Students, don’t count on loan debt forgiveness ever happening again

WASHINGTON >> The Biden administration has established an expectation that future administrations won’t or can’t meet: forgiveness of additional student loan debt.

President Joe Biden announced a plan to cancel up to $10,000 in student loans for millions of borrowers with an income of $125,000 or less for individuals and not more than $250,000 for couples filing a joint federal tax return. Pell Grant recipients could get as much as $20,000 of their loans erased.

This move could drive people deeper into debt.

The White House said nearly one-third of borrowers have education debt but no degree. I worry about setting a precedent that broadbased loan forgiveness will be available again. It is paramount we manage borrowers’ expectations.

Some students looking to take advantage of the promised forgiveness have already signed up for more loans, according to Betsy Mayotte, president of the Institute of Student Loan Advisors.

“There are people who are applying for loans for this semester or more loans than they had originally applied for because they assume they’re going to be forgiven,” said Mayotte, who works closely with student and parent borrowers.

This fall, millions of high school seniors will begin applying to college for the 20232024 academic year. One wonders if they might overextend themselves with the expectation that they, too, will someday not have to repay part or all of their loans.

Only current borrowers are eligible for forgiveness of loans fully disbursed by June 30, Mayotte said in an interview. “We’ve opened Pandora’s box,” she said.

In the last five years, Mayotte said she’s seen a trend of borrowers assuming they won’t have to pay back their loans.

Mayotte said she received an email from a woman in her mid70s who decided to return to college to get a master’s degree, racking up $100,000 in education debt.

“She said, ‘I want to know how I can get forgiveness because I’m old,’” Mayotte said. “It would never occur to somebody that their car loans would be forgiven. It would never occur to somebody that their credit card debt would be forgiven other than through bankruptcy.”

Mayotte said she favors forgiveness but is concerned that some people will take it as a sign of future debt relief and borrow under that assumption.

Biden’s announcement LAST this past week could lure families sending their kids off to college into taking on too much debt. And it doesn’t deal with the underlying issue: the high cost of college.