How Biden's student debt relief plan will affect Mississippians 

by Molly Minta, Mississippi Today
August 24, 2022

Hundreds of thousands of Mississippians could benefit from student debt relief plans announced by the Biden administration, as many others now face the prospect of resuming loan repayment come next year. 

Under plans announced by the U.S. Department of Education Wednesday, borrowers who make less than $125,000 a year will be eligible for up to $10,000 in loan forgiveness. Pell Grant recipients with federal loans could see up to $20,000 forgiven. 

Relief is capped at the amount a borrower owes. 

The department also announced student loan payments will resume in January 2023; these had been on pause since 2020 under the Trump Administration.

The plan will not benefit those with private loans but could wipe away some debt for more than half of the nearly 439,000 Mississippians with federal student loans, according to an analysis by  the Education Data Initiative. The average Mississippian with federal student loans owes about $37,000, one of the highest average debts in the country. 

The median earning for a Mississippian with a bachelor's degree was approximately $43,500 in 2019, according to data from the Institutions of Higher Learning, while those with a graduate degree earned about $55,500.

Details on how borrowers can get their loans canceled will be announced later this month. To qualify, a borrower must have taken out loans before July 2022 and made less than $125,000 in either 2020 or 2021, the Washington Post reported. Current students are eligible if their parents fall under the income cap. 

In order to receive relief, the department must have a borrower's income data. The Biden administration is planning to launch an application in the coming weeks for borrower's to upload this data, according to studentaid.gov. Borrowers can sign up here to be notified when the application opens. 

The department also announced a proposal that will significantly reduce future monthly payments for borrowers on income-driven repayment plans. The White House said it hopes these changes will lead more borrowers to sign up for income-driven repayment plans even as consumer watchdogs have decried the program's “abysmal track record.” 

The proposed changes to income-driven repayment programs will halve monthly payments for those with undergraduate student loans and make it so borrowers with graduate loans would pay an average weighted rate. Borrowers making less than $15 an hour would not have to make any monthly payments under the proposal.

Current and future borrowers would see their average annual payments drop by more than $1,000 under these proposed changes, according to a White House fact sheet. The federal government would also start forgiving loan balances after 10 years of payment, down from 20 years, and make it so that interest won't accumulate as long as a borrower makes monthly payments. 

In a press release, U.S. Secretary of Education Miguel Cardona cast the plan as a way to restore faith among Americans that student loans can lead to opportunity rather than a cycle of debt. 

“For too many people, student loan debt has hindered their ability to achieve their dreams—including buying a home, starting a business, or providing for their family. Getting an education should set us free; not strap us down,” he said.

The announcement was met with criticism Wednesday from the left and the right. On Twitter, Gov. Tate Reeves called the plan an unfair use of taxpayer dollars from working-class people who don't have student loans.

Progressive groups said President Joe Biden's plan doesn't do enough to help borrowers who struggle to repay their loans. Many noted that Biden had campaigned on a more far-reaching pledge to forgive all undergraduate tuition-related federal student debt for borrowers making under $125,000 who graduated from public colleges and universities and private historically Black colleges and minority-serving institutions.  

“On one hand, I'm happy about any type of loan forgiveness and leniency and extended grace periods,” said Stephen Brown, the assistant director of outreach at Get2College. “I think where the biggest conflict comes in — as far as arguments from people that (Biden) needs to cancel it all — was it was one of his campaign promises.”

Get2College is a nonprofit that advocates for college access and affordability and helps high school seniors fill out the Free Application for Federal Student Financial Aid. 

In an op-ed Wednesday, Derrick Johnson, the CEO of the NAACP, and Wisdom Cole, the NAACP's national director of youth and college, called Biden's plan “bad public policy and a devastating political mistake.” The NAACP had called for Biden to cancel up to $50,000 in student debt as a way to address the widening racial wealth gap among millennials.

Student debt disproportionately burdens borrowers in Black, brown and low-income communities, who have higher averages of student debt than white borrowers. 

“Many privileged and predominantly White Americans, who inherited generational wealth, have had the fortune of not depending on expensive loans to begin with,” Johnson and Cole wrote. “They will likely benefit from $10,000 in cancellation to cover the remaining sum. But what about those in our society who did not inherit generational wealth?”

In Mississippi, Black borrowers take on higher amounts of undergraduate student debt than those of other races, according to data from a recent National Postsecondary Aid study. Black students in Mississippi borrowed an average of $10,800 in undergraduate student debt during the 2017-18 school year, while borrowers of other races took out an average of $7,400. 

Black borrowers in Mississippi also took out more loans during the school year than the average Black borrower across the country, while borrowers of other races took on less debt than average. 

While Biden's announcement will benefit borrowers with past loans, it does little to address one of the primary reasons many Mississippians will go into debt to pay for college in the future — the rising cost of tuition. 

Jennifer Rogers, the director of the Mississippi Office of Student Financial Aid, said she hopes Biden's announcement will result in more legislative efforts to reduce the cost of college. 

“The President's executive action will certainly benefit past borrowers,” Rogers said. “I hope this action will also create momentum in the college affordability movement that results in additional bipartisan action to make college more affordable and therefore reduce the need for borrowing by current and future students.”

Since 2008, the cost of college has steadily increased in Mississippi — due in part to a dearth of state funding — but family income hasn't kept pace. At the same time, the Legislature has cut the amount of state grant aid available to college students. A 2019 study from LendEDU found that the average student loan debt in Mississippi is rising at the ninth fastest rate in the country. 

About 50% of students at public universities in Mississippi borrowed money to pay for college during the 2019-20 school year, according to federal data. 

Nearly half of borrowers who have defaulted on their student loans — meaning they haven't made payments for 270 days — could see their balances erased under Biden's plan. 

Brown, from Get2College, said this will benefit many adult students he has worked with who want to go back to college but can't because their loans are in default. Mississippi's educational attainment goals depend on increasing the number of adult college students. 

Graduates of for-profit colleges will also benefit from this plan, Brown said. He noted that these institutions, which typically charge pricey tuition rates for non-accredited degrees, tend to target students of color and non-traditional college students, like single parents and veterans. Borrowers who attended for-profit colleges also default at higher rates than those who did not. 

“You really can't tell this story without highlighting that a large percentage of student debt is from for-profit institutions,” Brown said.

Brown added that he would like to see Biden's plan kickstart more local initiatives to reduce the price of tuition, particularly for teachers. 

Student debt is a significant factor in Mississippi's teacher shortage, said Toren Ballard, the director of K-12 policy education with Mississippi First, a policy nonprofit. In order to become a teacher, students typically have to take on loans to pay for college tuition — only to make meager salaries that often do not cover the monthly payments. 

Teachers with student debt are more likely to leave their positions within a year than teachers without debt, according to a survey that Ballard conducted in late 2021. For teachers with student debt, 58% reported being likely to leave the classroom within a year, Ballard found, compared to 49% of teachers without debt. 

Student debt also causes Black teachers in Mississippi to leave the profession at significantly higher rates than white teachers, Ballard found, which contributes to larger racial inequities in the state's public schools.

“The attrition gap between Black and white teachers is being driven solely by a disproportionate debt load that Black teachers have,” Ballard said. 

Biden's plan will help Mississippi teachers, but Ballard said the state needs to look at more long-term solutions to the high tuition rates that lead teachers to take on unaffordable student debt.  

“This is just a temporary Band-Aid for a really wide-reaching problem,” he said.

Editor's note: Get2College is a program of the Woodward Hines Education Foundation, a Mississippi Today donor.

This article first appeared on Mississippi Today and is republished here under a Creative Commons license.