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How External Factors Affect Student Debt Repayment

Millions of Americans are carrying burdensome student loan debt, but what other factors are preventing their upward mobility? Experts break it down, from racial/gender disparities and wealth gaps to rising tuition costs and inflation.

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Oral arguments in early March and a forthcoming Supreme Court decision have focused a lot of attention on President Joe Biden’s student loan forgiveness program. But the White House has proposed other policy changes aimed at alleviating the burden of student debt for scores more Americans.

At the Education Writers Association’s January Higher Education Seminar: The Covid Generation , experts weighed in on these proposals, and discussed how reporters can tell stories that go beyond loan cancellation. 

Kat Welbeck, director of advocacy and civil rights counsel at the Student Borrower Protection Center, drew attention to proposed adjustments to the federal income-based repayment program, which include expanding the income eligibility threshold for $0 monthly payments. 

Welbeck praised this change but argued for parity between the repayment cap for undergraduate and graduate student debt for those who don’t have $0 payments. Under the current proposal, payments for undergraduate debt would be capped at 5% of a borrower’s discretionary income while payments for graduate student debt would be capped at 10%.

“A Black woman needs a graduate degree to make as much money as a white man with a bachelor’s degree,” Welbeck said. “We’re really trying to create a more equitable student student loan system for all student borrowers, and thinking about the ways that the current iterations or proposals for this current [income-driven repayment] program could recreate some of the problems that we’re already seeing.”

Other speakers included Ben Miller, a deputy undersecretary of education in Biden’s administration; Victoria Jackson, assistant director of higher education policy with D.C.-based advocacy group The Education Trust, and Michael Brickman, adjunct fellow at the American Enterprise Institute. Open Campus Reporter Naomi Harris moderated the panel, which took place in Alexandria, Virginia.   

Challenge Narratives About Student Loan Borrowers 

The Education Trust started focusing on Black borrowers because they “are more likely to borrow; they borrow more, and they’re more likely to struggle with debt,” Jackson said. 

Jackson attributed this disparity to inequities in the K-12 education system as well as racial wage and wealth gaps. 

“For example, in 2019, the median white household had $188,200 in wealth, compared to a Black household that had a median of $24,100 in wealth,” she said.

In 2020, Jackson’s organization surveyed nearly 1,300 Black borrowers and found that 71% said they were struggling to save money, 22% were struggling to pay for food, and 13% were struggling to pay for child care. 

Jackson urged reporters to tell the stories of the people behind these numbers, and to tell stories that challenge traditional narratives about people who owe debt.

“Even people – who on paper, they may have completed [college]; they may have a decent job; they may have decent pay” – are still struggling, she said.

Cover the Impact of Rising College Costs

Miller pointed out two priorities for the U.S. Department of Education related to borrowers: degree completion and post-graduation wages. 

“We know that, in general, debt with no degree is kind of the worst place to be,” Miller said. “And it’s where about a third of borrowers end up.”

Borrowers who don’t complete a degree default at a much higher rate than borrowers who earn a diploma, according to federal education statistics.

The Biden administration has proposed doubling the maximum Pell Grant awarded to students from low-income families since cost is often a reason students do not complete degrees. 

According to the Center on Budget and Policy Priorities, Pell Grants once covered nearly 80% of college costs, but the funding amount has not kept up with inflation, and now the award covers about a third of costs

“We have a lot of people who are graduating, but either the program that prepared them isn’t giving them enough wages to allow them to enter the middle class,” or, Miller said, the amount of debt borrowers took on is so large that it prevents upward mobility.

Miller said the federal education department is drawing up a list of institutions that provide “the least financial value” to increase accountability. 

Understand the Connection Between Financial Aid and Tuition Costs 

The income-driven repayment and debt-relief programs negate such accountability measures, according to Michael Brickman, adjunct fellow at the American Enterprise Institute. 

Using taxpayer money to write off student debt, he told reporters, incentivizes institutions to raise tuition prices.

Past research has found the strongest link between increased financial aid and rising tuition costs at for-profit institutions, which the Biden administration is seeking to further regulate