Next steps on student loan relief

President Joe Biden is reportedly planning to announce some form of student loan forgiveness, and the fact that loan relief is on the table and in the news, in some form, is a positive step.

Clearly, the federal government must address the student loan crisis. Too many Americans — over 43 million — owe an eyebrow-raising $1.6 trillion in federal student loan debt, according to educationdata.org. On average, borrowers owe $37,113. Student loan debt is now the second-largest category of consumer debt, after mortgages.

For America to truly offer opportunity for all, higher education must be affordable for every young person, even those from families of the most limited means. Federal student loans were meant to provide that opportunity, but have too often turned instead into a huge burden.

To help borrowers struggling through the pandemic, the Biden administration has paused student loan payments four times. But there’s no putting off the inevitable. Loan payments are set to resume Sept. 1. The federal student loan system needs changes — fair and practical change — to truly help borrowers long term.

Biden remains resistant — sensibly — to the big ask from many progressives who have relentlessly pressed him to simply wipe out $50,000 in debt per borrower.

“I’m not considering $50,000 in debt reduction,” Biden said last week in a speech in the Roosevelt Room at the White House. “But I am in the process of taking a hard look at whether or not there will be additional debt forgiveness.”

Focusing solely on wiping out existing student debt is a misguided, and at best temporary, fix, as this editorial board has written. What about next year’s college students and the loans they will likely take out? What about those borrowers with private, rather than federal, loans? What about taxpayers — including those taxpayers who scrimped and saved to pay off their own student loans — who would then bear the burden of repayment?

There’s the argument that debt cancellation would be an economic stimulus, but a 2020 analysis by the Committee for a Responsible Federal Budget concluded the cost of debt forgiveness would exceed any economic boost. A follow-up analysis from 2021 came to a similar conclusion.

The Biden administration should instead focus on reforming the student loan system itself, so that millions more borrowers won’t find themselves saddled with another $1.6 trillion in debt years from now.

One place to start: Before loan payments resume Sept. 1, the administration should provide lawmakers with details about its plan to help the approximately 7 million borrowers now in default.

U.S. Sen. Dick Durbin, D-Ill., is among a group of lawmakers who sent a letter recently to Education Secretary Miguel Cardona asking for such a plan.

Removing these borrowers from default would make them eligible to enroll in income-driven repayment plans, the lawmakers pointed out. They would get a new start, with loan repayments based on their ability to pay, as the Department of Education carries out its promised overhaul of its badly mismanaged income-based repayment programs.

The department must make good on its promise to fix those troubled plans, which offer loan forgiveness after 20 or 25 years of repayments. A recent NPR investigation found rampant irregularities in how qualifying loan payments were counted — or not counted — which ended up delaying borrowers’ progress toward loan forgiveness.

We also believe Congress should consider making income-based repayment the standard for all college loans, and also reduce the time frame after which outstanding debt is forgiven.

Congress should also pass a bipartisan 2021 proposal that would allow borrowers to discharge student loan debt in bankruptcy after 10 years.

The FRESH START Through Bankruptcy Act, co-sponsored by Durbin and Sen. John Cornyn, R-Texas, would also hold accountable those colleges with consistently high loan default rates and low repayment rates. Those colleges would be required to reimburse the government for a student’s loan if it is discharged in bankruptcy.

That’s another good and necessary move. Colleges that do a consistently poor job of educating students and preparing them for well-paying careers should pay the price — not taxpayers — when those students can’t make enough to repay loans.

The Biden administration must also make good on its promise to overhaul the equally troubled Public Service Loan Forgiveness program, which has failed to provide relief to 98% of applicants since the first cancellations were due in 2017.

Student loan relief is needed, but it’s only half of the solution to the student debt crisis.

The other half: Doing something about the sky-high cost of a college education.

Send letters to letters@suntimes.com