For more than two years, student loan repayment in the United States has been on pause, and interest on those debts has been frozen in light of the pandemic. In April, that pause was extended to August 31 of this year, offering another temporary reprieve for borrowers, many of whom were struggling to make often-crushing payments well before COVID-19 became a household name. Now, after years of calls to cancel some or all of the nation’s $1.6 trillion in student loan debt, federal policymakers are seriously considering finally taking a step in that direction.
To unpack how student debt became a $1.6 trillion crisis, what’s being discussed in Washington, and why student debt cancellation must be just the beginning of the conversation on making higher education affordable, Rebecca sat down with two of The Century Foundation’s experts on the subject: Tiara Moultrie, a fellow at TCF whose work focuses on higher education accountability, and Peter Granville, a senior policy associate studying federal and state policy efforts to improve college access and affordability.
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REBECCA VALLAS (HOST): Welcome to Off-Kilter, the show about poverty, inequality, and everything they intersect with, powered by The Century Foundation. I’m Rebecca Vallas. For more than two years, student loan repayment has been on pause, and interest on those debts has been frozen in light of the pandemic. In April, that pause was extended to August 31st of this year, offering another temporary reprieve for borrowers, many of whom were struggling to make often crushing payments well before COVID-19 became a household name.
Now, after years of calls to cancel some or all of the nation’s $1.6 trillion in student loan debt, federal policymakers are seriously considering finally taking a step in that direction.
To unpack how student debt became a $1.6 trillion crisis, what’s being discussed in Washington right now, and why student debt cancellation must be just the beginning of the conversation on making higher education affordable, I sat down with two of The Century Foundation’s experts on this subject. Tiara Moultrie is a fellow at TCF whose work focuses on higher education accountability, and Peter Granville is a senior policy associate studying federal and state policy efforts to improve college access and affordability. Let’s take a listen. [upbeat music break]
Tiara, Peter, thanks to both of you for taking the time to come on the show. And I’m really excited. This is both of you, for both of you, I think this is the first time having you on Off-Kilter. So, welcome and thank you!
PETER GRANVILLE: Thank you. Happy to be here.
TIARA MOULTRIE: Thank you. Very excited.
VALLAS: Well, so, I always love to start these conversations by asking guests how they come to this work. We’re gonna be getting into the student debt crisis and also some of the current conversation around debt cancellation and some of where that may go. But before we get into all of that, Tiara, I’m gonna start with you and then bring you in, Peter, to give you a chance to talk a little bit about how you come to this work.
MOULTRIE: Thanks, Rebecca. So, I actually started from an economic justice background. So, a lot of the work that I was doing was trying to understand the wealth gap, trying to understand how we have people access wealth through things like home ownership opportunities, through guaranteed income programs, and similar programs that would enable people to be able to live comfortably, essentially. Related to that, higher ed came to be one of the areas that I worked on because we were, again, trying to consider how do people get ahead? How do people try to find access to economic mobility and economic stability? And for a long time, we told people that college was the answer, was in some ways the only answer. Before we were making meaningful investments in things like apprenticeship programs and workforce development, people really felt like if they didn’t have a college degree, they didn’t have access to opportunity and would never be able to access the middle class.
And so, I think that that really is the basis for all of the work that I do, is how do we move from this idea that one, college was sort of the pathway to economic freedom, and how have we failed to uphold that promise? So, for people who are seeking access to formal education, whether it’s because they know what they wanna do, they want to be in finance, they wanna get an MBA, they know what the path going forward is, or for people who are a little bit more exploratory and wanna have the option to be able to pursue an interest without fear of what debt may be on the other side is really what drives me to this work and drives me to be really curious and interested about higher education.
I think while student loans are one aspect of the broader accountability bubble, they’re one of the most important because they really speak to what is supposed to be the transformative power of higher education. It’s supposed to not only grant people economic mobility, but also a kind of social mobility. It’s supposed to give you the opportunity to be in settings where you can discuss these really interesting and robust topics. And I know for me, that’s really what it was. And so, I think that’s what leads me here is trying to figure out how do I expand access to that opportunity? But really just the opportunity to be able to be in a space and think about things and figure out what you wanna do next and hopefully be able to find a sort of career pathway and a career trajectory through higher education.
VALLAS: I love that. And Peter, I’ll turn it to you next to talk a little bit about how you come to this work. And I know the two of you do some work together at The Century Foundation, but it’s a big team doing higher ed work. You two are just two of the folks on the team. Peter, how do you come to this work?
GRANVILLE: So, when it comes to student loans, I’m a student loan borrower myself. I’m very privileged in that for undergrad, I got to attend the college I wanted to attend, and my need was covered by grants and scholarships. And then went straight ahead to grad school, and I took on about $45,000 for that. Again, I’m very privileged because my income has been enough that I haven’t missed a payment, but I know how those bills can shape your life. When I entered repayment, I was working as an educator, not making very much money. I started getting the bills saying to myself, okay, I hope I’m able to make this work, but how am I gonna make it work?
And I remember I was looking for housing at the time, and I ended up living in a house with nine other people because it was simply the cheapest rent. Nine vet students, actually, and all of their animals. And it was fine. But would I have made the same choice if I wasn’t staring at almost $50,000 in loans? Probably not. But even more to the point, friends of mine from that grad program are not seeing as much success paying off their loans. I know a couple of them are seeing their balances increase. So, for them, the payment pause was a godsend, and it still is. So, so excited for this conversation.
VALLAS: I feel like that’s a great segue then into the sort of substance of this discussion. Folks are probably aware, right? It’s penetrated enough of the national conversation: We have a student debt crisis on our hands. We have for some time. It was not caused by the pandemic. It long predates the pandemic, and it was already at crisis levels well before we were having conversations about COVID-19 and any related consequences for the economy and for families and for students.
But I’d love to start with just a little bit of, what is the student debt crisis? How did we get here? And to put a little bit of a human face on it and how it’s impacting people’s lives. We’ll get to the discussion around potential solutions. There’s a very real conversation happening right now at some of the highest levels of power in Washington around actually taking potentially historic action to cancel large amounts of student debt, a clarion call that we have had from progressives for some time. But I’d really love to start by setting some of the foundation here, laying some of the foundation, for what is the student debt crisis and who is being affected. So, Peter, maybe I’ll stay with you to talk a little bit about some of the facts and figures here. Help people understand if they’re coming into this going, “Okay, I know we have a student debt crisis.” How bad is it? How many people are impacted, and what does it look like? What do we know?
GRANVILLE: Sure. I’ll throw some numbers at you, Rebecca, and I’m getting these from the latest reports from the Education Department. Forty-three million people in the United States are federal student loan borrowers. In total, they owe $1.6 trillion. So, that’s an average of around $37,000. You might be asking, okay, what about private student loans? Here, I’m pulling from Federal Reserve data. In 2020, about 45 million people in the U.S. had some kind of student loan debt, be it federal or private. And keep in mind that actually, not all debt for education is in the form of a student loan. So, there’s also home equity debt and credit card debt, just to name a couple. When we include those types of debt, then this data indicates the total rises to about 47 million people. So, 47 million adults in the U.S. have some kind of debt for education; 43 million of those owe federal student loans. So, it’s a bigger phenomenon than just the federal student loan program, but that’s certainly the largest component.
But I do wanna step back here. So, you used the word “crisis,” and the word “crisis” is really interesting. A crisis is usually something that demands urgent attention. But this crisis is actually, by its nature, extremely slow moving. So, every day for the past 40 years, a marginal number of people have newly taken on student loans, and a marginal number of people have newly defaulted. There’s even maybe a comparison to climate change in that any individual day that goes by without policy action won’t be the cause of a disaster, but years without policy action absolutely will. So, this has historically been a slow-moving crisis.
This is a really interesting time for this conversation, because what’s different now is that we actually are approaching a moment when this crisis will, for a brief moment, be very fast moving. I’m talking about when the repayment pause ends. So, in a year or two, we’ll likely be able to say what the Biden administration did during the repayment restart, maybe it did cause people to default on their loans. Or what the Biden administration did during the repayment restart prevented people from defaulting on their loans. There’s a real tangible cause and effect going on here, and the administration would much rather have history look back at how they prevented loan defaults compared to how they caused more loan defaults by botching the restart. So, I think that’s one reason why this conversation is so important right now. We’re coming up on a really historic moment for the student loan debt phenomenon, crisis, however you would characterize it very, very soon.
VALLAS: Yet another one of the many cliffs that have been created by good steps taken during the pandemic, spurred by the pandemic on issues that were problems before the pandemic, but which the moment we’ve been in that has created historic levels of political will, has sort of allowed temporary action to take place. So, such an important point to really start off with here. We’re coming up on another one of those cliffs, and that’s what makes this such a high stakes moment for so many people, millions and millions and millions of people of many different ages, as we’ll get into, who are impacted.
I’d love to bring you in here, Tiara, and to get a little bit more real and take this from facts and figures and bring a little bit more of a human face into this conversation and to paint a little bit of the picture of who are the people who are impacted and who are most impacted by student debt. Talk a little bit about who is hardest hit by this crisis that has not sparked urgent action until possibly now.
MOULTRIE: Thanks, Rebecca. So, this is a huge crisis that it’s taken sort of decades to come to, and everyone is impacted. I know that there are obvious faces of student loan debt cancellation debate that we think of. But the reality is that we’re all impacted in some way by what led to this crisis. So, the decline in state support for higher education, decreased state funding for college, causing schools to raise tuition in order to fill gaps really affect everyone. It affects parents who are looking to do the best for their children. It affects students who are considering whether or not they can even afford to go to their dream school. The easy access to federal loans means that schools can raise tuition without losing prospective students. So, again, when we think about this as a consumer issue, everyone who is a potential sort of convert for a college is someone who’s impacted by this. Federal loans are very easily available, and people are using them in order to cover tuition at institutions, regardless of if those institutions will pay off for them in the long run. And poor-quality institutions really don’t pay off for anyone.
But I think that when we wanna understand who’s really been hurt by the crisis, it is a number of people of color and borrowers of color, people who felt that they had no option but to pursue college because in the low-income communities they reside in, they were told that that’s the only way to have a path towards economic mobility. And for some people, the goal isn’t even mobility, it’s to find stability that theoretically comes with a college degree. We think that degree attainment means that you’ll be able to find recession-proof jobs, that you’ll be able to qualify for raises or bonuses that you traditionally wouldn’t be able to. And unfortunately, those benefits don’t come to everyone, even if you do complete a degree. And it’s worth noting that the vast majority of people who go to college, while a reasonable portion do actually finish their degrees, a number of people who start post-secondary education never finish or take more than four or five or six years to complete a degree. And so, when we think again about what those economic benefits of college completion are and whether or not these people are ever going to be able to make repayments, there are a lot of people who get left out of that conversation.
For low-income borrowers, again, who are seeking out opportunities, whether that’s at a traditional four-year school or a two-year school, they’re forced to take on a lot of this debt because they feel like they have, again, no other options. They don’t have the liquid capital necessary to cover what they may have as an estimated family contribution. They may have a sudden medical bill, a sudden crisis that leads to them no longer being able to get access to something. They may have issues proving what income bracket they are in. So, maybe previously they had a grant, and then due to a change in their family’s financial situation, they no longer qualify. So, student loan debt crisis really has hit everyone. But for very low-income students who are, again, just to gain access and opportunity, it’s really started to affect them because they’re faced with a debt that they’ll have no way of repaying and one that they wouldn’t have taken on if they weren’t reassured that college was a sort of pathway to economic freedom.
VALLAS: It’s such an important point as well which you make that a lot of the folks who end up impacted by crushing student loan debt that ends up radically changing their economic picture and not for the better are actually people who may not have ended up with degrees at the end of putting all that money down. And so, it’s all of the downside, none of the upside side in a way of saying of education in some ways and yet a significant slice of the pie here.
Tiara, you started to get into this, but I feel like it would be helpful to spend a few minutes actually kind of delving fairly deeply into how we got here, how we got to $1.6 trillion in collectively owed debt. That ceases to be a, “Oh, this is just a handful of people who are impacted.” I mean, you were just saying it, Tiara: This is impacting everyone. At that kind of scale, it’s also impacting us collectively as a society, as an economy. We’ll talk about that as well. But I’d love to stay on this point of how did we get here? What were the various steps along the way? Which people may not be familiar with it in terms of the story that ends with $1.6 trillion in debt owed and the huge economic consequences being so incredibly widespread. And Tiara, I don’t know if you wanna pick up there, or Peter, if you wanna pick up there on a little bit of the story of how we got here.
MOULTRIE: So, I’ll say that’s right. There were a series of steps that got us here. I think when we talk about crisis in higher education, it sounds like this is something that has emerged suddenly, when really, it’s been building pretty consistently over time. We often hear people talk about a past when you could afford to pay for college by having a summer job or taking out a small loan, maybe doing a collection at a local church or a civic organization that you or your parents are part of. But those days have really gone by the wayside because we haven’t been investing as seriously as we should be in education. It has led to a number of people having to take on debt in order to cover tuition gaps.
The tuition gaps are continuing to grow, partially because schools are continuing to be underinvested. The state isn’t making a reasonable effort to invest in public institutions. Private institutions are also facing their own challenges. One of the unique things about these schools is that because they’re so reliant on being able to draw endowments, those who can’t as students wind up shouldering the burden. And it’s not just students. It’s really their families as well. So, when we think about what the student loan debt crisis is, it’s easy to sort of envision what we think of as a traditional student: an 18-year-old who’s enrolling for the first time on a college campus. But this really is affecting a number of people.
During periods of economic crisis, we know people who are, again, concerned about job security, concerned about whether or not they have a recession-proof job, are more inclined to return to school. So, you have older adults that are attending school. You have people who have been disconnected from the K-12 education system who are now seeking opportunities to go to school. And then you also have traditional students whose parents are trying to figure out how to support them, even as tuition is getting more expensive.
When it comes to the kinds of institutions and really what led us here, one of the other important things to talk about is how certain kinds of institutions have continued to receive federal aid, even if students can’t afford to pay it back, and even if the schools aren’t giving people any benefits that generally come with a college degree. So, for people who have been defrauded by their schools, for example, people who enroll in a school based on a promise that they’ll be able to get a degree that is industry recognized, that they’ll be able to earn a certain salary, that they’ll be able to get a certification even that is applicable to a field that they wanna work in and one that they can, in fact, work in.
You have all of these people who have come to higher education with hopes in and a real belief in the promise that higher education is supposed to give us. And it’s sometimes a sort of lofty discussion about whether or not you’re gonna be able to pursue academic interests and whether or not you’re gonna be able to be a contributor in a real incubator of thought. But there are a number of people who are seeking higher education for one specific reason, and that’s in order to be able to have access to that economic mobility. And unfortunately, those people are often preyed upon by schools that have deceptive practices. So, they are also one of the sort of forgotten voices in the student debt crisis debate.
VALLAS: It’s another really important point as well right there. So, there’s folks who end up not finishing the program and not getting the degree at the end and still being saddled with the debt. But there’s also this group of folks, and unfortunately, a large and growing group of folks, who end up with the debt and end up with some kind of degree, but it’s not worth the paper it’s printed on, right, whether because of outright fraud—being defrauded, as you mentioned, by the school—but also, all kinds of predatory institutions, something that there’s been some level of increasing attention paid to within the education, the higher education, sector in recent years, but which is still very much not nearly as well-known as it could be within this conversation.
Peter, I don’t know if you wanna jump in there. I’m sure you’ve got additional thoughts as well on the how did we get here question, which I feel like is really important as we think about then, what do we do in this moment? And what does it look like to show up as a society who cares about the economic well-being of its people in a moment like this?
GRANVILLE: Yeah, I’d love to double down on what Tiara said around state disinvestment. So, in the United States, we have a system of higher education which is very state centric, and higher ed is called the balancing wheel of state government. And that’s because lawmakers can always reduce funding to public colleges, and the lights will stay on. Why is that? Because the colleges can then raise tuition. Prisons can’t charge more for the people incarcerated there. Public schools can’t fill in budget cuts by collecting money from second graders. Higher ed is unique in that it can actually raise money through tuition, so it has been a subject of major, major disinvestment over the past four decades or so. But that shifts the burden to the student. And voila, we have a $1.6 trillion volume of student loan debt out there.
So, we really should not be surprised to see a student loan debt crisis, because that’s what generations of state lawmakers have collectively signed up for, honestly, going back a generation and a half. For its part, Congress has really not done very much to help students, by the way, of increasing the Pell Grant. The Pell Grant is only a fraction of what it was generations ago. And because of that, we have this volume of student loan debt, but we also have food insecurity on college campuses and students unable to afford a place to live. So, even setting the question of forgiveness aside, what else needs to happen?
We need a structure in place to ensure that states provide healthy amounts of funding for higher ed. And actually, the America’s College Promise Act, which would’ve provided free tuition at community colleges nationwide, would be one way to do that. It’s not that well known about the bill, but as a condition of getting the funds to eliminate tuition, states would have to maintain their current levels of funding for public higher ed, which admittedly, are not great levels but are definitely preferable to the steady decline in funding that we’ve been witnessing now for a long, long time. So, even though community college students don’t take out that much debt, free community college through the America’s College Promise Act would actually go a long way towards reducing student loan debt for the future. So, it’s something to keep in mind, even as we talk about what do we do now with all of the student loan debt that has been created? We do need solutions to reduce it for the future. That’s definitely one pathway.
VALLAS: So, connections across the federal level and the state level, but also in some ways kind of a squeezing of the balloon that shifts the burden, and has shifted the burden, over decades, as you note, to students, to families, as part of a multi-layered level of disinvestment.
With that is a little bit of the story of how we got here—and frankly, we could probably do an entire episode on that. And I realize you guys are doing kind of amazing work summarizing multiple decades of trends and policy decisions and more in just a few minutes—I’d love to bring this conversation back to actually, Tiara, where you started in talking about how you come to this work. And then we’ll go into some of the debate over cancellation and what is currently on the table and getting discussed right now.
But in talking a little bit about how you came to this work, Tiara, you mentioned economic justice and the connection between higher education, and on the flip side, the student debt crisis and economic justice as a larger whole. Talk a little bit about how the student debt crisis is impacting our lack of economic justice in this country, but also how the student debt crisis is impacting the larger economy.
MOULTRIE: So, the student loan debt crisis, as I think we’ve covered by this point, has really gotten out of hand. The fact that borrowers all over the country are facing just a giant burden that they have no way of repaying does something for them sort of mentally and emotionally. But beyond that, and on the very practical side, it also means that a generation of people are being left in dire straits because they can’t afford to access the, again, markers of traditional middle-class life that we think a college degree is supposed to provide. So, those who are indebted and people of color, who take on a majority of the debt, and even though they generally have lower loan balances, have a much higher debt burden, specifically because they don’t have access to wealth. So, for families that are low wealth, who don’t own homes already when they’re sending their children to school, and then those children are taking on a disproportionate amount of debt, they have additional obligations once they complete. So, maybe they long to be able to own a home, they long to be able to meaningfully engage, and they simply can’t because they can’t afford their monthly minimum payments. Or worse, if they can’t find access to employment post-graduation, as many people who are graduating in a recession will find, it either leads to them taking on even more debt by going to graduate school in order to buy time as we hope the economy rebounds, or they simply go into default because they can’t actively make payments.
And I think that that’s something that we don’t discuss enough is just the fact that for a number of people, the current payment pause has been a real godsend because they don’t have the ability to make these payments. Faced with the reality that many people were laid off, many people who were already unemployed at the start of this crisis, it really is impacting our way of living, our way of life, and also impacting whether or not people are ever able to have access to things like being able to purchase a car, right? If you have a default for your student loans, it impacts your credit score, whether they’re federal or private loans.
And so, your ability to be able to even rent an apartment, especially if you live in a sort of high-rent city like New York or D.C., is really impacted by the fact that you didn’t have the funds to cover your student loans. So, it really imparts itself in every rank of the society. And that’s why even when we continue to talk about the economic crisis that’s befalling borrowers of color, again, we get to this reality that is, you go to college, you get a four-year degree, and potentially, you get a master’s degree, you get a doctorate, and you still have this huge debt burden that is preventing you from being able to do additional things with your life.
We know that during the Great Recession—which is generally when we hear people talk about the start of the debt crisis, but we know it has its origins much earlier than that—one of the things that constantly comes up is the fact that Black families in particular were hit especially hard during the Great Recession, saw very high rates of foreclosure. And so, again, you think about what that means for these people. You’ve already got a foreclosure on your record, which is gonna limit your ability to be able to take out loans. So, if you’re a parent, you’re worried about how do I finance my child’s education when I have this negative item on my credit report? Your children are concerned not only about where they’re gonna live, but if they do have aspirations for post-secondary education, they now have this additional worry of how do I burden my parents by asking them to take on debt? Should I take on more debt? What even are my debt allowances?
And I think that this is something that some people will remember being on college campuses for the first time and realizing that you suddenly are an adult who is expected to be fiscally responsible. You’ve taken on, for most people, a tremendous debt burden already when you get on campus. And then you are continuing to do so, right, over the course of your college education. Every year you’re filling out forms and taking on more and more debt, unfortunately, without really thinking about how those payments are going to hit you because you have this expectation that you’ve done things the “right way.” You’ve gone to secondary education. You’re now enrolled in school. You’re gonna finish your studies in something you’re passionate about, something you’re excited about. You’ll definitely get a job.
We never hear students sort of think long-term, like, what happens if I graduate into a recession? What happens if a job that I thought was recession-proof no longer is? What happens if I have to move because there’s an oversaturation of the degree that I have in X market where I decided to attend school? It all is unfortunately really interconnected and paints a pretty troubling picture for what people are able to accomplish.
And I think we’ve seen press pieces about whether or not people feel like they’re able to have children, able to think about marriage—all these things that have economic consequences—because they fear so much what happens with their student loan debt and continue to fear what happens if they can’t repay. Even if you are making consistent monthly payments, for most people, you’re one paycheck away from being unhoused, one paycheck away from not being able to pay your loans. And so, you have this additional, again, anxiety, fear, depression sometimes that comes with, how do I ever manage to get over this debt burden, and will I ever be able to accumulate wealth? And for the vast majority of people, especially those from low-wealth communities, the unfortunate answer is, even with a college degree, no.
VALLAS: I kind of wanna take everything that you just shared and package it and just have it available as an answer any time I hear someone say from now on, “Oh, it must be all that avocado toast that the millennials like. That’s why they’re not buying houses [laughing] and doing other things in the economy.” ‘Cause that has been the narrative for so long in such a shallow and facile way.
Peter, I wanna bring you in on this question as well around how the student debt crisis is impacting the economy as a whole. Tiara just offered a ton there, but I know you’ve got additional thoughts here too.
GRANVILLE: Yeah. Cosign everything Tiara just said. And thinking about the policy implications of this, there’s this argument going around that, hey, every dollar spent on student loan debt forgiveness is a dollar not spent on childcare, not spent on healthcare. Yes. From the government’s perspective, that is true. But also, think about it from the borrower’s perspective. Every dollar that a borrower spends on their monthly student loan bill isn’t going towards providing their child with childcare. It isn’t going towards covering healthcare expenses. It isn’t going towards buying a home. It isn’t going into the local economy.
I saw a headline the other day, “Mitt Romney Lambasts Joe Biden for Considering Student Loan Debt Cancellation.” Well, last week I was hearing Mitt Romney in an interview talking about how the U.S. needs greater population growth to compete with other countries like China. And I don’t know, Senator, what’s the big reason why young people aren’t having children? It’s because of their student loan debt.
VALLAS: And Peter, staying with you a moment there. And I love how you’ve both been connecting some of these dots, right? Because obviously, the student debt crisis does not exist in a silo. Policy does not happen to people in their real lives in silos. All of these issues interact. Different bills and expenses that you have all interact. These choices are not just, as you said, Peter, choices that the federal government is making. These are choices that families and individuals are making at their proverbial kitchen tables every single day.
Something that you have looked into, particularly as an area of research at The Century Foundation, is actually how the student debt crisis is impacting parents, which is not something I’ve heard get talked about almost at all, if at all, as part of this larger conversation around the issue. Talk a little bit about what we know and what you found in some of your research about the impact on parents.
GRANVILLE: Sure. A focus of the research that Tiara and I have been doing, along with our colleague Denise Smith, is all around this population that gets very little attention when it comes to the student loan borrower and student loan debt conversation ‘cause they don’t fit the mold. And that’s parents. This includes parent borrowers who are retired. This includes parent borrowers who may have never gone to college at all.
There’s about $104 billion owed in what are called parent PLUS loans. And these loans have higher interest rates than other federal loans and fewer options to reduce monthly payments through alternative payment plans. These are the loans that parents can take out for their child’s education. I’ve been doing analysis of these loans through the college scorecard, which is this great federal data set. And I find that after 20 years in repayment, about 38% of this debt still remains unpaid. So, what this means is that many parents spend more years paying off their PLUS loans than the years they spend living with and raising the child whose education that loan supports.
Parent PLUS borrowers make up about one third of the student loan defaulters who see portions of their Social Security payments withheld from them, which means they may be receiving monthly payments that are actually under the federal poverty guideline. These people also might have their student loan debts of their own. So, in addition, many more Black and Latinx parents, around 30%, hold these loans not just for their own children’s education, but for their own education. That’s compared to about 13% among white parents who hold these loans.
And as I’m kind of alluding to here, these loans interact in the worst ways with the racial wealth gap. So, we know the typical Black family’s net worth is around $17,000 versus about $170 for the typical white family. This phenomenon is really bad at HBCUs. I’ll give you two examples. At North Carolina Central University, within two years of a starter for payment, 14% of parent PLUS borrowers are in default. And that actually goes up to 17% by the third year. For North Carolina A&T State University, these figures are 12% after two years and 14% after three years. So, this is just one reason why it’s so important for the federal government to step up and better support the finances of HBCUs, so that they can replace these loans with grants to students and come up with some solution for the fact that parent PLUS loans have just gotten so large, and especially among communities of color.
VALLAS: Well, I feel like you guys have both collectively done a really fantastic job of laying a foundation here for why we are in crisis, who is being impacted, why this is something that anyone and everyone should care about, even if they don’t, or someone in their family doesn’t, have student debt, just as people participating in our national economy. There are clearly many, many reasons why this is a crisis that needs to be addressed. Now we actually have an opening. We have a moment where, for the first time that I am aware of in my lifetime—which I think would be similar to an overlapping with both of your lifetimes—we have federal policymakers actually talking very seriously and getting concrete about real options and real policy levers for doing something that could, with the flick of a pen, actually change millions of people’s lives and make a whole bunch of student loan debt disappear almost overnight.
I’d love to have each of you talk a little bit about some of what’s getting proposed. We’re, of course, hearing a lot of this from President Biden, who does have some level of executive authority to take action here, to actually take a real step forward in terms of canceling a large amount of student debt without needing legislation to move through Congress, something that we are increasingly realizing collectively is not necessarily where we’re gonna have great success right now. And certainly, that’s gonna get even more challenging as we get closer to the midterms. So, lots and lots of spotlight on what can Biden do, what might Biden do, what might we see this administration do?
So, Peter, I’m gonna stay with you for a moment to talk a little bit about some of the proposals that are on the table, and perhaps starting with President Biden’s current proposal—I believe it’s still the current proposal as we’re talking—to cancel $10,000 of student debt so that basically, the first $10,000 in student loan debt held by certain people under a certain income level. Talk a little bit about what we’re hearing from this administration, and then Tiara, I wanna bring you in to talk about this as well.
GRANVILLE: Yes. So, the current proposal that we are hearing from President Biden would be $10,000 in debt forgiven for those making under $125,000. That could change in the coming days. We’re still, as far as we know, this is happening all really behind closed doors. And so, we’re just getting, I guess, kind of reading tea leaves. We’re trying to get a sense of it, and this could change pretty rapidly.
But analysis from Charlie Eaton at UC Merced, who’s a great researcher on student loan debt, he estimates that if he passed $10,000 of forgiveness and capped it at about $150,000 of income, then you eliminate federal student loan debt for 13 million borrowers. That would be about 32% of them. Of those who are in the bottom 20% in terms of wealth, you go from 15% of those people having student loan debt down to 10%. And then as you go up in terms of the amount of money being forgiven per borrower, the amount of people who are captured by the income cap, then that certainly changes. That increases. But that would be some of the impacts of that sort of proposal.
I will say I’m thinking about how you said this would happen overnight, and I actually wanna challenge that a little bit. What we do know for sure is that this is probably gonna end up in court. It may take months for this executive authority question to be settled. There exist legal opinions, but the courts have never set a precedent for student loan debt forgiveness of this scale before. So, I just wanna kind of temper expectations. If you see an announcement on the news, know that this is really just the beginning of what may be a long, drawn-out process.
VALLAS: And Tiara, I wanna bring you in, in there as well. I also wanna note, as I do, that President Biden’s proposal is just one proposal. Obviously, it has outsize influence and attention because he is the president of the United States, and ultimately, it’s the administration that will be making this decision, we expect. But there are other leading voices in this debate and who have been really important champions in elevating this conversation to this level, such as Senator Elizabeth Warren, who have also been pushing for more expansive versions of student debt cancellation in this moment. I believe I’ve seen Senator Warren propose to cancel the first $50,000 of borrowers’ student loan debt. We’ve heard other members of Congress weighing in as well. So, Tiara, over to you to help us continue to set the table here of some of what we’re hearing, some of what the options are, and some of what is on the table as policymakers evaluate whether this is the moment to do something historic on student loan forgiveness.
MOULTRIE: Yeah. And there are a lot of options. So, the current plan that’s being proposed, which would be sort of 10,000 for people making somewhere between or at 125 and 150,000 is just one. Elizabeth Warren is probably the biggest name that has come out with a really progressive proposal of canceling up to $50,000 per borrower. Her analysis dictates that canceling student loan debt at that level would actually be a win for racial justice and will provide relief to more Americans. Which, while true, I think that there are a number of questions that we still have to consider. And again, it’s just one proposal.
We’ve heard 10,000. We’ve heard debt cancellation only for people who have up to $10,000. We’ve heard $25,000. We’ve heard $50,000. And then who actually benefits from that debt cancellation seems to vary as well. $50,000 in debt cancellation would zero off the debts for about three quarters of borrowers. So, that’s obviously a huge number of people. One of the considerations that people are, I think, making is whether or not debt cancellation for all is beneficial versus more targeted debt cancellation, whether that would mean people who fall within certain income guidelines, people who have pursued education at certain schools. For a little bit, there was discussion about whether or not it would be people who went to state institutions, private institutions, how and which HBCUs would be counted in that number.
So, there certainly are a number of opinions on the best way to do this. And while we don’t wanna take away from that, and certainly advocates on both sides of the aisle are calling for different numbers, one of the really important things to remember is, again, just how broad this crisis is. So, any amount of debt cancellation is gonna be beneficial, we think, in theory. But on a practical level, there are larger questions to consider, which is to say when we think again about borrowers of color, people who maybe have very low balances but have huge debt burdens, what amount of forgiveness is gonna be appropriate for them? And is that amount of forgiveness the same as someone who is pursuing a graduate degree is something that we have to think about. Whether or not PLUS loans, which are those that are generally given to graduate students and are also part of the parent PLUS discussion, are a part of any of these plans is something else to be considered. Whether it’s all federal student loans or not.
One of the unfortunate things about this problem is that it’s so huge. Unfortunately, no matter which of the proposals they go with, there are gonna be a number of people who are excluded from the conversation, which is gonna open up room for that level of advocacy. You know, there are gonna be people who make just over any threshold. Should Biden choose to go forward with having an economic cap in terms of salary, there are gonna be people who just exceed that cap. There are gonna be people who, again, if they went to private schools, if they went to schools that for whatever reason may be excluded from this cancellation, are gonna have real concerns about when they’re next. So, it’s definitely a big issue.
And to echo Peter’s point, there’ve been a lot of discussions about whose authority it can come under, who’s authority it should come under. So, while it’s one thing to think about this as an executive order, and President Biden has certainly used his ability to do debt cancellation, I do wanna start from that point as well. There’s already been a considerable amount done around debt cancellation. A number of groups of borrowers have already been able to see their discharges since this administration came into office. So, a number of people who qualify for total and permanent disability are now seeing discharge. People who attended schools that closed and weren’t able to transfer because their degree programs weren’t offered elsewhere have been able to see discharge. Thanks to some expanded authority during the pandemic, people who were seeking to have payments qualified under things like public service loan forgiveness are now seeing their payments counted and are reaching cancellation. So, there is a number of exciting opportunities that are happening, again, for very targeted aid groups.
But when we think about broad cancellation, there are a lot of different things to consider. And arguably the most important of which is the fact that in three months, a number of college students are gonna be back on campus. The debt cancellation conversation doesn’t include those people. So, how do we ensure that we’re not doing this, again, what you talk about this being the first-time debt cancellation is talked about, it’s because this is also the first time in 40 years where we’ve reached this sort of insane pandemic level. And the only way to ensure we’re not having the same conversation in 40 years with those borrowers who are entering college, this class of 2026, is to ensure that in addition to a conversation about debt cancellation, we talk about how to move forward with college affordability.
VALLAS: It’s so many important points in there. And I wanna ask the question ‘cause I feel like folks are probably listening and going, “Okay, I’ve been seeing lots of coverage about this. I realize this is a huge conversation right now, but what are the prospects?” And I don’t wanna make either of you look in your crystal ball, which I know you keep in your home offices or your work offices, whichever ones you’re recording from, for moments like this. But I do want to ask the question, where do things go from here? What should folks be watching in the coming days and weeks? If either of you wants to weigh in on what you think might happen, I’ll definitely take predictions as well. But I ask that question. Also curious if either of you wants to put a little bit of, shed a little bit of light on who are the opponents to doing this, given that there is lobbying going on, on the opposite side of this issue, as well, as there always is around hotly debated economic policy moments like this one. Peter, I don’t know if you wanna pick up there.
GRANVILLE: So, in terms of predicting what’s gonna come next, I remember my uncle, who is, you know, he’s been through many generations of politics before. He, I think, took me aside at a family event not that long ago and kind of clapped me on the shoulder and said, “Your student loan debt’s not getting forgiven.” And I think I nodded along like, oh, yeah, you’re probably right. Whatever. I don’t know, though. Like, anything is possible.
In the past four years, I’m thinking back to 2016, the amount of turbulence in politics has been so, so strong, and add to that the pandemic. And I don’t think any of us would’ve predicted the amazing win that was the Child Tax Credit in the American Rescue Plan Act, just as one example. And so, I don’t have a crystal ball. I don’t know what is going to happen, but I would just say, really, anything is possible.
MOULTRIE: To add to that—
VALLAS: Well, and I know— Yes, please. Please go ahead.
MOULTRIE: What I will say is that now is the time to watch. So, obviously, President Biden has continued to use his executive authority to extend the payment pause. And so, the current payment pause does end in August. Obviously, an interesting time since we are very close to midterms. So, I do anticipate if there’s going to be news, it’s probably gonna be in the next could be weeks, could be months. But very, very shortly thereafter, we’ll know what is going to come next. Because I can’t imagine that this issue that has now gotten such press that we’ve now seen movement even today with Democrats moving a debt cancellation bill, some language is gonna come out. I don’t know whether it’ll be done through executive authority or some other means, but I do think we will have some announcement towards where we are moving as a nation on debt cancellation.
VALLAS: So, we’ve been focusing most of our conversation around this potentially imminent cancellation, historic cancellation of a large amount of student debt. Obviously, as both of you have pointed out, unclear where things go from here. A lot of hope, a lot of optimism, a lot of advocacy going on right now to try to get the administration to take this kind of historic step. But something that is really, really important to point out, and which both of you I know wanna to speak to as well before we close this conversation out, is that the conversation can’t end there, even if we do see, and here’s hoping we do, some type of large scale debt cancellation in the coming weeks or months from this administration. That isn’t the end of and shouldn’t be the end of the conversation around what we do around the student debt crisis or of course, higher education more broadly.
Tiara, this has been a big part of the focus of your work. What else needs to be part of this conversation? Where do, where should things go after cancellation, whether or not it happens, now that everyone’s ginned up and finally paying attention to the student debt crisis for the first time at this level in about four decades?
MOULTRIE: Yeah, as my colleagues on the affordability side can speak to, the biggest concern at this point is really how do we ensure that college is affordable? For far too long, we’ve allowed students and families to shoulder the burden of a decision not to finance education at the levels that it was pre-recession. And so, we really have to think about how do we ensure that this crisis doesn’t continue to climb? So, if debt cancellation is in the cards and is something that’s possible, we do have to remember that in just three months, a new crop of college freshmen will be on campus. They’re going to be excited. They’re not going to be considering whether or not they graduate in a recession. They’re not going to be considering what may happen with their degrees. They are excited about the prospect of the future. And because they’re so excited about that prospect, they’re willing to invest in their selves.
And unfortunately, that’s sort of how we frame the financial aid and the student loan conversation, is how much are you willing to invest in yourself? Are you willing to borrow against who you are today in the hope that who you are in the future is gonna be able to make those loan payments? And for students being who they are, right, there’s always this expectation that you’re gonna be okay. And so, because of that, students are still going to borrow very large amounts.
Unfortunately, we’ve seen that any schools that are currently running things like tuition freezes, a lot of those programs are starting to go by the wayside as we slowly crawl out of the pandemic. So, a lot of the funding that was previously allocated that expanded certain kinds of student services are no longer gonna be there. We know that there’s been a decline in enrollment. So, what are schools gonna have to do in order to ensure that they’re able to continue to exist? They’re gonna have to increase their recruitment efforts. They’re gonna have to offer more programs that have relationships with either workforce readiness programs. They have to offer more evening classes. They have to offer more robust services when it comes to things like childcare on campus, right? So, everyone is gonna be in this hypercompetitive environment as we deal with the fact that college enrollments are declining. But schools have to be able to continue to have the resources necessary to run. And so, what we’re gonna have is even more students taking on debt and hoping that they can pay it back. And that’s the real worry.
I think one of the other important things to realize is that while federal action is obviously what would be best, this is a federal crisis. That $1.7 trillion number is huge and terrifying. And when we think about it, we think something must be done. And we always think that something must be done at the federal level, but there are also several states that are taking strides, both in terms of the number of debt forgiveness programs that they offer and in terms of their willingness to really commit to offering free tuition for college.
New Mexico, for example, has really, maybe surprisingly, been at the forefront and passed legislation that would allow anyone in the state to be able to attend post-secondary school for free. So, these aren’t programs that are flagged only for the top 5% from a certain institution. This is really anyone who’s seeking access to post-secondary education in the state. And I think that that’s amazing. New York is offering, obviously, the Excelsior Scholarship Program, which allows a number of people to be able to attend the state’s fine post-secondary education institutions for free. New Jersey has the CCOG, the Community College Opportunity Grant Program, as well as the Garden State Guarantee Program, which potentially allows students in New Jersey the opportunity to go to school for free for four years.
And all those states also offer pretty comprehensive programs. I say comprehensive with a caveat. One of the troubling things about debt cancellation is that I think there is a part of the narrative that thinks about who’s worthy of debt cancellation. So, for a lot of states that do run debt cancellation programs, they are flagged for certain industries, much like PSLF. So, for people who are teachers, people who are nurses, people who work in law enforcement, a lot of these really public facing opportunities, there are opportunities for debt cancellation, which is amazing and progressive. And hopefully more states continue to think about those kinds of programs as we consider what may need to be done depending on what happens at the federal level.
But it is a growing crisis, and it would be great to see even more states step up and say, we understand that this is a growing crisis. We want people to be able to stay in whatever state they attend college in and not feel compelled to move because they can’t afford their student loan debt plus rent, and really take a stand and say, we wanna come up with a robust forgiveness opportunity for people who reside in the state and who work in the state.
VALLAS: It’s such an important point, right? And obviously, so much more that needs to be part of the conversation. When it comes to higher education affordability, it can’t just be, all right. We took one-time action, and now we’re gonna land ourselves back in the same crisis level in another several decades as we do nothing else to address the problem, even if we do take some kind of historic one-time action now.
Peter, you have also worked a lot on the state level of this issue. Would love to give you a chance to weigh in on that question as well. Where should the conversation go from here, whether or not we get historic action right now or very soon on large-scale student debt forgiveness? And you’re gonna get the last word.
GRANVILLE: Wow, I’m honored. Thank you. Tiara’s completely right. We have a student debt crisis because we have a college affordability crisis. And structural solutions for college affordability are really paramount. In my opinion, free community college is a great avenue for change in the higher education cost space. First of all, free community college will make it easier for students to actually take on less debt because for the first two years of their college education before transferring to a four-year college, they’re going to need less debt because they’re paying less in tuition. It would put healthy cost pressure on other universities, like for-profit colleges, to lower their costs and not jack up prices to get the profits. We know that these free college policies lead to greater degree attainment, too. And that’s, of course, the goal.
So, what can people do? They can join the push for free community college in their state or even free four-year college, if that’s on the table in their state. A lot of existing free college programs that are out there leave out key groups of students such as adults, or they might be very narrowly tailored to certain fields of study. It’s unfortunately not that uncommon that policymakers will announce this exciting plan with a flashy title, but it might actually be leaving out a lot of students. So, accountability is needed to make sure that policymakers, when they talk about free college, are really delivering on that promise.
And I would say overall, this is why we need legislation like the America’s College Promise Act. But in the meantime, there is good work to be done at the state level. And even beyond that, we need to make sure that when students enroll, they are able to complete. So, major barriers that have already been mentioned today, childcare costs, as Tiara said, food insecurity as well. And we need greater access to benefits like SNAP, access to food pantries on campuses, things like that.
I’m hoping that the conversation around student loan debt forgiveness, perhaps through executive action, is accompanied by real pressure on Congress and state legislatures to make policy change that improves college affordability, not just for the students enrolling in the coming years, but well beyond that. So, as we wait for an announcement on executive action, people can always get involved in solutions on college affordability, be that at the local, state, even federal level.
VALLAS: And we’ve got lots more in our show notes for folks who want to learn more, including reading pieces from both of you, other Century Foundation resources, and a few timely news articles as well. But we’re gonna have to leave it there. It’s been great chatting with both of you. Peter Granville is a senior policy associate at The Century Foundation, where he studies federal and state policy efforts to improve college access and affordability. And Tiara Moultrie is a fellow at The Century Foundation focusing on higher education accountability. Lots from both of them in show notes.
Thanks to both of you for taking the time and for all of your work on this issue. I am among those who are optimistic and hopeful in this moment about some historic executive action, but also really grateful for this larger arc that you have both shined a lot of light on that it needs to be connected to. It can’t just stop with canceling debt this one time, even if we are able to see that as the outcome of this moment. So, thanks to you both for taking the time, and I look forward to having each of you back at some point in the future. [theme music returns]
GRANVILLE: Great talking to you. Thank you, Rebecca.
MOULTRIE: Thanks, Rebecca.
VALLAS: And that does it for this week’s show. Off-Kilter is powered by The Century Foundation and produced by We Act Radio with a special shoutout to executive producer Troy Miller and his merry band of farm animals, and the indefatigable Abbie Grimshaw. Transcripts, which help us make the show accessible, are courtesy of Cheryl Green and her fabulous feline coworker. Find us every week on Apple Podcasts or wherever you get your pods. And for the superfans, you can find a full archive of all past episodes and show transcripts over at TCF.org/Off-Kilter.
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