The Last Word on Student Loans

Image by Kenny Eliason.

To finance my senior year at one of Oregon’s private colleges I decided to go for the school’s post-graduation, no-interest deferred tuition loans that September. For three years, I’d been working 50-hour weeks at minimum wage just to meet tuition and my share of food and rent costs with roommates.

In June, I was in the commencement rehearsal line a week before graduation. As I reached the front, the financial officer checking off names informed me the school was in straitened circumstances and calling in all its loans. Unless I paid up (today’s $3,354) by week’s end, he said, I was barred from commencement and receiving my degree.

So my apoplectic parents—also in straitened circumstances—cosigned a bank loan for it two days later. I spent the next two years resentfully making monthly bank payments, this time as a one-meal-per-day graduate student at the University of Minnesota barely making boardinghouse rent from two jobs. Considering my parents’ situation, I was damned if I’d default on that loan. The long-term result? I—and probably other furious classmates—have never given the school a dime despite its regular pleas for funds.

In short, any betrayal on student loans is likely to “bear bitter fruit” down the road, triggering retaliation against double-crossers by lifelong bad-mouthing and negative actions toward the government or the colleges and universities, as it did me and thousands of others for decades. Anyone I’ve talked to about past loans can recite in detail the sum and struggle to meet payments years after graduation.

And it isn’t just today’s twentysomething student borrowers. Many are drawing Social Security still working toward the final payment. Overall, 48 million present and past students still owe $1.6 trillion on federal and outside loans.

Biden’s advisors had the President ready for them—and just days before the November 8 mid-term elections, too.

The sensational gift to those earning less than $125,000 a year was his October 17 announcement of was the one-time-only debt cancellation of $20,000 for each federal Pell grantee and $10,000 for those with outside loans guaranteed by the government. When the Administration’s application online site ( ) opened three days before, the first 8 million of 40 million eligibles signed up for this “forgiveness” program. Previously, the Department of Education had instructed non-Pell borrowers to “consolidate” their accounts into its Direct Loan program by the program’s December 31, 2023 deadline to qualify for cancellations. Some 81 percent of all borrowers are expected to apply before that deadline.

Glitches turned up prior to the website’s grand opening, chief of which was a one-day bobble September 29 between Biden’s advisors and the Department of Education. The DOE first informed non-Pell borrowers:

“As of Sept. 29, 2022, borrowers with federal student loans not held by ED cannot obtain one-time debt relief by consolidating those loans into [Federal] Direct Loans.”

That would have excluded some 800,000 borrowers . The uproar from a seeming double-cross by the Biden administration was instantaneous rage from the non-Pell population for favoring lenders over them to avoid a monumental and expensive court battle over “forgiveness” itself. The Biden Administration took a momentary direct hit from student borrowers, parents, educators, and the progressive media. Judging from the tsunami of applications when the website went live and Biden’s announcement—and that outraged response—perhaps it was his advisors who convinced the DOE to quickly reverse that exclusion.

Meantime, the Congressional Budget Office estimated total cost for cancellations would be $400 billion of the $1.6 billion in outstanding debt spread out for at least 10 years. It represents the price of educating millions for America’s future: doctors to engineers, teachers to grocers and everyone contributing to this country in the trades or professions.

To critics expecting repayment of their tax dollars to the U.S. Treasury, the obvious rebuttal is a litany of taxpayer generosity, say, to other multi-billion objectives. For instance, American interests ultimately reaping benefits abroad from trillions spent on foreign aid since WWII. Non-repayable billions have also been invested in foreign conflicts over the last few years, including today’s $17.5 billion so far in supporting the Ukrainian war against Russia.

At home, how many critical voices have been raised against small business owners defrauding taxpayer revenues out of $84.3 billion during the pandemic when the Small Business Administration was distributing non-payroll benefits of $385 billion to keep them open under the EIOL (Economic Injury Disaster Loans) plan. In its 2021 report, the agency’s inspector general reported 294 arrests, 366 indictments, and 142 convictions so far—and recovery of only $4.2 billion.

EIOL borrowers have 30 years to repay and might be able to declare bankruptcy. Student borrowers have no such out because, ironically, Biden in 2005 was one of the Senators who eagerly promoted and passed the Bankruptcy Abuse Prevention and Consumer Protection Act . Its stipulations were so stringent that it made declaring bankruptcy impossible , particularly for students. As The Guardian reminded readers:

“Private student loans were largely stripped of bankruptcy protections in 2005 in a congressional move that had the devastating impact of tripling such debt over a decade and locking in millions of Americans to years of grueling repayments.”

The article noted that from 2003-08, donors from credit card companies, banks, and other financial firms had given $500,000 to Biden campaigns. But then, he represented Delaware, home of major credit card corporations.

In 2020, Biden’s advisors and the Democratic Party pursued large voting blocs for his presidential run such as these millions of young debtors? Moreover, by the “multiplier effect” they also had family and friends who were registered voters.

So during that campaign, an April article in Medium under his byline declared solving part of the student-loan debt would not only be Biden’s priority project if he won, but “forgiveness” would be its principal policy in loans limited only to “low-income and middle-class people.” His proposal was to:

*Immediately cancel a minimum of $10,000 of student debt per person.

*Those earning less than $25,000 per year would not have to make monthly payments and which would accrue no interest.

*Those earning more than $25,000 per year would pay no more than 5% of discretionary income toward payments.

*After 20 years, the remainder of federal student loans would be forgiven without any tax burden.

*Those in public service would be eligible for additional federal loan forgiveness, including $10,000 per year for up to five years.

He would finance this proposal by repealing the high-income “excess business losses” tax cut in the CARES Act. It may have been antipathy to Donald Trump, but 59 percent of those under age 30 voted for Biden.

Because of the pandemic’s wallop to the economy, the Trump administration and Congress had already given those borrowers a payment moratorium —including interest—from March until September 30, 2020, followed by an extension to December 31, 2020 under the CARES Act of 2020. Trump seemed to be courting the same voter bloc to win the presidency and a Republican-led Congress.

Before Biden’s inauguration, his team had to have reminded him to show some gratitude toward that voting bloc. On his first day as president, why not announce the moratorium would continue at least to September 30, 2021 and that his plan for loan cancellations was in the works.

So when that September moratorium deadline approached—along with the upcoming mid-terms election campaigning—his team in late August issued a lengthy statement on his behalf spelling out an executive order Biden was about to sign containing most of the proposals from that Medium article.

The Department of Education announced that order would:

“….provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients.” Many of the eligible still owe far more than these sums, however, but this gift would remove a significant chunk of the loans.

Though the website announcement probably have set off thunderous celebrations by millions of present and past students, family, and friends, it did not sit well with three types of Americans—who also vote.

For the first type, it triggered a long-simmering intellectual and social class war about the unfairness of lending taxpayer billions to the college bound, but nothing for those with only a high school diploma or whose low grades or financial or family responsibilities made a four-year degree impossible. Small wonder Sen. Bernie Sanders on the campaign trail over the years has touted free tuition at public colleges and universities, as well as community colleges.

A second type were the millions who, like me “worked their way through college” on low-paying jobs or spent years retiring loans in the days before the federal government provided financial help. One friend who took 17 years to pay off her loan was vigorously opposed to Biden’s plan viewing it as a handout she never received. Another, like me, worked two full-time jobs during college and spent 10 years later to retire his debt. They certainly have a right to urge an end to student loans, forcing upcoming generations to do what we had to do to earn a degree.

Forgotten in my resentments was that those with government loans are doing exactly what we did to pay off other lenders years after graduation too. And, at bottom, that they and we received degrees benefitting our futures. Perhaps we need to consider giving those institutions some money next time they pass the tambourine.

The third types are seem to be right-wing groups and private lenders who’ve been launching lawsuits in vain against the cancellations. In the case of lenders, they’ve earned sizeable service fees from the government in managing student loans: 4.1 million loans worth $108.8 billion so far. That ends December 31, 2023 when most students probably will shift those loans into this federal direct program for debt cancellation.

The financiers may have been silent when Trump began those moratoriums perhaps because most feared his wrath and indignation. But few seemed to fear Biden because right after he announced the cancellations were afoot, six Republican state attorneys-general—from Arkansas, Iowa, Kansas, Missouri, Nebraska, South Carolina —filed action in a Missouri federal court to stop all student-loan cancellations. Another lawsuit was just filed in the Fort Worth District court , charging cancellations violated notice-and-comment procedures. As the Missouri Independent reported the action:

“The states are arguing that the debt relief, which would impact 95% of people with outstanding student loans, harms [financial] entities.”

As for the right-wing groups who want a U.S. Supreme Court temporary injunction against the Biden government’s massive cancellations, Justice Amy Coney Barrett who handles emergency cases, and Judge Henry E Autrey of the Federal District Court in St. Louis both just dismissed their complaints .

Autrey said those six state attorneys-general “had not suffered injuries that gave them standing to sue.”

But the major indication that such cases might not receive certiorari before the full Supreme Court came from Barrett’s ruling, one without an explanation against the Brown County Taxpayers Association’s claim that Biden’s executive order “exceeded its authority and violated the Administrative Procedure Act” and that the association will be harmed because the cancellations will “deplete the federal treasury by a staggering amount.” Emergency rulings from the Supreme Court don’t require an explanation, but The New York Times’ reporter guessed the six states and the Association lacked standing and that both judges believed the claimants’ applications weren’t “on solid legal footing.”

Such litigatory threats may become moot, however, if Congress passes a bill permitting student debtors to declare bankruptcy: Rep. Jerry Nadler’s Student Borrower Bankruptcy Relief Act of 2022, the work of four Democratic members, Nadler, Sens. Elizabeth Warren and Sheldon Whitehouse, and Rep. David Cicilline. It would create a Chapter 10 provision in the U.S. bankruptcy code to treat student loans like ordinary consumer debts. If enough student borrowers vote to keep a Democratic Congress in the midterm election, the Senate just might kill the filibuster and with the House, pass the bill.

The last word on student-loan cancellations is a suggestion for the Biden team that could mollify the likes of us, the disgruntled.

Why not get Biden to give some kind of official recognition to the millions of us who have paid off either federal student loans or those from a variety of private lenders? Those retired loans are a monumental achievement by us for our country past and present borrowers. It also could inspire, encourage, and end the lifelong resentments of millions still paying off those loans.

Honoring us could be done, of course, before the election.