Editorial: Debt relief helps not just students

Reactions to last week’s announcement about a federal college debt-relief plan have run the gamut, from jubilation to outrage.

Controversy is to be expected. The timing of President Joe Biden’s proposal, as midterm elections heat up, is undeniably one of the plan’s incendiary elements. A debate has ensued over its impact on the current inflationary economic environment, raising the political temperature even further.

All of this has coincided with a draft of the University of Hawaii strategic plan, in which the state’s only public university system is working to strike a balance between maintaining standards and keeping costs in check.

In the midst of the hubbub, though, it would be wise to step back for a longer view. Clearly, some people will reap this benefit while others, who opted not to go to college or somehow aren’t eligible, will not.

However, the way to evaluate this loan forgiveness idea is not to weigh its equity among each individual American, but to assess whether it will do good for the society and economy as a whole.

And on balance, if the implementation properly targets those who are less able to discharge the debt on their own, it has the potential to do a lot of good. Those earning under $125,000 a year would qualify for some relief, but the focus will be on those earning under $75,000.

The plan does attempt to correct a federal college-aid imbalance. According to the White House fact sheet on the program, the gap between the cost of a college education and the maximum aid offered to needy students has widened drastically between 1980 and 2021.

Students who then apply for an untenable loan to make up the difference must bear some responsibility — but the loose regulation of these financing programs surely didn’t help them make the wisest choice. Especially for low-income students, difficult payment terms have frustrated hopes to stay ahead of the interest charges and pay down the loan principal.

This relief could enable many of those weighed down by debt to move on with their lives: consider buying a home, launching a business, starting a family and other ways of engaging more fully in society.

At the federal level, more needs to be done to address problems going forward; only those with loans active before July 1 of this year will be eligible for the relief. But attacking the root problems of managing college tuition and fees as well as financing costs will require congressional legislation.

Imperfect a solution as it is, the Biden program is a moderately sized relief plan. For many, the offer of up to $10,000 in debt relief (topping out at $20,000 for those who also were awarded federally funded Pell Grants) will not fully erase the loan balance. Payments, on pause through the pandemic, will resume in January.

The president resisted pressure from some of his constituents arguing that many of the nation’s poorer students had to carry the biggest loans and needed more relief than that.

The government is a long way off from providing precise details on how students might make a claim, once anticipated legal challenges are resolved.

In addition to the loan forgiveness offered on current debt, there are two other primary elements of the plan, aimed at providing some help to future students:

>> The student loan system would be reformed by cutting monthly bills in half for the government’s income-based repayment plan, capping payments at 5% of discretionary income. Loan balances after 10 years of payments would be forgiven for those with balances of $12,000 or less, and unpaid monthly interest would be covered if payments are being made, so that the balance would not grow.

>> The federal Department of Education would reestablish its enforcement unit to hold accreditors accountable and requiring institutions with the worst debt loads to implement improvement plans to hold costs down.

The accountability part will be the toughest to carry out, as enforcement strategies usually are. The real work of keeping costs in check could require colleges to better manage tuition hikes in order to qualify for various federal grants. Again, that would mean having an extra push from Congress.

Locally, UH has work to do as well. Part of its strategic planning should include ways of maximizing institutional efficiency to make sure students are not bearing the brunt of unnecessary cost increases. A recent move, reorganizing various communications programs under the College of Social Science, is one step in the right direction.

And there is an imperative to offer residents more affordable higher-education pathways. An existing example is Hawaii Promise, a program to help cover costs for community college courses.

It would be easy to dismiss such efforts, including the debt relief plan, as handouts and bailouts. They are, in fact, investments in human capital.

Seeing that the investment yields well-educated young adults prepared for work and life is a goal Americans should endorse.