We are told that higher education is one of the best ways to overcome poverty. But for many borrowers in debt, it’s just the opposite.
Since 1980, the cost of a college education has increased nearly 9 times the rate of paychecks. If you’re poor and don’t join the military, land a full scholarship, or win some mysterious wealthy benefactor, you have only one option: borrow against your prospects. ‘coming.
That’s what I did. My family was poor enough that I could qualify for both Pell Grants (federal aid programs for students with “exceptional financial need”) and Perkins Loans (which were subsidized low-interest loans, unfortunately no longer available). Many semesters, I also took work-study jobs.
Even so, I had to borrow $10,000 – a lifeline that came with a clear threat.
Before graduating, every senior who had received financial aid at my university had to squeeze into a cavernous lecture hall, where a financial aid officer instilled in us the fear of God about what would happen. if we ever run out of payment. For hours, we watched slides about declining credit scores, losing jobs and homes, going bankrupt — it’s all part of the slippery slope from lack of payment to inexorable ruin.
After the presentation, we each had to sign a “primary promissory note” – a fanciful IOU – and estimate our annual post-graduation income to calculate monthly payments. They made us do this even though we hadn’t landed a job yet, or if the job we had landed paid too little for us to pay.
These scare tactics made a deep impression – I skipped meals rather than missing a payment. But even after paying for years, I still have a few thousand dollars hanging over my head.
And I am one of the lucky ones.
Millions of American students, especially low-income students of color, end up in debt of tens, if not hundreds of thousands of dollars. They had to find a way to make payments much larger than mine on stagnant wages while covering rising rent and healthcare costs — or while supporting family members.
That’s why President Biden’s order to forgive student loan debt up to $10,000 for all individual borrowers who earn less than $125,000 a year — and up to $20,000 for recipients of Pell scholarships – is so important.
According to the Student Borrower Protection Center, 41 million Americans are eligible for debt relief of up to $10,000, while 25 million are eligible for relief of up to $20,000. And 20 million of us could see all our debt canceled, going from negative to positive wealth for the first time in our lives.
This will free up a significant portion of people’s paychecks, boost our economy, and combat a major source of inequality among American workers of all ages and backgrounds.
Biden’s order will also help in other ways. It will now cancel future loan balances after 10 years of payments for borrowers with a loan balance of $12,000 or less. And as long as they make their monthly payments, borrowers won’t see their balance increase, even when that monthly payment is $0 due to low income.
This is huge for people who have struggled for years or even decades under the crushing weight of student debt. It is also the floor of what is needed, not the ceiling.
Cancelation everything student debt would do more to unlock our economy and give our communities greater upward mobility. We also need to crack down on predatory private lending, which can force borrowers to pay interest for years just to owe After than their original loan amount.
And finally, we must push to make public higher education free so that no one has to buy their ticket to a better future on credit.
Olivia Alperstein is the Media Officer of the Institute for Policy Studies. This editorial was distributed by OtherWords.org.