Student loan forgiveness is a tense topic in politics. Both Democratic and Republican politicians turn to statistics about federal student loan forgiveness programs to illuminate each others’ faults. These actions create confusion for voters and enrollees of these programs.
One of the Biden-Harris Administration’s most appealing financial policies is the Saving on a Valuable Education Plan, or the SAVE Plan. Though the SAVE Plan has relieved student loan debt for many Americans — nearly 8 million to be exact — the U.S. Supreme Court upheld a pause on the SAVE plan Wednesday, according to a press release by the House Budget Committee. The pause further confuses enrollees who don’t know where they will stand with their payments.
According to an issue brief from the White House, SAVE “introduces flexibility compared to previous repayment plans.” SAVE is an income-driven repayment plan, which calculates student loan payments based on the borrower’s earnings. The calculation for SAVE enrollees also waives unpaid interest at the end of each month to lower monthly payments, according to the brief.
However, others believe the SAVE plan is an irresponsible use of federal and tax funding. Chairman of the House Budget Committee, Rep. Jodey Arrington said in a statement, “The so-called ‘SAVE plan’ is a back door loan cancellation on the taxpayers’ dime and, even worse, it forces mainly lower-income individuals to pay off loans of higher-income college students.” The reality of the class divide may be less knee-jerking than Arrington alleges.
In 2022, Rep. Glenn Grothman said, “Nearly 60 percent of all student debt is held by the rich and upper-middle class,” according to a newsletter from his office. However, this is misleading.
The group Grothman labeled as “rich and upper-middle class” were people earning $74,000 or more. In 2022, the average middle-class income was $106,092 for a household of three, and the low-income average was $35,318, according to the Pew Research Center. Therefore, the “rich and upper-middle class” group was more middle-class. Grothman likely mislabeled the group this way to push his political agenda.
The statistic Grothman cited is also affected by the relationship between finishing a bachelor’s program and economic status. According to Brookings, a non-profit, nonpartisan research group, 74% of higher-income students enroll in a bachelor’s program compared to 36% of middle-class students and 23% of low-income students. That means students from higher-income families are more likely to finish their programs than other students, accruing more student loan debt in the process, according to Inside Higher Ed.
Democrats are also guilty of skewing the benefits of the SAVE plan. According to the White House issue brief, “the immediate benefits of having more disposable income are well understood. The SAVE plan also offers significant long-term debt relief.”
SAVE enrollees with loan amounts of $12,000 or less will “receive loan forgiveness after making the equivalent of 10 years of payments,” according to Federal Student Aid, a year is added for every additional $1,000. The repayment term is capped at 20 years for borrowers with undergraduate loans.
Though the benefits may seem great for low-income and middle-class borrowers, one must consider the bigger picture. Low-income students in bachelor’s programs are less likely to finish them than high-income students, and they are more likely to have gone through a two-year program before the bachelor’s program, according to Inside Higher Ed. A primary reason for the retention issue is limited financial support; low-income students may be unable to afford to finish their Bachelor’s program, resulting in lower student debt.
However, people with bachelor’s holders earn between $630,000 and $900,000 more in median income in their life than those without a Bachelor’s, according to the Social Security Administration. Students who can’t finish their Bachelor’s degrees potentially have lower student debt, but they may have less income to pay it off than graduates with higher student debt. Low-income students are also more likely to attend a two-year program before a bachelor’s degree, potentially leading to more debt they struggle to pay off. Therefore, the benefits of SAVE may be exaggerated for low-income students.
Politicians skew student loan forgiveness data to push their agendas. Voters are the rope in a proverbial tug-of-war across the political aisle, ultimately leaving them confused about the SAVE plan and other forgiveness programs. Voters cannot rely on their representatives to present them with accurate data and information on student loan forgiveness; they are forced by political greed to rely on themselves.
Taylor Orcutt is a junior studying journalism. Please note that the views and opinions of the columnists do not reflect those of The Post. Want to talk more about it? Let Taylor know by tweeting her @TaylorOrcutt.
