How much are you banking on your student debt getting canceled?
During Tuesday night’s debate, Democratic candidates for president got into some detail about their plans to lessen the student debt burden on the 44 million Americans who still owe money for their college degrees.
When all that debt is combined, it clocks in at an overwhelming $1.5 trillion. According to a report by Forbes, the average student loan recipient in the class of 2017 has $28,650 in debt.
Several Democrats running for president have plans, or at least a desire, to erase the student loan burden for everyone or many people — most notably Sen. Bernie Sanders and Sen. Elizabeth Warren.
Warren’s plan would relieve student loan debt based on household income. Families with an annual income of less than $250,000 per year would be eligible. She said she wants to make public college free and expand Federal Pell Grants, government money awarded to undergraduate students in need. It differs from a loan in that it does not need to be paid back.
She said during Tuesday’s debate on CNN that her plan “cancels student loan debt for 95 percent of the kids with student loan debt and helps close the black-white wealth gap in America.”
Sanders introduced a bill in June that would eliminate current student loan debt for everyone, regardless of income, and make public college free.
“A new vision says that we must cancel completely student debt because the younger generation in this country today, for the first time in modern American history, will have a lower standard of living than their parents,” Sanders said during the debate.
Candidate Marianne Williamson, an author, agreed with Sanders’ vision for deleting student debt, though didn’t describe how she’d do it.
“I think that all domestic and international policies should be based on the idea that anything we do to help people thrive is a stimulation to our economy,” she said. “If we get rid of this college debt, think of all the young people who will have the discretionary spending, they’ll be able to start their business.
“The best thing you could do to stimulate the U.S. economy is to get rid of this debt.”
But, if you’re one of those 44 million people who are supposed to be making payments every month, how high should your expectations be?
Not very, says certified public accountant and personal finance expert Logan Allec.
Because loan forgiveness would come from banks that lent us the money, and banks have no incentive to not collect these debts, the federal government would need to step in to make it happen. That’s why candidates are making these plans.
And it might be hard to believe, but “the reality is forgiving student loans is not very politically popular, and therefore unlikely to happen since government intervention is necessary,” he said.
According to a poll by Quinnipiac University, only 57 percent of people support the federal government forgiving student debt for households making less than $250,000 per year. And 52 percent oppose debt forgiveness being paid for with a new tax on the wealthy.
“While there is plenty of opposition from older (and) wealthier individuals, the staunchest opponents of student loan forgiveness are those who used to have student debt but paid it off,” Allec said.
“Those who had student debt know how hard it is to pay it off. There are countless stories of individuals who took on multiple jobs or side hustles in order to make enough income to pay it off. … As a result, many people in that situation resent the idea of today’s students not having to work to pay off their loans, too.”
This mentality has gotten plenty of backlash on social media.
Curing cancer would be a slap in the face to all those who have died of cancer https://t.co/0G5D3QPqUu
— Will Weldon (@oldmanweldon) April 22, 2019
Improvements to the federal government’s existing loan forgiveness program is more likely than mass debt cancelation, said Donald E. Petersen, a Florida-based consumer attorney “who has represented hundreds of consumers in bankruptcy court, including discharging educational debts.”
The program is meant to forgive debt for people who work in “public service.” However, analysis of U.S. Department of Education data showed that more than 99 percent of people who apply for forgiveness through the program are rejected.
Feasibility aside, with more than a year until election day, it’s “difficult to predict whether a candidate who supports student loan forgiveness will win the (Democratic) nomination, nonetheless the presidential election,” Petersen said.
And, if one of those candidates is elected, will they even be able to make good on a plan to cancel student debt?
“At this point, the odds of a mass forgiveness program… are fairly low.”
Writer Heather Taylor had $56,000 in federal and private loans when she graduated from college. After paying only the monthly minimum for years and getting nowhere, she changed her strategy and paid the remainder off in less than a year.
She said she wouldn’t bank on getting help from the government, as great as it sounds.
“My guess is that if there was a student debt forgiveness program initiated it, much like the idea of universal healthcare, would take years to go into effect,” Taylor said. “I also believe that there would be many strings attached to a program like this.”
Her advice is to “work to pay (loans) off now and do not cling to the hope that somebody else will do it for you.”
“It was terrible and I hated it and I gave up a lot to make it happen, including not having a car, but I would not stake everything into the idea that a political candidate will make all of this happen at the snap of their fingers.”
Want more debate analysis? Check out coverage by our sister publication, Next Avenue.