Policy Corner
The Headline
U.S. Supreme Court Strikes Down Biden Administration Student Loan Forgiveness Program
The Story
The expert
HER TAKE
Perna said that the ruling has wide-ranging consequences because of the prevalence of educational debt. “According to the Education Data Initiative, federal student loan debt now totals more than $1.645 trillion across 43.6 million borrowers. So, it’s a lot of money and a lot of people are affected,” she said. “This is more total debt from student loans than from credit cards—it’s lower only than mortgage debt. . . . It’s something that’s now structured into our higher education system—the use of loans to pay college costs is not a choice.”
And, she points out, the debt does not affect all borrowers equally. “It’s more common for Black students to be borrowing and to borrow higher amounts,” said Perna. “Again, according to the Education Data Initiative, on average, student loan debt is $25,000 higher for Black college graduates than white college graduates. And, for more than half of Black student borrowers, the amount owed in student loan debt exceeds their net worth. So, this is a really important social justice and racial equity issue as well.”
Following the Supreme Court’s decision, the Biden administration announced a new plan, Saving on a Valuable Education (SAVE), that calculates payments based on a borrower’s income and family size—not their loan balance—and forgives remaining balances after a certain number of years. Perna thinks it is an important step, particularly because of the relief it provides to those with the lowest incomes and those working in public service. “People have criticized the cost of this program, but these changes recognize the very real challenges that some experience in repaying student loans.”
Photo credit: Stuart Goldenberg for Penn GSE
She also applauds SAVE’s simplified approach. All borrowers of federal direct subsidized and unsubsidized loans are eligible, those on the previous Revised Pay As You Earn (REPAYE) plan were automatically enrolled, borrowers can be automatically recertified each year, and there are changes that could reduce the monthly payment for borrowers. For example, as long as someone on the SAVE plan makes their principal payments each month, they won’t be penalized with growth of unpaid interest.
Beyond this plan and other recent actions from the Biden administration—including the cancellation of $9 billion in student loan debt in October—Perna would like to see broader bipartisan conversations about college affordability and who should bear the responsibility of paying for the cost of an educated population—something that she argues is essential to our nation’s current and future economic and social prosperity. Additionally, she suggests that the language around educational debt be rethought to be less accusatory.
“It’s interesting that we talk about ‘loan forgiveness,’” she said. “[University of Southern California’s] Bill Tierney—full disclosure, a mentor of mine—wrote an op-ed in Inside Higher Ed, [saying] student loan ‘forgiveness’ is not a good way to talk about the issue. These students haven’t done anything wrong. Forgiveness is usually saying, ‘I’m sorry for something I did.’ But it is not the fault of students that they have these loans. We really should be talking about this as ‘debt relief’ and addressing a structural and systemic failure in our nation’s current approach to financing higher education.”