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Student loan arrears, fairness and forgiveness

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First, thank you for the very warm welcome of this new blog. As soon as I published the first post, I got sick of COVID, and now, two weeks later, I’m digging through emails, tweets and LinkedIn messages. Thanks and I’m catching up!

On May 16, I participated in the May American Public Education Council pop-up, The policy and policy of granting student loans, with Terry Hartl and John Fansworth. I try to attend these monthly classes whenever possible and often recommend them to my students.

I started my career in the higher financial aid service, and I was put in charge of loans – in particular, the recovery of loans. That was over 30 years ago. I started managing the credit program of Perkins Institution and then took Stafford, PLUS and private loans for families. In this role I was the main liaison with the collection agencies and it was brutal. I also conducted field interviews with students and eventually organized budgeting workshops. This early start of financial aid has since shaped my approach to my work. Although we have made many improvements in servicing and repaying loans, student debt has become serious for many of our young people.

Terry and John did a great job preparing the stage for their student loan forgiveness session. They noted that there are currently seven federal student loan programs, 16 repayment options and about 45 million borrowers are involved. That’s a lot to take. This is difficult, and it seems that political decisions that are easier to implement are also more political.

That same Monday, when the ACE policy pop-up, Tom Harnish’s Morning Email included at least 8 references to reports and major articles in the press and articles on student loans. The first reference was to a NASFAA report – Borrower protection and capital promotion. The titles of some articles say:

  • Biden plunges into risky debt policy on The Washington Post student loan (Publication date: May 16, 2022)

  • Editors: Student Debt Destroy. Canceling it for everyone is still a bad idea. The New York Times (Publication Date: May 14, 2022)

  • Borrowers of student loans do not deserve “forgiveness”. They deserve an apology. The New York Times (Publication Date: May 13, 2022)

For those who have time to wade through the recommendations, I recommend the NASFAA report. It focuses on three main areas: servicing student loans, repaying student loans, and defaulting on student loans. If this is your business, this is definitely worth reading.

The report highlights $ 1.6 trillion in outstanding student loan debt and, repeating a recurring theme, this situation is a “symptom” of a flawed system. Decisions require a systematic approach, and from what Terry and John have said, it seems that the more streamlined the approach, the more political it becomes. One approach could be to “forgive” up to 10,000 for each borrower (undergraduate and graduate) with a family income of less than 125,000, and it looks like this could become a reality sooner rather than later. This morning’s issue of Inside Higher Ed has the latest here.

For more than two weeks of fog from COVID it seems to me that comments on student loans have increased exponentially. I would direct people to this fantastic article in the NY Times from my sociologist sister, Tracy Macmillan Kot, America has turned the greatest means of social mobility into a debt machine. And yet there is a study highlighted in the AERA Open that focuses on equity for debt repayment behavior.Like any other trap: a workaround is the way to repay a student loan. The authors studied student loan repayment schemes and identified five types of loan repayment: regular defaulters, perpetual payers, fast full payers, overdue full payers, and consolidators. They also disaggregated data based on the borrower’s race / ethnicity, social class, and institutional sector to analyze borrowers ’stratification.

Readers, what do you think of the student loan forgiveness policy? Who should I poll on this topic for future blogging?

Mary Churchill is a former head of policy and planning for Boston Mayor Kim Janey and current Deputy Dean for Strategic Initiatives and Public Relations and Director of the Higher Education Administration Program at Wilcock College of Education and Human Development at Boston University. She is the co-author of When Colleges Close: Leading in Times of Crisis. She is on Twitter @mary_churchill and can be contacted by email at [email protected]

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