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Experts on Campus Comment on Student Loan Debt Relief
As applications open for President Biden's student loan forgiveness program, MC professors weigh in on how this process will impact students.
In late August, the Biden administration released a plan for forgiving college students’ outstanding student loan debt. On Oct. 17, U.S. President Joe Biden announced that applications are now open for this federal student loan debt relief amidst a national outcry for aid in the student debt crisis alongside rising tuition rates for higher education.
Two Mississippi College professors offered their insight on the debate and added valuable perspectives on the hot-button subject coursing through American political and economic circles.
Dr. Glenn Antizzo, an Assistant Professor in the History and Political Science Department, provided a greater understanding of student loan forgiveness in the wider scope of a politically divided America. He also detailed the context of Biden’s plan in light of recent congressional elections. Dr. Antizzo has experience working as a loan officer for the State of Louisiana and is an alumnus of Cornell University and Louisiana State University.
Another faculty member, Dr. Chuck Beauchamp, added his expertise of the issue from an economic point of view. Dr. Beauchamp is an Assistant Professor of Finance in the School of Business, with an undergraduate and master’s degree from Nicholls State University and a Ph.D. from Mississippi State University.
What is the political landscape of the debate of Biden’s student loan forgiveness plan?
Antizzo: The argument in favor of doing this is that loans are crushing young people who are just getting out of school: that the payments are so high and students have had to borrow so much money. It's felt that if the government could give some help, that would improve the economy because it would free up money to be spent in other places. This is money that you could be spending on other things in the economy. You have to delay things like getting a car, buying a house, and in some cases having kids because the financial weight of all this is absolutely crushing.
People on the other side of the argument are wondering where the money comes from, which is the American taxpayers. Some of which are people who have either already done paying for their own student loans or decided to forgo college so they would not accrue student loan debt in the first place.
How did the government become involved in student loans?
Beauchamp: The government has had student loan programs since 1950. But the way it worked before is you would apply for student loans, and a bank would provide the money while the government paid the interest while you were in college. In the early to late 2000s, they took over the student loan business almost entirely because it was no longer an equitable business venture for banks. Student loans were the least profitable investments for banks, and the federal government saw an opening in the industry and took it. Federal loans then exploded and became the main source of student loans.
Antizzo: People obviously cannot afford the cost of going to school purely out-of-pocket. State universities are still fairly inexpensive, but private schools, like MC, are expensive. Tuition and room and board here is roughly $34,000. You can get money from a couple of sources. One is from grants, and the other is, unfortunately, from student loans. For the longest time, there was a program where the federal government was acting as the guarantor of a loan. When you take out a student loan, the bank is going to ask for some evidence that you can pay it back; for big loans, this is known as collateral.
Is there an issue with the federal government being the main source of student loans today?
Beauchamp: The solution to a student loan crisis really is to get the government out of the student loan business. Banks are able to properly price student loans properly. A lot of the state schools in these bigger private schools offer extremely specialized degrees that do not always guarantee a good return on investment for students. If you plan on getting one of these overly specialized degrees and you cannot find a job, banks could properly determine that risk-reward ratio prior to a student taking out a loan. They would price each degree differently, assigning interest rates accordingly.
Antizzo: The value of a degree has changed. It takes a lot of education to get a set of specialized skills, like medical school, law school, etc. I want a competent doctor. I want a competent lawyer. I want a competent accountant. I'm not sure all majors are equally great investments, and banks know this, too.
What is the result of forgiving student loans on taxes?
Beauchamp: You can deduct your student loan interest from taxes. So for the people that are getting the relief, their federal taxes are actually going to go up because they'll no longer get the deduction because the interest is gone. But also, some states are going to tax this as income. The people who are actually reaping the benefits of their entire tax bill from their states this year are also going to have higher federal taxes because the interest deduction is going away.
What is the result of forgiving student loans on rising college tuition rates?
Beauchamp: Anytime the government subsidizes anything, the price of everything goes up, including college tuition. This is basically giving universities a free pass to raise their prices. So you're gonna see, on average, that tuition will increase probably $10,000 or a little bit more, because that's the relief amount, and we will see that increase slowly over the next few years. Secondly, when you run the numbers, the majority of the relief is going to go to people that can afford to pay it anyway. It's going to go to doctors and lawyers, and professionals all across the spectrum. They are the ones making six figures and can pay their degrees off.
Who is actually getting the relief money?
Beauchamp: The ones with the majority of the debt are practicing professionals because professional school is so expensive, the people who can afford their debt are the people who will receive the most relief. You go to law school, you go to med school, dental school, that varies, and you're looking at six figures in debt easily, so the majority of student loan debt is concentrated there. And that's not to say that some lower-income people are not going to get the relief. The majority of it is going to go to people that can afford their debt which isn’t what President Biden promised it will go to. It's being sold as a relief to lower-income Americans.
Are there any other possible solutions for the student debt crisis?
Beauchamp: The way student loans work nowadays is the federal government, which is the leading lender in the student loan business, sets the market rate for interest that is accrued on loans over the repayment period for borrowers. They directly hold that power. Lowering the interest rate would also be much more affordable in the long run for the national treasury as compared to the billions at stake with Biden’s current plan. The government would essentially be covering the cost of borrowing the money. The high interest is what makes loans so difficult to pay back.
Why is the cost of tuition rising?
Antizzo: The cost of tuition is up because of these extravagances and these eye-catching and attractive extra things. Another issue is the number of tenure track positions shrinking, including here at MC. That means you have more people competing for fewer jobs, i.e. a lot of people who are more than qualified and have spent a lot of money on their education being left jobless, which is a large concern, especially when talking about the quality of education students are receiving and paying thousands for.
Beauchamp: Over the last two decades, universities have been on a building binge. They build these massive buildings that sometimes go completely unused with the rise of online classrooms. Mississippi College has actually stayed away from trying to keep up with the state schools’ many building projects. It's just a recruiting tool to get students’ attention with shiny and new infrastructure. Some universities are also guilty of using their funding for excessive administrative positions. Their student bodies have grown exponentially because more people are able to go to school, but their number of faculty hasn’t increased, only their administrators and buildings.
What are some conclusions to be drawn in the aftermath of an executive decision like this?
Antizzo: I think there's going to be a backlash from people who've already paid their loans back and are not going to get any relief and is going to be from people who are working class and feel like they are going to be subsidizing the upper middle class by paying back their loans when they themselves may not have gone to school, or did go to school and already having difficulty paying back their own debt. This is going to awaken the conservative side, and this presidential election may be the most truly balanced we’ve seen in a while.
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