minimum

You Did It, Joe. The Bare Minimum.

Joe Biden has agreed to relieve the American people of $10,000 in student loan debt, and $20,000 for Pell grant recipients. While this is being promoted as a huge victory, that is all a farce. Joe Biden is the reason student loans cannot be written off in bankruptcy. The average borrower owes $12,000 in loans, $50,000 if they’re a POC. Biden did the bare minimum in order to improve his odds for re-election. Paycheck Protection Program loans were given during the height of the pandemic, some of which are in the very high six figures. Quite a few of those borrowers are receiving 100% forgiveness as they are unable to repay what was borrowed. This is not a victory for the American people because it does nothing to stop predatory lending to students, the college scheme, or help with the staggering increase in the cost of living in this country.

Predatory Lending 

All undergraduate student loans are predatory in nature. Most students attending college right out of high school are aged 17 or 18. These students lack the maturity and knowledge to commit to that degree of debt. Even worse, the depth of education given regarding the loans is typically done during college orientations. Provided by the people whose job security literally depends on students taking out loans. In my case, I was told how to sign up for a student loan, but not what it would mean for me in the long run. The impact of the interest rate is hidden in plain sight – very easy to do for young people whose student loan is typically their first action as an adult. Loan companies prey on the ignorant no matter what the loan is. Student loan companies are raking in billions on the backs of uninformed young adults. 

What about the interest? The interest rate on a student loan via federal lending is about 6%. Pre-Covid-19 and inflation, that was more than the interest rate on the average 30-year mortgage! It’s even worse for private lenders like Sallie Mae. A private student loan can have an interest rate of 12%! That means students can (and have) been paying for decades and haven’t even touched their principal balance! It unfortunately becomes an everlasting debt for most people. Student loans are more predatory than home or car loans because of how permanent they are. You have a pretty good idea of what you can afford in terms of mortgage and transportation. After college, there’s no guarantee of a job, let alone one that will pay enough to pay back the loan. A degree is the least tangible and offers the least security, but carries the most impact.  

College Scheme

The college scheme is very simple. It is all of the expenses in order to attend college. For starters, the tuition price for an in-state vs. out-of-state student. I’ll use my alma mater, Kent State University in Ohio, as an example. According to their website, an in-state student’s tuition is $12,000 per year. An out-of-state student’s tuition is $21,000 per year. The mere difference in baseline price is staggering! Why is there a difference in tuition for public universities? The assumption is that the student’s family has paid taxes that have contributed to the university’s expenses. However, if you take into consideration that the only public university in DC is UDC, most DC students attend an out-of-state university. Using Howard as an example for the cost of a private university, the cost of tuition for every student is $28,000.  

Most universities require all freshmen to stay on campus, forcing students to pay for room and board. At Kent, the standard room and board with a meal plan is $12,000; Howard’s is about $15,000. Even if a student can find more affordable living and food, they’re not allowed to for the first year. Finally, let’s get into textbooks. The average student pays $1,200 a year on textbooks. Websites like Chegg will allow students to rent a book for the semester at a fraction of the cost. Unfortunately, schools found a way to curtail that. How? The online course code! Each textbook contains a personal code for the student to visit the online portal for “exclusive” (i.e. one extra sentence the book doesn’t have) content. Teachers may actually use the online service once, or not at all. Essentially, the minimum amount required for you to buy the book and make it impossible to return.

Cost of Living 

The federal minimum wage is $7.25 per hour. While most states have a higher wage, no state can pay less. For example, Ohio’s is $9.30 per hour. The average rent in Ohio is $800 per month. While an income-based repayment plan may not require payment from someone making minimum wage, private loans aren’t that sympathetic. There are horror stories of people having to pay $400 per month in student loans alone. That leaves very little room for rent, groceries, and other expenses like phone, internet, and transportation. Imagine living in a bigger city like D.C., Los Angeles, or New York City where the rent is the highest in the country. A lot of the jobs that require some sort of higher education don’t even offer a living wage. Even a $15 per hour minimum wage is not enough to offset the inflation we have seen recently.   

Since Covid-19, we have seen unfathomable inflation in our basic necessities. Gas topping $5 a gallon in some states, grocery shelves bare in some places, and very expensive in others. Some states are seeing the prices of their rent triple. It is best described as companies price gouging in attempts to recoup money lost during the height of the pandemic. Regardless of what it is, we have all seen a significant change in how far our dollar goes. A lot of Americans are barely scraping by without student loan payments. So many of the other benefits afforded during the pandemic were eliminated, like the child tax credit, for example. Adding another bill on top of a paper-thin paycheck just doesn’t seem feasible or appropriate, especially considering the number of tax dollars that are spent on military efforts and subsidies for big businesses. It seems like citizens cannot catch a break.

Conclusion

What is the solution? All student debt prior to 2023 should be forgiven in its entirety, at a minimum. Since most borrowers have not made a student loan payment since 2020, that should be fairly easy to accomplish. President Biden should have announced legislation that protects future borrowers from predatory lending, lower interest rates for future loans, and no-interest accrual as long as payments are made on time. As of this post, only the latter was part of his plan. All repayments should be income based, for private and public loans with a repayment cap of 20 years. Finally, students should be able to see their estimated repayments before signing the paperwork. Similar to a mortgage or a car loan, which explains how much will be paid before the purchase is finalized. That gives the borrower the option to shop around or make better decisions on their college path.  

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