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Office Hours: William Elliott III Discusses Student Loan Repayment

Michigan Alum speaks to a faculty member about an issue in their field.
Read time: 3 minutes

William Elliott III is a U-M professor of social work and the director of the joint doctoral program in social work and social science. His research focuses on college savings accounts, college debt, and wealth inequality. We spoke to him about the Biden-Harris Administration’s student debt relief plan, which was ruled unconstitutional by the Supreme Court in June 2023.

Why is student debt such a significant issue for voters right now?

Reducing student debt burdens has been an important campaign promise of Democrats since President Obama in 2012. However, they have had only minimal success in delivering on the promise. So, from a political perspective, it is tremendously important for Democrats to deliver a substantial win to their constituents on student debt prior to the upcoming election. Polls show that this is a very political issue as well with about 80 percent of Democrats favoring forgiveness of debt and about 23 percent of Republicans. From a more pragmatic view, over 43 million Americans have federal student loan debt for a total of $1.6 trillion. Simply, it affects a lot of Americans. It limits employment options and slows wealth building (e.g., delay saving for retirement, delay buying a home, delay marriage, have less net worth, etc.). 

Why did the student debt relief case become an issue of the Supreme Court?

Republican lawmakers felt that President Biden overstepped his executive emergency power by proposing to wipe out about $400 billion in student debt for tens of millions of Americans. Moreover, the Supreme Court’s conservative majority has frowned upon actions without approval from Congress, making it more likely to be taken up by them. 

What other, if any, potential avenues might we see this administration pursue in order to relieve debt for low- to middle-income borrowers?

Biden’s recent proposal to relieve debt for about 800,000 borrowers on income-driven repayment plans and his attempts at restructuring income-driven payments themselves were certainly not the last attempts at reducing student debt. It is likely that they will attempt to expand this relief to additional groups using the 1965 Higher Education Act to allow the U.S. Secretary of Education to “compromise, waive or release loans under certain circumstances.” The question now is under what circumstances can they waive or release loans. 

Do you believe this need for student debt forgiveness will mark a shift in how future borrowers may approach student debt when considering higher education?

Relieving student debt is a short-term answer which treats the negative symptoms of student loan debt (e.g., default). However, it does not treat the cause of the problem; that is, financing education largely through students borrowing. Opponents to forgiving debt typically state that forgiveness today will only lead to having to forgive a new generation of their student loans down the road. They are likely not wrong. The answer is combining short-term solutions that treat the symptoms with long-term solutions that attack the root cause. An example of a long-term strategy is combining Baby Bond-type proposals with Children Savings Account (CSA) policies. CSAs provide an infrastructure/scaffolding for delivering a large-dollar investment into children’s accounts from multiple sources. Sen. Bob Casey (D-PA) has proposed a large-dollar CSA program that combines the two policies. These types of programs have the potential to eliminate the possibility that future generations will be reliant on paying for college with student loans in the first place, eliminating the need to forgive loans in the future.

Is there anything else you’d like the U-M community to know about this issue?

Current financial aid policies largely fail to tackle the overlapping and accumulating effects of wealth inequality and instead treat inequality in education as only a problem of paying tuition. This ignores the role that financial aid could play in influencing children’s post-college financial health. Given the narrow focus of current financial aid policies, including free college proposals, children and their families are largely left to their own devices except for when it comes time to pay for college. This has resulted in a situation where education is unable to provide low-income and minorities with the same return on a degree that their counterparts receive helping to exacerbate or at the very least maintain economic inequality in America.

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