President Joe Biden followed through on a campaign pledge to wipe out some student loan debt, a move that affects millions. Will it help the Democrats in the midterms?
Millions of Americans who attended college could have their debt completely canceled or reduced under a plan announced by President Joe Biden last week. But the move is unsurprisingly stirring debate among the right and left, but for completely different reasons.
Today, we talk about how this announcement might impact the midterms. Read the full transcript here.
Host: Gustavo Arellano
Guests: L.A. Times national reporter Arit John
More reading:
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CLIP: Hi. My name is Kyle J. Critchlow from Salt Lake City, Utah. I'm a student at the University of Utah, and I just wanted to voice my support for the student loan forgiveness plan proposed by President Biden.
CLIP: Hi. This is Marissa, $10,000 or $20,000 in student loan forgiveness would change my life. It would take a huge weight off my shoulders. I could save up money for a house, help out my mom pay rent, save up for a new car, just get on with my life.
CLIP: It would allow me to just focus on literally everything else I have in terms of bills, you know? Just focus on rent, and insurance, and my cat Ollie.
CLIP: If I’m understanding it correctly, I would qualify for the full $20,000 student loan forgiveness, which would virtually eliminate all of my student loans.
CLIP: For me and my husband, this ability for us to put $20,000 into a savings account for us to hopefully start the surrogacy process. And that really is life changing for us. So, thank you President Biden for giving us the ability to literally, uh, hope to one day, start a family.
Gustavo: Last week, President Joe Biden announced a long anticipated student debt relief plan, just a few days before the freeze on loan repayments was set to expire.
Clip: The burden is so heavy that even if you graduate, you may not have access to middle class life that the college degree once provided
Gustavo: This is a promise Biden campaigned on, and many Democrats have been pushing for years.
Clip: It helps both current and future borrowers and will fix a badly broken system.
Gustavo: At least 20 million Americans who attended college could have their debt completely canceled under Biden's announcement. And if you're one of those folks, hey, this might be the time to break out the bubbly. Cheers to you. But the move is unsurprisingly stirring debate among the right and the left, but for completely different reasons. And right before the midterms.
Gustavo: I'm Gustavo Arellano, you're listening to The Times, essential news from the L.A. Times.
It's Wednesday, Aug. 31, 2022.
Gustavo: Today, as part of our coverage of the 2022 midterm elections, we talk about how the student debt forgiveness decision is going to impact the generation of college graduates, the midterms, the economy and maybe even the future of higher education.
CLIP: People hate the term “Make America great again.” They think it's a pejorative, but Biden, by doing this, is making America great again.
CLIP: This is gonna be a game changer for a lot of people out there. A lot of people who are working really, really hard to just survive.
Gustavo: Arit John is an L.A. Times staff writer based in Washington, D.C. Arit, welcome to The Times.
Arit: Glad to be back.
Gustavo: So, how did this happen? This huge movement, because when I was going to college 20 years ago, no way would anyone who took out loans ever imagine that you could get them forgiven. And I mean, you'd like to, but like, it was just too impossible of a dream to ever imagine, you know?
Arit: So the cost of college has just been rising exponentially. And like the average amount that people have been borrowing has been going up and up and up.
Arit: After the financial crisis, in 2008, there was really this growing movement.
CLIP: Hey hey, ho ho, the banks have got to go. People united…. The people united will never be defeated. The people united will never be defeated.
Arit: We had Occupy Wall Street, but also this growing movement of: Why am I taking on this debt?
CLIP: I’m sick and tired of being unemployed. For three years, I've been looking for a job. And all I get is “we'll call you.” I've heard that so much that I'm beginning to believe that's my middle name.
CLIP: Whose streets? Our streets. Whose streets? Our streets.
Arit: I mean, a lot of people feel like the government is making money off of them, which, you know, that's even up for debate, if the government makes money from student loans, but people felt like college should be affordable, like, at least there should be a public free college option. And so there's this growing movement to go on strike basically to say, you know, I'm not paying these loans, these loans aren't fair. And I think that Congress, over the years, has started to pay attention.
CLIP: Shame…shame…shame…Shame.
Arit: There have been moments in the past where Democrats wanted to give people the chance to refinance student loans. There have been efforts to, just to make it, different ways to make it more affordable. And I think we saw in 2020 during the democratic primary, that's when student loans really became a campaign issue and you had people like, Sen. Bernie Sanders and Elizabeth Warren saying forgive $50,000, forgive all of it, just completely cancel student loan debt.
CLIP: Here's the deal. Even if you don't have student loan debt, you will be helped by seeing student loan debt canceled because it will help our economy.
Arit: And then you had all 20-plus people who ran for president as a Democrat in 2020 had some version of a student loan plan. And then you have Biden who did not want to go the direction of broad forgiveness, but he did promise to forgive $10,000 and he wanted to do it through Congress. But it's been clear that Congress has struggled to pass a comprehensive education reform bill for years. So then we get to this point where he's getting pressure from the left saying, you know, forgive $50,000, forgive like $10,000 isn't even enough, but you at least need to do what you promise. And then on the right, you have conservatives saying, like, this isn't fair to people who didn't go to college, people who already paid off their bills, the favorite phrase, like the latte sipping, basket-weaver, master's degree people. But I mean, it's a much more complicated issue than that.
Gustavo: I paid my student loans long ago and thankfully I didn't have to pay much back. So I actually haven’t been paying too much attention to this whole issue. What are the numbers around this? Like how much is the loan forgiveness and what are the limits?
Arit: Yeah. The thing about this is that there are 43 million people who have some form of federal student loan debt, to a total of $1.6 trillion. And then there are millions of people who didn't go to college, or there are people who, like you, went to college and paid off their debt. Or there are people who went to college and were able to pay for it. And then there are all the people who looked at the cost of college, looked at the burden of paying back student loan debt and decided, you know, that's not for me. So now we have this proposal from President Biden that will eliminate the student loan debt of about 20 million people, about 27 million people will qualify for up to $20,000 in loan forgiveness, because they received Pell Grants as undergrads. And so it's setting off this big debate about, on the one hand, is this enough for the people who wanted full forgiveness? Is this too much for the people who aren't benefiting from it? And what does it look like going forward in terms of actually fixing the main problem, which is the exponential rising cost of college.
Gustavo: So the numbers … it was like $10,000 for one person or something like that?
Arit: Yeah. So the plan that President Biden released last week says that if you make under $125,000 a year, or your household makes under $250,000 a year, you'll qualify for $10,000 in loan forgiveness. If you received a Pell Grant, which is a grant for low-income students, if you received a Pell Grant, anytime while you were in college, you'll be eligible for another $10,000 in forgiveness. So there’s about 27 million people who the Department of Education estimates will qualify for that $20,000 in forgiveness.
Gustavo: And Biden also announced that there was a loan repayment freeze on them because of the pandemic and it was about to expire, but now he's actually extended it until the end of next year.
Arit: I mean, this has been going on since March 2020 when President Trump and Congress first started this pause, which said you don't owe on your federal student loans and interest rates are zero from now until whenever the pause ended. And it's been extended and extended, Biden got into office, it's been extended, extended. And you know, this time the deadline was supposed to be Aug. 31. He waited until basically the last minute to say, OK, this is the final, final, final extension to Dec. 31. To sort of give people some time because you know, this forgiveness process people are gonna have to fill out applications. People have a lot of questions. The people who are issuing the loans, they have to have time to actually get up to speed on this. So they're giving everybody a few months sort of transition back into payments in January.
Gustavo: Does Biden actually have the authority to make all of this happen? Because you know, this is pretty big news.
Arit: That's been the debate for a while. The Trump administration, basically on the way out the door, the Department of Education released a memo saying that presidents don't have the authority to forgive student loan debt. And when Biden came into office, he had the Department of Education come up with their own memo. And this was sort of like a big push and pull between Congress, especially people like Senate Majority Leader Chuck Schumer who wanted Biden to forgive $50,000, and the White House – they just never released that memo for months and months, months. And now with this forgiveness plan out, they're basically arguing that, under the Heroes Act, the 2003 law that was basically passed to help people with their student loan debt in cases of emergency, you know, in this case, like right after the 9/11 attacks. So basically the administration is saying that that law gives them the authority to forgive student loan debt during this current emergency, which is the COVID-19 pandemic.
Gustavo: So if this is unprecedented as a presidential action is anyone threatening to sue?
Arit: There's definitely a threat of a lawsuit out there. You know, we even saw Republicans in Congress trying to pass bills to block this. But the biggest challenge to any lawsuit is that you have to prove standing. You basically have to be able to say this effort to forgive student loans hurts me personally. And that's going to be a big challenge because Congress isn't raising you taxes or anything to pay for this. They're just adding it to the deficit. So it's hard to say who individually is harmed by this.
Gustavo: After the break, the political and economic implications of the decision.
CLIP: Those of us that didn't qualify initially for loans because of our nationality are continuing to be left out of the equation. I applaud the Democrats, but I wish they'd come up with a more creative and equitable solution.
CLIP: Having this is a game changer for me because it makes me feel like I can breathe. Makes me feel that the money I'm saving will be going towards big life things I would like to be doing or ways I can advance in my career
Gustavo: That’s one of many listeners and readers who called in to give us their take on student loan forgiveness. So Arit, what about the political parties? What have they said so far? Like the Democrats?
Arit: I mean, overall Democrats are supportive. I mean, for like 27 million people, this is life changing. In a few weeks, their student loan debt will be wiped out. Democrats are obviously very pleased about that, but there's also, you know, a lot of Democrats who, who wanted more, who say, this is just the first step. This is not $50,000 in student loan debt. This is a drop in the bucket for people with 60, 70, $80,000, $100,000 dollars in student loan debt. So there's a sort of a mixed bag on the Democratic side.
Gustavo: You talked with Eric Swalwell. He's a Congress member, a Democrat, who represents parts of Northern California.
Arit: So Congressman Swalwell, he went to college originally on a soccer scholarship, got injured, took out loans for undergrad, took out loans to go to law school. And now, you know, he's a member of Congress. At one point, he had nearly $200,000 in student loan debt and he's been paying. Yeah, he's been paying that off for about 15 years, and now he's down to $85,000. And his big thing, you know, he has three younger brothers who didn't go to college and he's not comfortable with the idea of saying that argument of your tax dollars shouldn't go toward like forgiving my debt.
CLIP: With three younger brothers who did not go to college, I would have a hard time looking them in the eye and telling them that I deserve to have my debt wiped out and that it would essentially be paid for by, you know, their hard-working taxpayer dollars. And so I hesitate to support, you know, just kind of a blanket across-the-board cancellation.
Arit: But his compromise, which I sort of heard organically from a lot of student loan borrowers I've talked to, is that it's the interest rate that really gets people, especially when you either are delinquent or are in forbearance or just like, you're not able to pay the full amount of your loan and whatever you are paying is going toward interest. And so your balance keeps going up.
CLIP: What I think is a longer-term solution is to get rid of the interest that borrowers are paying on federal loans. And I really don't believe the federal government should be making money on the interest. In that, if we brought the interest to 0% you would see, depending on the borrower, the median student loan amount is $37,000 a year. And so the interest on that is, between $600, $700, in that neighborhood, a year. And so that cash each year, I'd rather put into the pockets of everyday Americans.
Arit: And so what if you forgave the interest that people have now, and you set the interest rate at zero going forward. So that's been sort of his bill that he's been pushing for the last couple of sessions of Congress. The problem is that it's been so hard to get traction for any sort of moderate reform, if you can even call it that, to student loan debt and that everything has sort of been pushed on forgiveness and how much forgiveness will it be?
Gustavo: What about the Republicans? What's been their reaction to Biden's move?
Arit: On the Republican side, Senate Minority Leader Mitch McConnell said this is a slap in the face of people who paid off their debts or people who didn't go to college. It's almost as if going to college is a liberal issue. We don't really see Republicans coming up with as much legislation to address college costs or address student loan debt. And it seems like for them, it's not really a winning issue. But I mean, because this is seen as a people-under-40 issue, it's definitely something that Democrats need to focus on. And I think for Republicans, it seems like there's not a lot of political gain in backing something like this, but there is a lot of gain in saying President Biden is trying to buy votes by handing out $10,000 and $20,000 to people.
Gustavo: Will that work, though? Do you see young voters, especially more liberal voters, go out and support Democrats because of this issue, because of what Biden did?
Arit: I think it'll depend on what actually happens with the rollout of this, if it's a smooth rollout, especially so close to the midterm elections, if there's a legal challenge that's successful or that delays this. But at the end of the day, this is what Biden said he was going to do.
CLIP: It’s holding people up. They're in real trouble. They're having to make choices between paying their student loan and paying their rent, those kinds of decisions. It should be done immediately.
Arit: He said that he would forgive $10,000 in student loan debt, and he is accomplishing something. And I think one of the things that Democrats have struggled with over the last two years is they made all these big promises: Go out and vote, help us get back the Senate, go out and vote, help us like keep the House. They got their 50/50 Senate. It's a coin toss, but it's still, they are in charge. They kept the House, they have the White House. And what have they been able to pass? And in recent months, especially with the passage of the Inflation Reduction Act, we've seen that the White House is able to pass stuff. The Biden administration is able to get things done and fulfill some of those campaign promises. So if you're a voter, yes, you're thinking about inflation; yes, you're thinking about the cost of gas, but you're also seeing these news stories about, OK, Biden said he was gonna do something and he did it. And now you're seeing all these people who maybe haven't really talked about their debt as much coming out of the woodwork and seeing like, you know, this changed my life.
CLIP: I won't have to worry about making those payments. And instead we'll be able to focus my money into becoming a homeowner and just spending and using that money to stimulate the economy, basically.
Arit: So it's hard to say, but I think that polling has sort of shown, too, that people are more supportive of targeted relief – especially for people who aren't wealthy – than they are of blanket forgiveness. And I think that's what the Biden administration was banking on.
Gustavo: What about the opposite – this idea that this is only helping more affluent people? Is this gonna motivate conservatives to go out to the ballot box and take it out on the Democrats, on Biden?
Arit: I think that's a little bit harder to say. The argument the Biden administration has been making was that nobody was upset when the PPP loans were forgiven, which, you know, that's not really an apples-to-apples comparison, but I think that it's more likely to get people to be enthusiastic about voting because you did something for them than to get people voting because they're upset that the government did something to help someone else. And I think that for conservatives, and Republicans more broadly, there's a lot of reasons to help Republicans take back the House and take back the Senate than this one issue.
Gustavo: More with Arit … after the break.
Gustavo: Arit, how will forgiving some student loans further impact higher education as a political plank? Because we've had so many debates over the past couple of decades about the campus culture wars. But I've never really seen those debates influence elections. But again, I think forgiving loans, it could seem like a whole other matter to at least make people think like, hey, higher education is an issue that is political, and we need to figure out how to fix some of the things that a lot of people say are wrong with them, especially on the financial part.
Arit: Yeah, I think that's a really good point, this idea that the campus culture wars and this belief that campuses are not places of free speech, that conservative voices are being like smothered or canceled on campuses. When you combine that with this idea of people are going to these “liberal colleges” and taking on this debt, should the government be helping them? And what are the politics of that? But I think that to an extent that both parties are concerned about helping student loan borrowers. The main issue is I think there's sort of a mutual agreement that colleges are charging too much money and they're just constantly raising the costs. And I think that conservatives and Democrats can get behind that. I think the question is how do you pass a major piece of legislation that holds colleges accountable, either in terms of, OK, you guys are raising prices, but are people graduating in four years, are people getting jobs in four years? And we've even seen from the Biden administration … this really broad effort to tackle the schools that like the ITT Techs and the Corinthian Colleges of the world, that made false promises about job prospects and used that to get federal loan money and basically defrauded students. And now the Biden administration has forgiven $32 billion in debt for people who went to those schools. But there's a bigger question of how do you hold those schools accountable and how do you hold more credible schools accountable for jacking up costs and not really setting people up to pay those loans back.
Gustavo: If the Democrats keep the House and the Senate in the midterms, do you think Biden goes even further and forgives more student debt or tries to do something to reform the cost of higher education altogether?
Arit: I don't foresee him trying to forgive more debt. I mean, we saw how long it took him to do this, and this is what he promised. I think that if you look at his platform from 2020 when he was running for president and just what the Education Department has done, Biden has really been focused on using the current system and improving the current safety net to help borrowers. To me, the big thing out of this announcement last week was actually the reforms to the income-driven repayment plan, that now it'll be instead of 10% of your discretionary income, borrowers can cap their payments at 5%, and then it's more generous in terms of what's discretionary and what's not. And then on top of that, normally if you're in one of these plans, your payment could be as low as zero, but you're still racking up interest on what you're not paying. And this plan will basically forgive or pay off the interest that people's payments aren't covering. And then, it also cuts down the amount of time you have to pay before your loan is forgiven. And that's sort of like a very typical Biden approach to student loan debt. Use the current system. That's their income-driven payment and make it better. Using the borrower's defense to repayment, which helps students who feel like they've been defrauded by their schools, take that program and beef it up, make sure that people are actually getting their loans forgiven if they went to ITT Tech, if they went to Corinthian College. So that's sort of his approach. And I think that if Democrats maintain the House and the Senate, which we'll see what happens in November, I think that he will encourage Congress to work toward holding colleges accountable. He'll work on pushing that rule. But I think that he's not a fan of blanket forgiveness.
CLIP: This didn't change my life because I didn't go to school because it was so expensive and I've been paying off cash and I've been working really hard. So thanks for nothing. All these kids are gonna have their loans paid, and it's just not fair for the others who worked really, really hard.
CLIP: Biden's plan to lower student debt is gonna make a huge impact on my life. I was homeless as a teenager. I actually ran away from home when I was 12. And I didn't have a lot of family or anybody really to help me or support me by the time I was able to get off the streets and go to college. So I was a Pell Grant recipient. I received tons of scholarships. I got free tuition from UCSB. The problem was none of that covered housing. So I ended up having to take out about $10,000 of student loans for two years of rent. Now looking toward getting my loans partially forgiven, it's gonna make a big impact on my life and actually give me hope that I might have some kind of future.
CLIP: As an international student, I never actually qualified. Neither did my husband. And so we had to take out private loans, and basically right now we're paying them back at about between 15 to 20% of our total income each month. And so this is actually creating yet another barrier toward us as immigrants, fully embracing the American dream.
Gustavo: Finally, we've been hearing from the voices of people who have called into us and expressed their opinions on this whole student loan forgiveness. What about the people in your life – how have people who are affected by this reacted?
Arit: It's been really interesting. I've talked to friends who didn't finish college and have had their loans forgiven. I've talked to people who maybe paid off their loans or got scholarships, but they're happy for people who didn’t. And then I've talked to people who wish it was more – like one of the first stories I did this year on student loan debt was with this woman, Kayla Camacho in California. And she has a little more than $60,000 in student loan debt.
CLIP: Part of me is excited. I'll take $10,000 any day. So part of me is excited. I was excited that it was going to as well. I was already planning. Like what does it mean if on the first of September I have to make a loan payment?
Arit: And, you know, she's happy to get the $10,000 in forgiveness, but at the end of the day, she still has a loan burden that’s maybe a little insurmountable.
CLIP: In the grand scheme of things, like it won't, it will make a difference, but it will not be astronomical, in my loan situation in particular. And so, while I'm grateful for it happening, it also will not vastly change the trajectory of my loan repayment plans.
Arit: And she's one of the people I've talked to sort of like, you know, I'd really like to see something done to the interest rate. So I think that there is a mixed bag of reactions across the spectrum.
Gustavo: Arit, thank you so much for this conversation.
Arit: Thanks for having me.
Gustavo: And that’s it for this episode of The Times, essential news from the LA Times.
David Toledo, Denise Guerra and Ashlea Brown were the jefes on this episode and Mario Diaz mixed and mastered it.
Our show is produced by Shannon Lin, Denise Guerra, Kasia Broussalian, David Toledo and Ashlea Brown. Our editorial assistant is Madalyn Amato. Our engineers are Mario Diaz, Mark Nieto and Mike Heflin. Our editor is Kinsee Morlan. Our executive producers are Jazmin Aguilera, Shani Hilton and Heba Elorbany. And our theme music is by Andrew Eapen.
I'm Gustavo Arellano. We'll be back tomorrow with all the news and desmadre. Gracias.