Graduates hope Biden will extend pause in student debt
One of Joe Biden’s first acts as a newly inaugurated president could be to give more breathing room to millions of college graduates saddled with student debt in a pandemic-ravaged economy.
Extending the federal student loan repayment “pause”— one of several actions he is expected to take as early as Wednesday — is a temporary answer to an issue that is entrenched, especially in Pennsylvania, where two-thirds of college students graduate with debt averaging more than $39,000 — second only to New Hampshire.
In fact, Pennsylvania students who borrow face debt load that is $10,000 greater than the national average, according to the latest report from The Institute for College Access and Success, which tracks state-by-state debt load annually.
Although the rate of debt increases nationally has slowed of late, the total tops $1.6 trillion.
It’s true that loans, best used when other options are exhausted, have helped millions to realize their degree ambitions, although amounts owed can become an albatross, delaying home purchases and derailing other family ambitions. It’s not just the dollars, but who gets hit hardest.
“Although growth in graduates’ debt has flattened in the past few years, and declined very slightly this year, many recent borrowers struggle to repay their loans,” the institute’s president, James Kvaal, said in a letter this fall accompanying the annual report. “Low-income students, Black and Latino students, students who do not complete their programs, and students who attend for-profit colleges are disproportionately likely to struggle to repay.”
In fact, the 42-page report, “Student Debt and the Class of 2019,” says Black students who borrow run into difficulties repaying at a rate nearly double that of white graduates.
Officials with the Biden transition team did not respond to inquiries Monday about the issue. But over the weekend, national news outlets, including the Associated Press, reported that Mr. Biden intends to act Wednesday on the loan pause, one among a dozen executive actions he is to take that day on matters from climate change to saving off foreclosures and evictions of families hit hard economically by the pandemic.
“These executive actions will deliver relief to the millions of Americans that are struggling in the face of these crises,” read a memo from incoming Biden chief of staff Ron Klain cited by The AP. “Presidentelect Biden will take action — not just to reverse the gravest damages of the Trump administration — but also to start moving our country forward.”
The student loan pause was
enacted by the Trump administration beginning in March and affirmed by Congress. It reset interest rates to zero, temporarily, and effectively paused required payments. It was to expire at the end of December, but was extended by then-U.S. Education Secretary Betsy DeVos through January, meaning payment obligations and interest would resume in 12 days.
It’s unclear how long the extension that Mr. Biden is expected to sign will last. And it likely will be followed by far more thorny decisions early in his administration about potential loan forgiveness — another hot-button issue.
During the loan pause, borrowers have not faced collection actions or other penalties such as wage garnishments, officials said.
Ms. DeVos noted the harmful effects on student finances from the pandemic, and she took what appeared to be a subtle jab at Congress. She said her month extension was to give the body time to do its job.
“The coronavirus pandemic has presented challenges for many students and borrowers, and this temporary pause in payments will help those who have been impacted,” she said in a statement in early December. “The added time also allows Congress to do its job and determine what measures it believes are necessary and appropriate. The Congress, not the Executive Branch, is in charge of student loan policy.”
Nationally, 62% of college seniors at public and nonprofit private colleges carried student debt, down from 65% in the Class of 2018, according to the Institute. Borrowers nationally owe on average $28,950, nearly a percent less than the previous year.
Reasons cited included improved availability of Pell and other grants in recent years, although the Institute warns that the pandemic that hit in March already is reordering financial concerns among students and graduates. Between 2004 and last year, debt among the share of students tracked by the Institute grew by 56% to $28,950. Officials noted that it outpaced inflation of 36% during that period.
Experts long have said first-generation college students and the poor are particularly vulnerable to financial issues — given limited resources and inexperience with the college process — as are students of color. The Institute’s report drove that home.
While 22% of white borrowers had difficulty making loan payments within a year of graduation, the share was 29% among Latinos and 40% among Black borrowers. It was 19% among Asian borrowers, according the report.
Pennsylvania, at $39,027, is the nation’s second highest, after only New Hampshire’s $39,410. Rounding out the five highest are Connecticut, $38,546; Rhode Island, $37,614; and Delaware, $37,447
Utah had the lowest average student debt at $17,935, followed by New Mexico at $20,991.
About 16% of student debt nationally is in nonfederal loans that have fewer consumer protections and repayment options and usually are more costly than federal loans, the institute cited. Perplexing was that some chose nonfederal loans when they did not have to. Stated the report: “While there is broad consensus that students should exhaust federal loan eligibility before turning to other types of loans, recent federal data show that more than half of undergraduates who take out private loans have not used the maximum available in federal student loans.”