Flashpost: Student Loan Debt

In light of the news that the Department of Education has laid off over 50% of its workforce (in an effort to make it more likely that Congress will disband the Department of Education), we should talk about Student Loans.

If you don't know (and I don't know how you would not know), the Student Loan crises has been growing since 2015 - factually, we know that the student loan industry has taken advantage of young people and has been allowed to offer loans with size-able interest rates, leading some people to pay on their loans for decades without really diminishing the principle.

Every presidential election that Donald Trump has been a part of has seen this issue at the centerfold. For the progressives the notion of student loan forgiveness started to gain traction when COVID happened and payments were paused, which actually stimulated the economy (people were free to buy and save on things like homes). For conservatives, the notion of forgiving student loans sparked intense debate with meaning arguing that students essentially did not deserve a governmental buy-out (besides the fact that we buy out other industries all the time, but I digress).

Under President Biden efforts to get students relief were attempted, but most failed on procedural/legal grounds. His most promising attempt the Saving on Valuable Education (SAVE) plan, was a new income-driven plan that like other income-driven plans would have made the monthly payment an amount based on your income (your payment cannot be more than 10% of your income). It was appealing to borrowers because for smaller loans the time to forgiveness was shorter (10-15 years of steady payment, instead of 20-25 years). A federal judge has filed a temporary injunction on the enforcement of that plan, but it no longer matters because the Trump administration has paused ALL income-based replacement plans.

This is a really weird move because the standard income-based replacement plans have been around since the 1990s and have been the only way some people who go into public-service jobs with low salaries have ever been able to pay back their student loans. The bigger issue, however, is that most people simply will not be able to afford their monthly payment. Let me give you an example:

• Borrower gets a job paying 80,000/yr and has 115,000 in student loans.

• Under the SAVE Plan their monthly payment would be $494/month, forgiven in 2046. Full amount repaid 184,939.

• Under the regular income repayment plan it would be $735/month, forgiven in 2041. Full amount repaid 183,072.

• Under the other plans the borrower's monthly payment would vary between $670-1100 (because it increases as the years go on), fully paid somewhere from 2050-2055. FULL AMOUNT PAID 241,055-260,527.

Without the income based plans, the borrower not only likely will have a higher and unmanageable monthly payment they also end up paying almost double the original loan amount. But besides all of this, people simply do not have it. Thus, they will not pay it, which makes this crises a crises for all Americans whether you have student loans or not because it will tank the economy (even more than what we are already seeing happen with the tariffs).

Like with a lot of these changes, the people who are going to suffer the most are those who are middle-low class families. And I can't help but think this is just another way of opening the door for privatization - in education and in the workforce.