When it comes to debt from student loans, Elissa Pennebaker says she’s “a mutant” compared to her Spokane Community College classmates .
Pennebaker, of Spokane, was able to obtain federal Pell Grants, awarded to students in financial need, so she could get her associate degree at SCC en route to a bachelor’s degree from Washington State University this December. She graduated SCC with $12,000 of debt.
“That’s like nothing. I have classmates that were much more in debt,” she said. “I was able to do work-study. I was an English tutor on campus and I was very fortunate that I was able to live at home and my car was paid off and I had no credit card debt.”
Pennebaker said she is taking a job at MultiCare Deaconess Hospital to pay off the last $8,000 left on her loans.
But assuming there isn’t any “fine print” that precludes her, as she put it, Pennebaker looks to be among more than 40 million people to have all or portions of their college debt forgiven as announced Wednesday by President Joe Biden.
As proposed, the initiative would erase $10,000 in federal student loan debt for people with incomes less than $125,000 per year or households that earn less than $250,000. The amount forgiven would go up to $20,000 for anyone who received federal Pell Grants for college.
Undergraduate, graduate and Parent PLUS loans issued before July 1 will be eligible for forgiveness. Borrowers who are dependent students will be eligible based on parental income.
The White House says the program will provide relief for to up to 43 million borrowers, including 20 million who stand to have their debt fully canceled.
Calling the program “a milestone moment for borrowers,” U.S. Sen. Patty Murray, D-Wash., said in a statement the Department of Education and the Administration must ensure easy access to loan relief.
Experts say the more difficult and bureaucratic an application process is, the likelier it is for an application to fall through the cracks. According to a White House fact sheet on the plan, the Department of Education is going to set up “a simple application process for borrowers” expected to be available no later than the end of the student loan pause.
Murray, who has pushed the Biden administration for months to provide some debt relief to college loan borrowers lauded the additional provisions for former Pell Grant recipients, saying this can “help address long-running racial and economic disparities in our student loan system.”
“It’s hard to overstate how badly the student debt crisis has strained borrowers and families across the country,” she said. “I hear from people in Washington state all the time about how student debt has been holding them back – preventing them from starting families, buying homes, and all too often, from simply making ends meet.”
GOP Congresswoman Cathy McMorris Rodgers criticized the loan relief plans as unfair to those who already paid their college debts or never incurred any in the first place, saying the initiative “will only lead to more inflation and higher costs for those who can least afford them.”
McMorris Rodgers, R-Spokane, also criticized the income threshold, pointing to how the household threshold is more than four times the median household income for Washington’s 5th Congressional District, which is $57,837, according to Census data.
“This action is a dramatic overreach of his authority,” McMorris Rodgers said in a statement, “and it’s a slap in the face to every hardworking person in Eastern Washington who will now have to foot the bill.”
The two did find similar ground related to the cost of education moving forward. McMorris Rodgers said federal officials should focus on curtailing the rising costs of higher education rather than debt forgiveness, while Murray said she will continue fighting for more affordable education.
Jim White, dean of student financial services for Gonzaga University, particularly lauded additional plans proposed by the Department of Education. These include reducing the amount borrowers have to pay each month on undergraduate loans from 10% to 5% of discretionary income, and forgiving loan balances after 10 years of payments, instead of 20, for borrowers with original loan balances of $12,000 or less.
With the loan forgiveness piece, White said Gonzaga undergraduate degree students from the past year graduated in May with an average of around $22,000 in federal debt, which he said is slightly down from prior years.
“Even a $10,000 forgiveness is going to be just about half of the typical Gonzaga student’s debt,” he said. “I really feel like for Gonzaga’s borrowers, this is a great thing. We have about 70% of the students borrow during their time at Gonzaga, so this is going to hit a lot of people.”
Overall, White said he believes the forgiveness plan will have an overwhelming impact on the populations most affected by student loans, particularly low-income, first generation students of color.
“It feels like a good strategy without being overgenerous, and it’s really going to get to students whose incomes are lowest and need it the most, so I think it’s a good thing,” White said. “There are people that are paying loans for quite a long time and are seeing almost no downward movement in the principal or the total debt, so I feel like all of the things that were announced today are going to have an impact on that.”
While White believes debt forgiveness may help stimulate the economy, Sandy Baum isn’t counting on it. Some people, she said, might not see changes with their monthly payments.
“It’s not like they’re handing people $10,000,” said Baum, a senior fellow at the nonpartisan Urban Institute. “They’re saying the way you haven’t been paying loans for two and a half years, you can keep not paying them. It’s not like they’re going to wake up tomorrow morning and be rich.”
Given the political pressure on Biden to do “something,” Baum said she believes the $10,000 “was the right amount,” as that clears one-third of federal borrowers out of the system. Increasing that for Pell Grant recipients was also a good idea, she said, since that directly supports students of color and low-income households that are disproportionately affected by debt burdens.
Baum noted the income thresholds are very high, saying there are not many who would be disqualified from the benefits. Baum also said the program is indeed a transfer of debt burden and “is not free,” as it increases federal debt that could make for less spending on federal programs or higher taxes.
Debt forgiveness, meanwhile, does not address the costs of college, whether it’s for tuition or other expenses students incur even if school is free, she said.
“It doesn’t say anything about the future,” Baum said. “Students are borrowing money today and they’re going to keep borrowing money, so we’re going to be right back in this same situation very soon unless we do some other things.”
Baum said it was difficult to imagine Biden announcing just before the midterm elections that there was no debt forgiveness coming.
“It’s going to be a step in the right direction,” Pennebaker said. “Any help we can get out there for people that are struggling under the weight of their student loans, why not?
“I feel the same way about immigration,” she added about the fairness aspect. “You can’t come into this country and then slam the door shut behind you. Just because you paid off your debt, you can’t take that from somebody else. That’s just really unfair.”
The loan forgiveness program announced Wednesday makes Pennebaker feel braver about incurring more debt to continue her education, she said. She intends to begin her doctorate studies in January, for which Pennebaker said she will have to take out loans.
“As you get older, it’s much more scary to change career paths and it feels a little more risky,” she said. “I’m hoping this will help people that are under a mountain of debt and maybe inspire people to go out and pursue different degrees in some of those fields that they may be passionate about and that we need help in.”