Around 35 million students attending tertiary institutions will receive an application next month that will allow many of them to forgive their student loans. For another 8 million borrowers, the process is already underway.
The pledge comes after President Joe Biden’s Aug. 24 statement that outlined a three-part plan to ease the $1.7 trillion debt burden incurred from federal student loans. Aimed at low- and middle-income households, it continues to freeze loan repayments, cancel the debt of borrowers that the government deems “most at risk of default or default once payments resume” and organizes a new recovery plan. income-based repayment to reduce future monthly payments. .
For the 26% of USC undergraduates who receive federal loans, like junior philosophy, politics, and law student Andrew Lutz, this plan will be a welcome relief.
“It’s money that I would either have to pay with my own career for the next five to 10 years or money that my parents would have to take out of the house,” he said. “It will probably cut in half the time, including interest, it would take me to repay the loans.”
By writing off debt of up to $10,000 to $20,000, Lutz said he thinks the discount plan provides more options for the future.
“It also gives me more peace of mind because I’m not a STEM major,” he said. “While there are certainly plenty of options for me after college, I don’t really feel like I have to find something that’s going to be super lucrative right out of school.”
Victor Falcon, a first-generation business administration sophomore, said the plan “makes a huge difference” in his decision to pursue a fourth year at USC rather than graduating from undergrad after three.
Student loan debt is the second highest category of consumer debt in the United States, second only to mortgage debt and higher than credit card and car loan debt. California holds the largest contribution to this segment of debt, totaling $141.8 billion for a combined population of undergraduate and graduate students.
“I definitely feel like I’m getting a better deal right now from school,” Lutz said. “It often feels like if you want to get an education, you have to go into debt.”
While the plan helps current USC students manage their debt, some suggest the school still needs to do more to increase its affordability. It is estimated that attending the University in the 2022-23 academic year will cost $63,468 in tuition alone, 53% more than the national average of $41,568.
“USC wants to proclaim itself as a top institution … on par with the top schools in the Ivy League,” Falcon said. “Many of these schools are waiving tuition and guaranteeing free tuition for all families under $100,000.”
In April 2022, Bloomberg reported that the average cost of tuition at an Ivy League school fell by about 5% on average, adjusted for inflation. While the University of Pennsylvania increased its tuition by 4%, it increased its financial aid by 5.25%. Earlier this month, Princeton University expanded its aid program by offering free tuition to students from families earning less than $100,000.
USC’s most recent milestone in need-based funding was in February 2020, when it committed more than $30 million to cover tuition for families earning less than $80,000. per year.
“[The University] needs to make financial aid more accessible, more streamlined, especially to reach first-generation students who are new to this process. Also, be more generous with their help, or maybe limit costs,” Falcon said. “Let’s say you’re a freshman, USC [could] guarantee that the costs to come here will be fixed.
Meanwhile, others believe that while the policy can help USC students, it diverts funds from areas that need it most.
“It’s going to help places like USC, but maybe there are better ways to spend those funds and the people who are really going to suffer,” said Robert Dekle, professor of economics at Dornsife College of Letters, Arts and Sciences. Science. “[With a degree]you are going to be reimbursed by the market, it is just an investment in yourself.
While California has the highest level of student loan debt, it also has the third lowest average student loan debt, at $21,125. Sixty-five percent of Americans don’t go to college, but the pardon plan will cost taxpayers about $400 billion over 10 years.
“Use the money for early education, and there will be more of an impact on income equality,” Dekle said.
Falcon “strongly disagrees” that the plan won’t help low-income families, since it targets families earning less than $150,000.
“I feel like it’s completely a step in the right direction,” he said. “I think the Senate debt relief should really increase the amount. I’m more in favor of a $50,000 relief.
For years, progressive members of Congress have been pushing for the cancellation of $50,000 in student loan debt. After the economic fallout from the coronavirus pandemic, which affected the ability of borrowers to repay their loans, Congress and the Trump and Biden administrations responded with historic student loan relief and pauses on federal student loan payments.
Looking to the future, Falcon and Dekle said the long-term goal to achieve greater equity in education should not rest solely on the issue of student debt.
“I know that canceling student debt is not the ultimate solution,” Falcon said. “It should really be enlarged. I believe that the United States should adopt a system closer to the European education system for higher education, where citizens pay little or nothing to go to college and pursue their dreams. Here in the United States, we pay an exorbitant amount. »
Dekle said he had doubts about the plan’s longevity and subsequent effectiveness, asking whether jurisdictions “will permanently have a $10,000 rebate program.”
“Education has externalities,” Dekle said. “There is the question of whether this individual [forgiven of a student loan] should benefit so much at the expense of other programs… my feeling is more balanced towards greater needs than that.