Although President Joe Biden has supported canceling $10,000 in student debt for individuals, some lawmakers are pushing him to go higher and forgive $50,000. But Biden and other influential figures argue that former Ivy League students and Wall Street financiers would be the main beneficiaries.
At a CNN town hall last week, Biden said that forgiving $50,000 would be erasing the “billions of dollars in debt for people who have gone to Harvard and Yale and Penn.”
Similarly, former Treasury Secretary Larry Summers, once president of Harvard University and a partner at a hedge fund, said this subsidy would go toward high earners who work in finance.
“I find it ironic and pathetic that the progressive wing of the Democratic Party … are all excited to give $50,000 or more of debt relief to young people who are working at Wall Street investment banks making six-digit sums of money,” Summers said in an interview with “Bloomberg Wall Street Week” last Friday.
However, only 0.3% of federal student borrowers attended an Ivy League college, according to estimates that higher education expert Mark Kantrowitz shared with CNBC. Ivy League colleges also offer generous financial aid packages that allow students whose families make below a certain threshold to attend for free.
Experts and advocates say that forgiving student debt could stimulate the economy and help address the racial wealth gap. Currently, more than 45 million Americans collectively owe more than $1.7 trillion in student debt, with each carrying an average of about $38,000 in loans.
“People in the U.S. will not have to spend hundreds of dollars every month. They’ll be better able to plan for the future, to save, to buy things that they need in the meantime,” said Naomi Zewde, an associate professor of health policy and management at the City University of New York whose research focuses on economic inequality.
Diana Morales is one graduate who would benefit. The 28-year-old Detroit resident has roughly $51,000 in federally held student debt. With a sociology degree from a public college, she’s far from a Wall Street hedge fund manager.
“When I was younger, I wanted to look at social systems and how they impacted experiences for low-income people and immigrants,” she said. “It really just came from a place of trying to understand my own experience.”
Morales, a first-generation college student, said her parents immigrated here from Mexico. “You feel like you’re left out of the conversation,” she said of the notion that the policy would primarily benefit Harvard grads.
She recalled that when she was about to attend Wayne State University in Detroit, her awareness of how financial aid worked was limited, and she didn’t really know what she was getting into when she accepted some of her loans.
Having $50,000 erased would allow her to plan a family and help out her parents financially, especially when it comes to health care.
“They’re getting older,” Morales said. “I’ve been having to help them with having to go to the doctors, to see specialists, and it’s superexpensive.”
A major burden for some with student debt is the interest that accrues after graduation. If they are struggling with their careers, paying off the debt becomes even harder — harder still if they didn’t complete their degree.
Students with loans who never graduate are three times more likely to default, according to the U.S. Department of Education.
Jamie — a North Carolina resident who declined to give her last name — said she started attending the University of North Carolina at Charlotte during the Great Recession in 2009. She majored in earth science/geology with a minor in education.
After struggling with attention deficit disorder and taking antidepressants, she made the difficult choice to leave school before completing her degree. She had $35,000 in debt at the time, which has increased to more than $52,000 due to interest.
“I’d like to go back to school, and [the debt] has kind of stopped me from doing that,” Jamie said. Her dream is to eventually start an educational nonprofit.
Emily Ring, a 26-year-old resident of Merrimack, New Hampshire, has also amassed just north of $50,000 in federal debt since graduating from the University of New Hampshire with a communications degree.
“Right out of school, I was working retail. I was working part-time hours, but I just could not find a full-time job anywhere,” Ring said. “I had internships that were unpaid, but not enough experience to get a job in the field that I was interested in.”
Without all that debt, she’d be able to plan for her future, she said.
“I would be able to buy a house. I would say yes to going on trips — of course, once the pandemic’s over. I would say yes to donating more money. I’d say yes to going out to eat more. I’d say yes to buying things a little bit more,” Ring said. “I know, those are all frivolous things, but when you have so much, so much debt on your back, those are things you really have to think about.”
Although Ring doesn’t work on Wall Street and didn’t attend an Ivy League school, she doesn’t think they should be obstacles to debt forgiveness.
“It shouldn’t matter where you went to school because growing up, you’re pushed to do your best,” she said. “You’re pushed to try and strive for those schools like Harvard and Yale and Princeton.”
Morales feels that even if the Biden administration wiped out current student debt, future students shouldn’t have to deal with the problem in the first place.
“I don’t want to just think about myself when I think about these issues,” she said. “I want to think about how we would prevent this from happening again.”