• Gary Grewal

Student Loan Forgiveness: Where Do We Go From Here?



By now, most of us are aware of the recent decision to cancel up to $10,000 in federal student loans ($20,000 if you're a Pell Grant recipient). In addition, payments will again be in forbearance until January 1st, 2023. Plus, the administration is saying that the payments will be reduced as a portion of income.


Saying this student loan forgiveness has been a contentious issue would be an understatement. It's been polarizing, and surprisingly so, with some saying it will unleash the shackles of debt to enable greater prosperity for middle and lower-income Americans.


Others say not only will it make inflation worse, but it's a hand out to high-earning people that voluntarily took on these loans as well.


Whatever your position is on it, we're here to break down what it entails, who it affects, and what impacts it has on our community and society.


Who Qualifies for Student Loan Forgiveness?

Here is a link to the official announcement on the Department of Education website. Since the announcement is relatively new, there are some specifics and kinks to work out, such as how to actually apply for loan forgiveness. Here is the link where you can subscribe to be notified of any updates. The box you want to check should say "NEW!! Federal Student Loan Borrower Updates".


Under the current guidelines, those making less than $125,000 (or $250,000 married filing jointly) will have up to $10,000 of their student loans forgiven, and if you were a Pell Grant recipient, that goes up to $20,000. I say up to because they are not going to just send you a check for $4,000 if you only have $6,000 of debt left. All you're going to get is the amount you have under $10,000, not a total of $10,000 across the board.


You may need to complete the application, which they say should be available next month (October). They recommend applying by November 15, 2022, to receive relief before student loan payments resume at the start of 2023.


In addition, apparently, they are proposing that income-based repayment plans be restricted to only 5% of someone's discretionary income, down from 10%. Forgiving balances after 10 years of payments, increasing the income limit that is deemed "non-discretionary" and ensuring no loan balances grow as long as the borrower is making their monthly payments, which could be $0 based on their income.



What About Those of Us that Already Paid?

Obviously, there has been a lot of resentment among people who paid off their loans in the past. Personally, I don't think it's fair to those people, however, I can see the argument on both sides.


Some Democrats have even pointed out that some of those who complain about the "unfairness" of student loan forgiveness, are also people who applied for and got forgiveness for PPP loans. Now that's a whole can of worms we won't open today, however, it is an interesting comparison. Because the PPP was designed to protect small businesses who suffered financially from the pandemic.


However, there were reports that large companies with millions in revenue, and who still were operating during the pandemic, were able to get loans as well as get them forgiven. Due to the speed at which the program was created, some loopholes inevitably existed, and companies could use free government funds to pay for rent and payroll, while still earning money through revenue.


With student loans, a lot of people compare the forgiveness not being "fair" to the point that many programs funded by the government are not for everyone, such as welfare and Medicaid.


However, I don't think that's a fair comparison. Student loans are voluntary, you don't have to take them out. Just like countless others, you can take whatever scholarships/grants you receive, and work your way through community college and state schools to get that degree. I have yet to meet a person that is voluntarily in poverty.


In addition, student loan borrowers state that the system failed them, and having the loans forgiven gives them an even playing field because their classmates with wealthy families gave them a head start.


That's also not entirely true. That's basically saying you deserve to go to a private school because the neighbor's kids got to go there too, and the government should foot the bill. In addition, the government does kind of foot the bill when you fill out the FAFSA, because everyone must meet certain criteria for receiving Pell Grants and other aid that doesn't have to be paid back.


Alternatives to Student Loans

So, what can we learn from this? Should people start applying to grad school and other programs because the government "might" pay it off?


Not exactly.


I also want to emphasize that colleges have a major role to play in the student loan crisis, it's not the government's fault. Colleges have been competing for students for years. Putting in glamourous dorms, posh student lounges and lecture halls, and even lazy rivers. Who puts a lazy river in a college?


There are plenty of alternatives to student loans. For one, if you're adamant about getting a college degree, you could go to community college first, and then transfer to a state school.


Still, there are so many viable paths outside of paying $50,000 a year to go to the campus with cool architecture.


Have any friends that are software developers? Guess what, many of them learned on their own or did a coding academy that costs maybe $10,000-$15,000 total. Many employers provide scholarships or reimbursement as well.


We also have an enormous shortage of construction workers and specialty trades. I personally know some electricians and masonry workers making over $150,000 a year. No college degree, in fact, they got paid to train.


Then there are stable jobs like police and fire, auto mechanic, renovation contractor, etc.


Lastly, remember that government branch called the US Military? Yep, they have generous programs as well to not only help with an undergraduate degree but law and medicine degrees as well. And no, it doesn't mean you'll be fighting with guns on the front line the day after you sign up.

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