Jon Fansmith: Hello and welcome
to dotEDU, the Higher Education Policy Podcast from the American Council
on Education. I'm Jon Fansmith with the ACE's government relations
team. In this episode of our monthly interactive recording, ACE Senior
Vice President Terry Hartle and I take a deep dive into what we're
hearing and what we know about student loan forgiveness. As always, we
appreciate your questions and suggestions for show ideas, and you can
share those with us at podcast@acenet.edu. That's podcast@acenet.edu.
Now, enjoy the conversation.
Jon Fansmith: Hello
and welcome to the May edition of the Public Policy Pop-Up. We are
going to do a deep dive this week into the politics and the policy of
student loan forgiveness. This is an issue that's getting a lot of
attention here in Washington, DC, and we're certainly seeing that in
this webinar. Lots of people registered, lots of questions coming in,
and I think it's going to be a pretty exciting and engaging
conversation, and I am lucky as always to be joined in that conversation
by ACE Senior Vice President Terry Hartle. Hello, Terry.
Terry Hartle: Delighted to be here with you.
Jon Fansmith:
Always good to have you. Terry, I said there's a lot of interest and
engagement in this, maybe a record number of questions submitted to one
of our Public Policy Pop-Ups. Why don't we start by you giving an
overview of where we stand right now and why we're talking about this?
Terry Hartle:
Before we start, let's distinguish a couple of things. One is student
loan cancellation or forgiveness versus the restarting of student loan
repayment, and we can actually add a third category there, which is
improving existing repayment options.
Beginning in March 2020,
people with student loans have not been required to repay loans because
of the economic dislocation caused by the COVID pandemic. The Trump
administration initially put the pause in place. It was very quickly
approved in statute by Congress. It has been extended several times. At
the present time, nobody who is repaying a student loan needs to be
repaying a student loan at least until September. That's the restarting
of repayment.
When will repayment start? That's an open
question that people have been talking about for some time, but
cancellation is a different matter. The president proposed during the
2020 election campaign to cancel $10,000 of debt for all student loan
borrowers, and that is what is at work here today.
Democrats
initially were all over the map in terms of how much was to be canceled,
$10,000 according to President Biden. A lot of people, including Chuck
Schumer, the Senate majority leader, has asked for $50,000 in loan
cancellation, but the administration is thinking about how to proceed.
Initially, the administration's view was we don't have legal authority
to do cancellation. They have apparently decided that they do have the
legal authority to do cancellation, and they are thinking about how much
cancellation to do, not whether to do it.
Finally, the third
thing I mentioned not shown on the screen, improving existing options,
one of the things the Biden administration has done a pretty good job at
is improving existing repayment and forgiveness programs that are
already in place. This is stuff like borrower defenses against
repayment. This is public service loan forgiveness.
The
administration has helped, by their estimate, 700,000 people already
just by making existing programs work better. Keep in mind, that's
700,000 people out of 43 million people, or 45 million people, somewhere
in that vicinity, who actually own student loans and need to pay the
government money, so three separate dimensions. A lot of what the
media's focused on now, of course, is cancellation, whether they will
simply forgive some or all loans across the board for some or some
subset of borrowers.
Part of the challenge that we face in
talking about this is that, when we talk about federal student loans, we
are talking about a big, messy set of programs. There are seven
separately identifiable federal student loan programs. There are 16
separately identifiable repayment or cancellation options already
existing in the law. One of the first questions that comes up is which
of those seven loan programs would be covered by this forgiveness or
cancellation effort? The answer is, potentially, all of them. It is not
entirely clear what loan program or programs the administration is
talking about.
One of the big issues that the administration
will have to weigh is that there are millions of people involved. The
Department of Education says that there are 43.4 million people who are
repaying student loans. This weekend, The New York Times used
the number 45 million people, so there might be some disagreement even
about how many people are repaying student loans. That gives you some
idea of the complexity about trying to do something that could affect
that many people.
A part of the challenge the administration
will face if they move forward with this is the trade-off between the
ease of operations and the ability to target it. One of the arguments
against loan cancellation, loan forgiveness is that a lot of the
benefits would go to people who went to graduate and professional
schools who may be making a lot of money and who might not under any
reasonable standard need assistance paying off their student loans.
The
challenge the Department of Education will face is that they either
cancel loans for everybody across the board, which has the advantage of
administrative simplicity, or they need to review every single student
loan that is held by a borrower and make one-on-one decisions, an
extraordinarily large amount of work if they have to break down and do
this on a case-by-case basis.
The implementation of this is
going to be... Excuse me. The creation of this will be controversial. I
think one of the things the Department of Education particularly wants
to avoid is complicated administration so that they don't have a repeat
-- well, for some of you with a slightly longer memory, remember the
roll out of the Obamacare website in the first term of President Obama
and what a disaster that was -- so the last thing they want to do
particularly of the underlying policy is going to have some controversy
to it.
Nothing is set in stone. The administration has not
provided any details. As near as we can tell, the administration is not
talking about what they're thinking to Democratic offices on the Hill in
any detail about the size of the cancellation, whether it's $10,000,
$20,000 or more, the eligibility, whether it is for everyone or whether
there is some sort of an income cap or some sort of an elimination of
graduate and professional students. Those questions have not been
answered.
Right now, we're trying to figure out what the
administration is thinking about. One of the big questions that matters
to us in higher education, of course, are the operational issues that
the Department of Education is concerned about because their ability to
implement something like this that could affect this many million
Americans is likely to be a matter of great concern.
Jon, I
think that's a pretty much a summary of where we are. Do you want to
talk about how we got here and what led us to this point?
Jon Fansmith: Yeah.
I think that might be helpful in terms of illuminating a little bit of
some of these policy issues that you touched on in the political
debates. A lot of this, unsurprisingly, arises out of politics and,
particularly around loan forgiveness, we are tracking back to the 2020
presidential election when there were a variety of Democratic
presidential candidates who had varying levels of loan forgiveness as
part of their campaign.
Obviously, the president had a $10,000
loan forgiveness policy as part of their proposals, but it went all the
way up to universal loan forgiveness across all federally held debts
among other candidates. There's always been this spread on the
Democratic party about what is the appropriate level of relief here.
What we tended to see was, once the Biden administration took office,
there was this interesting back and forth between the Hill and the White
House on who would do this.
You might recall there were previous
statements about the Department of Education was looking at whether they
had the authority to do this. Terry touched on this a little bit. There
is a memo that was completely redacted that spoke to the department's
legal authority. There had been a memo produced under the Trump
administration saying that they don't have the authority to do this.
Outside the groups that have submitted memos, it's not entirely clear
whether they have the authority or not. It tends to be whichever opinion
you have. You can find a memo that backs it up, but the administration
pursued it by basically saying we want Congress to act.
Congress
and particularly progressives, voices like Chuck Schumer and Elizabeth
Warren who have been very, very vocal on this issue, fully believe the
president can do it. They want the president to do that. It's easier for
the president to do that. If you do it in Congress, you have to figure
out some way to pay for it. If the president can do it, it's just coming
out of the Treasury. They've been going back and forth about this. As
they've been going back and forth about this, we're seeing this
increasing public attention to the issue.
Again, this is not a
new conversation. It dates back a couple of years to the specific
proposals we're talking about, but forgiveness has been talked about for
a long time in part because of some of the other programs Terry
mentioned. Congress has put together 16 different forgiveness proposals,
usually very specific ones, but this is an element of policy-making
we've seen a lot of, but increasing attention. You're starting to hear
these indicators very clearly that the administration is moving toward
this.
About a month ago, Senator Schumer had said that he
talked to Joe Biden and this was very much on his mind. He thought he
was closer than ever to forgiveness. Then the president met with members
of the Congressional Hispanic Caucus. He said that he was likely to
extend that repayment pause, and then they asked about forgiveness, and
he said, "Well, I can't tell you. We're looking at our options, but
you're going to like what we do," and then, following up on those, you
start to hear statements from White House officials, particularly Chief
of Staff Ron Klain and Jen Psaki, the press secretary for the president,
essentially confirming that they were looking at those things Terry was
talking about, an income threshold, loan forgiveness, targeted, maybe
limited, lower than that 50,000 threshold.
Why are they
talking about this? Why is this getting increasing attention? Well, the
last bullet makes it pretty clear. We are approaching a pretty
consequential set of midterm elections. Democrats hold both the House
and the Senate and the administration, but very narrowly, and the
midterms aren't looking good for Democrats.
In particular, one
area that's getting a lot of attention is the fact that Joe Biden is
losing the support of young voters and, in fact, young voters who have
moved their favorability ratings have dropped more than any other group
of voters who had previously supported him. There's a lot of interest
politically in advance of these elections and shoring up with a big part
of the Democratic base. That might explain some of the timing issues
we're looking at, so that brings us to where things stand now.
I'll
say, Terry, you covered a lot of this in the intro, so I'll skip
through some of these things, but, really, it's unclear. We don't know.
It's not clear that they know exactly where they want to put it. We've
seen the parameters. They've put out $125,000 income. They talked about
maybe $150,000 as the income threshold for doing this. People assume
they're talking about $10,000 because that's what was on the campaign.
President Biden ended at one point and said he did not want to do
$50,000 in forgiveness. They have never publicly entertained the idea of
universal forgiveness, so if you're trying to guess what they're doing,
the signs are clearer than most for $10,000 in forgiveness or at a
$125,000 income or below.
There's also been a discussion
because the president has talked about this that he is in favor of
relief for undergraduate borrowing, but not necessarily for graduate
borrowing. You hear those rumors that there are discussions that they
might make forgiveness only apply to undergraduate loans, not to
graduate loans.
As Terry pointed out though, any kind of test
you put into place greatly increases the complexity of doing this, so if
you do an income threshold, then you have to set up a process that
allows them to determine borrowers income. If you set up that it's
graduate versus undergraduate loans which are forgiven, you have to
start unpacking loans that may have been consolidated that may have
originated from multiple places. It gets really complicated really
quickly.
The timing here is really important. The reason, if
you accept that part of this is driven by political concerns in the
midterm elections, you need to announce something and put it in place
and have it so that borrowers are seeing forgiveness before the
elections to really get the full benefit of doing this as a policy.
Loan
repayment, Terry touched on this. It's scheduled to resume September
1st. The president said, essentially, "I've always extended that
repayment pause." It seems very likely they will extend it again.
Frankly, the idea that they will make 44 million or 43 or 45, whatever
number it is, borrowers start repaying their student loans two months
before the midterm elections just doesn't seem very likely. Related to
that, if you're going to make this announcement about broad-based
forgiveness, doing that as soon as possible so you have time to deal
with implementation issues so borrowers will begin to see that in their
balances before they go to the polls, that would indicate that they want
to move as quickly as possible.
Terry, we've been hearing
these rumors about something happening in the next few weeks, but based
on the conversations we've been having with folks on the Hill and folks
in the administration, they don't seem ready to move that quickly. There
may be a real desire to move that quickly based on all these factors
we're talking about, but it doesn't seem like they'll be capable of
doing it, and that's in part because of these implementation challenges.
Once they set a policy and it's not clear there's agreement on what are
the best ways to go forward, figuring out how to do that is a really
big lift for all those reasons we touched on.
Then, finally,
we started, I started, by talking about authority, the debate going back
and forth. It's not just a rhetorical political issue. Do they have the
legal authority to do this? The balance to an administrative action
that there may be questionable legal authority to is lawsuits. There's
been a lot of attention about who would actually have standing to bring a
case. Not surprisingly, there's been memos that say no one would have
standing. The administration could do this. Similarly, there's been a
number of memos issued that said it could be governors of individual
states. It could be a collective of servicers that other groups may have
standing. They bring a suit that would block this.
Obviously,
if you're the administration, this is a signature effort you're putting
forward. What you really don't want to see is something that you put it
forward and then it winds up going into the courts for a few years so
you're not seeing any of the political benefits particularly in the
short term, which is what seems to be driving the concerns right now.
Terry,
I've sort of danced around some of these political issues. You touched
on it. A lot of backlash coming towards colleges and universities is
part of this discussion and a lot of political ramifications that we're
hearing from people both in favor and opposed to it. You want to go into
that a little bit more deeply?
Terry Hartle:
Yeah, but before we do that, following up a little bit on what you were
saying, I think, Jon, you're absolutely right. There's a lot of talk
about this at a very general level, but there's very little conversation
at it, about it, at a specific level along the lines of, well, how much
money, what programs would be eligible, would there be any targeting or
means testing?
I think you're exactly right. The
administration is actively working on this very hard, but I don't think
they've focused in yet on exactly how they're going to pursue this. I
think the next action-forcing event comes at the end of August because
that is the date at which the repayment pause ends. Presumably, in
September is when now people would have to start repaying their loans
unless the administration kicks that repayment pause out a little bit
further.
It might be that the administration will conclude
that the best thing for them to do is to announce whatever they're going
to do on cancellation and forgiveness, but give themselves a couple of
months to put it in place so that they won't have to run the risk of
some sort of an administrative meltdown before the election. They can
promise the benefit to people. People can know what's coming. That'll
give the Biden administration the political benefits that they are
seeking, but it won't require them to have something operational in time
for the election. If they do that, I think they'll probably kick the
repayment pause to the end of the year as well.
We could be
looking at this for several more weeks or a couple of months before we
really, really see anything. I'm pretty confident that, if the
administration were focusing in on the how-to-do-it aspect, the
operational questions that are so important, that we would be picking
some of this up in the conversations we're having with people, but we're
just not hearing anything about that at all. Does that seem reasonable
to you?
Jon Fansmith: Yeah. No, and it highlights
that this is a very political process right now. We're talking about a
one-time forgiveness. This is not a change to underlying policies going
forward. This is an exceptional event, and a lot of what's driving the
determinations really are not those operational ones. They're not the
long-term view. It's what are we looking at in the near term and how do
we address that? I think you tend to hear a lot from the White House
around this. You don't tend to hear nearly as much from the Department
of Ed in part because I don't know that they're the ones central to the
decision-making.
Terry Hartle: Yep. No.
Unfortunately, it's pretty obvious that the concerns that the department
is raising about how they would actually execute this haven't been
given the attention in the White House that I think they want. The
fundamental point here that I think you've made is that there are policy
arguments for and against doing this, but this is being done for
political reasons.
Democrats are hoping it will help an
important part of their constituency. Democrats are hoping that it will
encourage younger voters to go to the polls in November. Republicans are
arguing that this is a very discriminatory benefit. It will not help a
lot of people who vote Republicans. It looks like another bit of
Democrats benefiting college elites at the expense of the common man.
There are policy arguments in favor and policy arguments against, but
this is a political decision. This is not based on any careful weighing
of the policy implications.
I think the big issue, the thing
that you and I are most concerned about, Jon, is that this is going to
put higher education in the middle of the culture wars in a very, very
big way. This could become a very big deal in the midterm elections with
Democrats arguing, "Look what we're doing for you if you want to get a
college education," the Republicans arguing to their voters, "The
Democrats don't care about you. They just care about elites who go to
college."
I think that this could become an ongoing source of
political controversy and I think that, particularly, if Republicans
take back control of the House and/or the Senate following the midterm
elections, this could be a focal point for congressional investigations
and deep dives into how they decided what they decided.
The
risk that I see for colleges and universities is that we're starting to
see, from both conservatives and liberals, people saying, "Well, the
issue here really is colleges. College is too expensive. The value, the
economic return of a college degree isn't that high. Colleges are
responsible for students borrowing so much money. We need to focus our
attention on colleges and universities. We don't need to focus our
attention on other things." We could find ourselves really on the firing
line both from the left and the right on this particular issue.
There've
actually been a couple of tweets that I've seen in the last week that
just illustrate what the potential risks are for colleges and
universities. JD Vance, a Republican Senate candidate in Ohio, said this
over the weekend, that it's a massive windfall to the rich, to the
college educated and, most of all, to the corrupt university
administrators of America. That probably gives you some idea of the very
populist approach that some conservatives are going to take to
describing this, most of all the corrupt university administrators of
America.
It's not just the conservatives, the Republicans that
are raising these questions. Chris Murphy, a very distinguished senator
from Connecticut, Democratic Senator from Connecticut, if you had a
continuum of Democratic senators between Joe Manchin at zero and Bernie
Sanders at a hundred, Chris Murphy would be 75 or 80. You can see what
he's saying here is that the problem is the cost of a degree that they
have to start forcing higher education to engage in radical structural
reform soon. This is how the Democrats might turn around and go after
colleges and universities.
I think the implications for us
going forward are pretty, pretty significant and, perhaps, a much more
negative attention to colleges and universities than we have seen in a
long time in the political arena. We're a collateral damage in a
political fight rather than a policy discussion.
I think where
ACE is right now and what we will be saying about this is that
canceling debt will help millions of people who are struggling to repay
their loans. That's, obviously, what the Biden administration intends.
It's probably also incontrovertible. If you wipe away debt, it'll help
people repay their loans, but the bottom line here is that the student
loan program is broken and really needs to be overhauled.
The
federal student loan programs were last reauthorized in 2008, which was
before we completely federalized student loans in 2009. The federal
government did manage to make loans pretty seamlessly, but problems have
started to occur in the repayment area, and we're seeing the results of
that right now with these calls for across the board cancellation.
It's
not that there aren't changes that need to be made in the student loan
program. For example, focusing on customer service in the servicing
arena rather than focusing on lowest cost bids would probably be a very
good step to take to help people who are struggling to repay their
loans.
Having workable cancellation and forgiveness
provisions. As I mentioned earlier, right now, there are 16 in
negotiated rule-making. The Biden administration has proceeded to
propose to add a 17th. There are things colleges and universities need
to do. We probably need to increase the counseling that we are giving to
borrowers before they take out student loans.
I think another
question is whether or not colleges and universities ought to have the
authority to set lower loan limits. Right now, student loans are an
entitlement to individuals. Even if colleges know that the students
don't really need a student loan to meet the cost of their education, if
the student is enrolled, they are entitled to the money. The school
can't prevent them from taking it out.
How we set interest
rates in the student loan program, government borrows money at about 3
percent, and they lend it to parents and graduate students at seven and a
half percent. Is this a good idea? Well, I think that's an open
question. Now, does it make sense to continue to impose a tax on people
who take out a student loan in the form of origination fees? I think
that's another question that we ought to be addressing.
We
think we, as colleges and universities, need to recognize the enormous
concern about this in both political parties the extent to which it
creates serious problems for many of our former students. We need to
identify with Congress and with the executive branch proactive steps
that the government can take to make the programs work more effectively
and efficiently, and I think that that'll be a focal point in the coming
year of a lot of discussions in Washington, DC.
I think I
will stop here, Jon. I don't know if you want to add anything or correct
anything I said, but assuming you don't, we can go to questions if we
have some.
Jon Fansmith: We have plenty of
questions and more coming in all the time so, and then I encourage you
to keep sending in those questions. Terry, I think this is a good
follow-up question to where you ended. One of the questions we got was
will the current focus on student loan forgiveness lead to a wider
examination of how students finance their educations?
You
talked about some things that could be done to improve that process. The
Biden administration grants $10,000 forgiveness. The day afterwards,
students will still be borrowing. Do we think there will be substantive
steps to say, all right, this was a one time gesture or measure? Where
do we go from here, or is it we're going to carry on as usual?
Terry Hartle:
I think what we want to do is we want to encourage follow-on steps that
look at a minimum at federal student loan policies and practices and
parts of the federal student loan programs that make it much harder for
students to repay their loans. We want to look at things that drive up
the cost of student loans such as how the interest rates are set, such
as origination fees, as I just mentioned.
Do we get to a
broader discussion about how America finances post-secondary education? I
don't think so. I think it's long overdue particularly because states
have been running away from their obligation to finance public higher
education for a generation, but this is being done for political
reasons, and it's going to be interpreted as a political action. It's
not going to be seen as something that underscores what we think it is,
which is a need to have some basic conversations about how we help
people pay for post-secondary education in the United States.
I
think a best case scenario that I see is that this action, when we see
it, leads to some rethinking about federal student loans and how they
work and how they might be improved for borrowers. Beyond that, I have a
hard time seeing it happen.
Jon Fansmith: We've
also gotten a number of questions on a related theme, and I think this
goes a little bit to some of the political debate over here, but I'll
highlight from Greg Schuckman and from Ashley Reich. Apologies if I'm
mispronouncing your names.
They both asked questions around
the idea of there's lots of borrowers who have been repaying their
loans, in fact, may have repaid them entirely. How do you see this
playing out there? Those borrowers may feel that they were not given a
benefit. They've asked, some people have asked about is this going to be
you get a retroactive credit for what you would have received if you'd
gotten forgiveness instead of paying off your loans? Do you see any
action there particularly with some of the criticisms of this that
you... like we saw from both the left and the right?
Terry Hartle: No.
I think if forgiveness happens, Jon, I think it's one of those public
policies where you happen to be in the right place at the right time. I
don't think that there will be any effort to make it retroactive to
people who may have paid off their student loans in the past nor do I
think there'll be any effort to extend it to people who will start
borrowing money when they go to school in September. I think this is
just a one-shot effort that probably sets an expectation of future loan
cancellations, but with no guarantees that that will happen. Do I see it
being retroactive? No.
One of the issues that doesn't get talked
about too much with respect to loan cancellation/forgiveness is the cost
that this will impose. If you forgive $10,000 for every one of the 43
million people who have student loans, the cost will be about $370
billion. Under the Federal Budgetary Rules, that don't make sense
anywhere except in Washington, if Congress were to authorize that. If
Congress were to tell the Biden administration to do it, Congress would
have to offset that $370 billion. If the administration does it on its
own without approval from Congress, then there are no budgetary
consequences.
Having said that, moving $300 billion around
even in an economy as large as the United States is going to have some
implications. One of the things you will hear from conservatives if
that's what is done is that this is just going to fuel the fires of
inflation because the federal government is spending a lot of money, or
in this case, federal government is giving up a lot of money that
otherwise they would count as revenue. I think this is going to benefit
people who are repaying student loans right now. We don't know if it'll
benefit all of them or some of them, and that's what we're watching to
see how the administration decides to play it.
Jon Fansmith:
Speaking of people who may or may not benefit from loans being
forgiven, we have a question about the idea of means testing. It's these
income thresholds of 125,000 or, in some cases, 150,000 we've seen
reports of. The question is basically, Terry, what are the pluses and
minuses of doing this? Why is the Biden administration doing this?
Terry Hartle:
One of the biggest arguments against loan forgiveness is that it will
dramatically over-benefit people who went to graduate and professional
schools, borrowed a lot of money and are paying off debts relatively
easily because they have pretty good incomes to draw on, that this will
not really help lower income and lower middle income people as much as
it will help people who are doing just fine. Thank you very much.
The
argument in favor of means testing it is that you can focus it on the
people who are having the most difficulty repaying their loans, people
who clearly aren't likely to be able to repay loans. You can target it
on individuals. The biggest argument against means testing in some
fashion is that the Department of Education doesn't have a very easy way
to do means testing and, therefore, they would have to look at each
borrower individually and make a separate decision.
The
Department of Education doesn't have the ability to get income data from
the IRS that they could use for this. Federal Privacy Laws regarding
the IRS prohibit that, so the Department of Education will have to
figure out another way to measure income. One of the suggestions we have
heard about is self-certification. In other words, you just tell them
whether you are eligible. Obviously, you could build up something where
you required people to send in a copy of their previous year's tax
return so the government can assess their income, but that's 43 million
people potentially, an extraordinarily huge administrative workload.
The
challenge, the trade-off essentially is a more focused, a better
targeted public policy versus administrative complexity and possibly
some garbling of the message because it would benefit some people, but
not all people.
Jon Fansmith: As a follow-up, we
just had a question from Carla Cortez who asked about graduate
borrowing, but she was specifically saying what about those who require a
graduate degree to enter their chosen field and areas like social work,
education, healthcare, but don't necessarily earn high incomes, and
then saying you're excluding graduate borrowing in some ways or would...
it would... not in some ways. It would explicitly exclude those people
who aren't seeing necessarily the same economic benefits as others who
have pursued graduate education.
Terry Hartle:
Yeah, and that's a perfect argument for why this ought to be means
tested, because there are an awful lot of people who will go to graduate
and professional school and who will engage, be engaged in very
important occupations in our society. You've mentioned a couple of them.
Divinity would be another one we could mention, Jon, and they simply
don't make the money to pay off their loans that people who go to law
school and medical school and dental school, business school typically
make.
The trade-off here is pretty easily stated. It's how
much of a complicated super structure do you want versus how much do you
want a universal benefit? I think that's one of the big issues that the
administration is wrestling with. The easiest way to make this work,
the way to avoid a collapse in the Department of Education's
administrative capabilities to avoid a repeat of what we saw with the
rollout of the Obamacare website, the way to do that is simply to
provide the benefit to everybody, but that's very expensive, and it
means an awful lot of people who are making a large amount of money are
going to benefit from this.
Jon, you and I have colleagues at
ACE who haven't been in college for 10 or 15 years who are making pretty
decent salaries who could find themselves eligible for the benefit,
depending on how it's defined. I think that's the trade-off we face.
Jon Fansmith:
Yeah. I think that's really well-said, Terry, too, and related to that,
we're getting questions around, well, why can't the department do this
more easily? I think I'll highlight Elaine Maimon. Again, apologies if
I'm mispronouncing your name.
She asked that the FAFSA already
requires IRS info. There's that data link now that, when you apply for
the FAFSA, you can give your consent to have the IRS work with ed to
release your records. Elaine was asking, "Couldn't loan forgiveness be
limited to undergraduates who filled out FAFSA forms?"
I would
say there's two things: One, the Department of Education has legal
authority to link with IRS only for the purposes of finding out aid
eligibility and amounts, not for the purposes of providing forgiveness.
They don't actually have existing statutory authority to do that, or
else we wouldn't be talking about these challenges. Again, limiting it
to undergraduates who have filled up the FAFSA, that information
changes. If it is tied to income, that's changed since you last filled
out the FAFSA. It may apply to current students or students recently out
of college. It might be a way to do that.
Think about all
those borrowers, Terry, like you were just talking about, who are 10 who
are 15, who are 20 years out of college and still repayment. You
wouldn't have accurate information for them, so it is, the more you dig
on this, I think you start to see this is a very, very complicated
operational issue that even setting aside those big policy questions
that you've talked about so well, Terry, the more you dig, the more
complicated you realize this is.
Terry Hartle:
Yeah. If there were an easy, straightforward, reasonable way to do this,
people would've figured it out by now. It's just a complicated system.
As you said, Jon, there's a very explicit legislative approval for
sharing the FAFSA and the IRS data. There is no federal approval. In
fact, there's a law that would ban the IRS sharing data directly with
the Department of Education.
Now, could the Department of
Education send a letter to everybody who is repaying a student loan and
say, hey, if you want to be eligible for this, you need to fill out this
form and ask the IRS to send us your data? Yeah, the Department of
Education could presumably do that, but that also adds another step that
means dealing individually with millions upon millions of individuals.
That's
not something the federal government does very well. Just think of the
difficulty people have in getting an answer or getting someone to answer
the phone at the Internal Revenue Service. Think about the difficulty
of talking to somebody in Social Security these days. The Department of
Education hasn't, unlike SSA and the IRS, been trying to deal with
individuals for decades. This gives the department a whole new set of
responsibilities if they have to start dealing one on one with that many
people.
Jon Fansmith: I would raise, because I
think it transitions nicely into the next question, the department has
that process in place right now related to loan forgiveness with PSLF,
and it's been so problematic in the management and implementation that
we're in this period where the department is using extraordinary
measures to address public service loan forgiveness and borrowers who
might qualify for that so, which is my tease to the question. We've
gotten a number of questions that are around this issue of other paths
to forgiveness and how does this impact those.
Public service
loan forgiveness is obviously one that a lot of people have heard about,
but also, Terry, you talked about there are 16 separate loan
forgiveness programs. Somebody just pointed it out. Rachel Smith said
PSLF is still a mess. I think a lot of people would agree with you, so
certainly a reason for concern about another similar process if that's
how it's going about it.
Terry, maybe you can talk a little
bit just briefly, I know 16 programs is too much to go into all of them,
but the fact that how does this interplay with that? Is this meant to
replace them? Is this meant to supplement them or is this something
wholly different?
Terry Hartle: It's something
wholly different. None of the existing programs would go away. I
mentioned seven student loan programs. Five of those alone programs have
explicit cancellation and forgiveness programs built into the
individual loan programs. In addition, there's another 11 separate
cancellation and forgiveness provisions like public service loan
forgiveness, like borrow defenses against repayment. That's how we get
to 16.
The Department of Ed is trying to make the repayment
and cancellation provisions that are in the law work. The Department of
Education told us a year ago that they were going to do everything they
could with public service loan forgiveness to make it a workable
program, but they told us they would clearly need legislative fixes to
really make the program work effectively. We have not yet seen nor have
we heard anything from the Department of Education about what those
legislative fixes will look like.
I've indicated to the
department that we at ACE and our association colleagues will be very
aggressive in trying to lobby to get those changes made in statute, but
we need to know what changes the Department of Education needs. So far,
the Department of Education has not said what those will be.
Public
service loan forgiveness is ultimately the nightmare, I think, that the
Department of Education would like to involve because they're looking
at every student loan, every student borrower who claims public service
loan forgiveness on a case by case basis. It is very labor intensive. It
is very detailed work. That takes an enormous amount of time, and
that's what the department wants to avoid if they do some
across-the-board forgiveness activity. I think public service loan
forgiveness is a model, and it's a cautionary tale.
Jon Fansmith:
Terry, we are running close to the end of our time. I know you like
your designation as an honorary lawyer, so I thought that I would give
you the opportunity to play honorary economist because we've gotten two
questions that are I think diametrically opposite. One is what would it
do for our economy to relieve millions of people from burdensome student
loan debt? And then, on the flip side, we had a question that said,
with this kind of broad-based relief, would that increase the
inflationary pressures that we're already seeing and are already
concerned about?
Terry, go back to whatever level of economics you
last took in higher education and, tell us, is this going to exacerbate
inflation or is this going to supercharge our economy?
Terry Hartle: Those are not mutually exclusive.
Jon Fansmith: Fair point.
Terry Hartle: The
fact of matter is, if we did provide across-the-board loan forgiveness
to individual student debt who are having difficulties repaying their
student loans, they would have more money to address their daily needs
and expenses. We'd be leaving them with more money in their pocket that
would certainly leave them in a personally better financial situation.
Having
said that, if you're pumping $300 billion into the economy or you're
forgoing $300 billion in revenue, you don't do very much to relieve the
inflationary pressures that are such a key subject in Washington these
days and something likely to be a very big deal in the midterm
elections. I don't think those two are mutually exclusive. We could have
something that has a very positive impact on millions of people and, at
the same time, creates a deeper, more extensive economic problems over
the longer term.
Jon Fansmith: Great. Well, that
sounded very much like an economist, Terry. I think we'll work on that
honorary degree for you. We are up against our time. I want to thank
everyone for participating. Let me remind you that we do these on a
monthly basis, so keep an eye out for another announcement from ACE for
the June Public Policy Pop-Up, but I also want to thank you all for the
questions. There really was a great volume of questions, very thoughtful
questions. That makes this, I think, particularly enjoyable for me and
Terry to do as well. Thank you so much for joining us and have a great
rest of your day.
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