in her adult life.
When Jacob heard about Biden’s debt relief plan, he was able to write off nearly $9,000 of the remaining debt.
“I can actually pay and enjoy going to school,” she said. She returns to her college community and plans to one day earn her bachelor’s degree and become a history teacher, her first in her family.
Senior Researcher Beth Akers The American Enterprise Institute said that while Mr. Biden’s pardon plan was poorly structured, she supported bailouts for non-degree borrowers. I really think it’s the population that’s doing it,” she said.
Many students have absorbed the message that higher education is essential, she said. However, for those who have dropped out and are now entering middle age, the calculation method may need to change.
“I think it’s great to celebrate education,” said Dr. Akers. “But we also need to be realistic about whether individuals are on track to reap the financial benefits.”
For Sheranda Pender, 46, the possibility of forgiveness brought “a little hope,” but nothing more.
Pender, who grew up and still lives in Waterbury, Connecticut, enrolled in Southern Connecticut State University in New Haven in 1993 and became a nurse. But three years after that, she became pregnant with her first child and had to leave the program before completing her degree. She soon returned to Waterbury, where she found herself married and working for the telephone company.
“I had a place and I had a baby,” she said. “So I had to work and survive.”
Today she has over $50,000 in student loans, she said. She has made a career out of her customer service but doesn’t have enough money to pay off her loan.
It would be easier if Mr. Pender’s monthly payments were capped at 5% of discretionary income, as Mr. Biden suggested. Also, she received a Pell grant, so she may be eligible for a $20,000 loan forgiveness. But paying her remaining balance in full is still out of reach, she said.
“It’s like rubbing two pennies together and where you get 5%,” she said.
She added that it was hard to imagine going back to school as long as the debt loomed over her.
Bridget Strickler, alumni strategist, said many college graduates feel like they’ve failed. A network to support students returning to school. Forgiveness can have a lasting effect on them, across generations.
“We know that when people get a college degree, their families are more likely to be educated, and life and employment trajectories change forever,” she said.
Smith, who lives in Detroit, has repeatedly tried to get an education that would give her a solid foundation.She struggled in high school, served in the Navy, and earned her high school diploma, she said., Attended Wayne County Community College part-time for several years. I applied to a private college, dropped out, took online classes at a for-profit school, and attended another community college in Macomb County.
She studied business and has two associate degrees and a certificate in digital marketing, but no bachelor’s degree. During that time, she was eligible for Pell’s grant, but Ms. Smith racked up about $37,000 in her student loans and interest.
Working at a strip club helped Smith survive financial hardships. Currently, she wants to transfer her college credits to Michigan State University.
Student Loan Debt Relief Details
For her, education is more important than a diploma. Smith said the coding and business skills she’s acquiring will help her in the long run.
Even if the $20,000 debt was forgiven, “That’s great,” Smith said. But she won’t let it get in the way of her four-year degree. “School was really beneficial to me,” she said. “I never complain.”
Providing additional relief to Pell grantees, who make up the majority of student loan defaulters, will help borrowers who need it most, says Adam Rooney, a senior fellow at the Brookings Institution. It said it was a “well-targeted” approach. Professor of Finance at the University of Utah.
But Biden’s plan would be an “inefficient” way to improve college affordability, he said. The proposed repayment rules may reduce the burden of debt, but they do not reduce the price of college education.
Ryan Johnston, 29, of Lake Charles, Louisiana, was a brilliant high school student before attending McNeice State University in 2011, but hit a wall. Anxiety haunted him. He quit his studies and started over.
Although he had Pell’s grant, his student debt continued to mount as his academic performance stalled. By 2016, he had racked up his $17,000+ loan.
“I started looking at options, then debt, and everything else,” he said.
Mr. Johnston devoted himself to his work and spent hundreds of dollars each month paying off loans, but he defaulted a few years ago. His credit score plummeted, he lost the job he was looking for, and he started getting calls from debt collectors on a daily basis.
The 2020 loan repayment moratorium has eased some of the pressure. If Mr. Biden’s amnesty plan comes to fruition (Johnston is skeptical), the debt could be written off entirely.
“I feel like I might actually buy a house in a few years,” he said. “My goal of repairing credit feels more achievable than it did a few weeks ago.In doing so, the future looks brighter.”
Even college, he said, could one day return to the table.