Should Joe Biden Forgive Student Loan Debt?

(NewsNation) – The student loan repayment freeze expires on May 1. It’s been in place since the start of COVID-19, and there are new calls not only to extend the freeze, but also to forgive student loans completely.

You may recall that progressives won the battle with President Joe Biden over the eviction moratorium. He didn’t extend it, they protested on the steps of the Capitol for a week led by Rep. Cory Bush (R-Mo.). It got a lot of attention and the president relented.

The numbers here are much larger. The average student debt balance is now over $37,000. More than 43 million Americans have some form of college debt. Do the math. The US government, the taxpayers, owe $1.3 trillion.

Alan Collinge is co-founder of Student Loan Justice. His petition to cancel federal student debt has over a million signatures. Below is a transcript of his discussion on “On Balance,” edited for clarity.

Leland Vittert: By cancellation, you mean that people who owe money simply shouldn’t have to pay it back.

Alain Collinge: Yeah, Leland, you know, for the first 15 years of my organization’s existence, we fought very moderately for just the return of bankruptcy protections to student loans, they were stripped out in unique ways. But at this point, when COVID arrived, it became abundantly clear that this lending system failed catastrophically. He’s a big government behemoth, and at this point it probably makes more sense to take him to the bath and drown him in the tub. You know, just before the pandemic, 80% of all borrowers were underwater, 64% didn’t pay at all, and the remaining 16% paid and paid and paid.

Viter: I’m a bit confused here. So if the system is, in your words, “broken”, then people who owe taxpayers money shouldn’t have to pay it back?

Collinge: He will not be paid. Leland. This is simply not the case. I mean, look at the state of Texas: $141 billion in student debt, mostly federal. What if we took $141 billion from the state of Texas and sent that money to the federal government? It wouldn’t be good. The loans won’t be paid, Leland.

Viter: Law. I wonder where it ends, because there is a lot of student loan debt. There are also a lot of Fannie and Freddie backed mortgages, federally backed mortgages. These people are also going through hard times, should we (should we declare) that they are also dead?

Collinge: Well, you know, all of these loans have a real trump card behind them. And all of these loans have the same constitutional bankruptcy protections that all other loans have, but student loans do not.

Viter: So should we cancel student debt and cancel all these loans and taxpayers won’t get paid back because there’s no bankruptcy protection?

Collinge: Taxpayers are doing very well with this loan system. Even Donald Trump before running for president noted the fact that the federal government has been enjoying more than $50 billion per year on this program since Obama’s federalization in 2010. Taxpayers have not paid 1.6 trillion dollars for this portfolio of loans, they paid a small fraction of that. And compared to say [Paycheck Protection Program] loans or any of the other stimulus we’ve seen, especially during COVID, it’s the cheapest and easiest way to stimulate the economy.

Viter: I’m still confused. Did any of the people who signed the loan documents do so under duress?

Collinge: They did so without knowing how unconstitutional and viciously predatory these loans are. No other loan in this country has been stripped of bankruptcy.

Viter: But what about offering someone money to go to college and giving them a loan to do so, especially after 2010 when we knew they had no bankruptcy protection, is it predator?

Collinge: When you remove the bankruptcy protections from a loan and the statute of limitations, you are giving the lender, in this case the federal government, a license to steal, and that is precisely what has been happening for 40 years.

Viter: So I’m confused. How did we go from “we want bankruptcy protections”, which (is) a reasonable debate, and whether or not people should get bankruptcy protections for federal student loans, to “it doesn’t matter, we should just forgive all the loans?” They seem to be very different things.

Collinge: Well, at that time, you know, the subprime mortgage default rate was 20%. The default rate for borrowers in 2004 who only borrowed a third of what we have borrowed today is double: 40%. My best guess is that, certainly post-COVID, we’re looking at a 70-75% default rate.

Viter: Where does the equity exist for all the people who (didn’t buy) new cars or new houses or vacations or whatever and paid off all their loans? Should we go back a few years and give them all their money back too?

Collinge: You know, people who have been through the loan system for years or decades should be glad they’re done. It has nothing to do with the fact that today this loan system is over, it’s over.

Viter: Your argument is that we should cancel all debt because some people can’t pay it?

Collinge: Because the vast majority of people cannot repay.

Viter: Shouldn’t they? Should they pay anything? They took the money, they got the education, they signed the papers, and they shouldn’t pay it back, because some of them can’t?

Collinge: For 15 years, I was there with you. If they had returned the bankruptcy protections a decade ago, we would have hopefully seen the stabilization of this lending system. It’s too late. The numbers are too big. We still need bankruptcy protections, make no mistake.

Viter: Let’s go ahead for a moment and say there should be federal student loan forgiveness. Why on earth should taxpayers keep lending money if there’s this precedent that “hey, people don’t have to pay it back because it’s going to be forgiven at some point?”

Collinge: Well, I don’t think they should. I think that’s the end of the federal student loan system.

Viter: Oh, come in. And now, all of a sudden, five years from now, you’re not going to see a big group saying, “Oh, hell, poor people can’t get loans to go to school. Therefore, we need a federal system”?

Collinge: I don’t know what the future funding system for higher education will look like.

Viter: Well, you’re agnostic now, but I guess you’ll change once you get what you want, right?

Collinge: Well, if there is to be a lending system in the future, loans must have the same bankruptcy rights, statutes, limitations, fair debt collection practices, truth and lending laws and all the other consumer protections.

Viter: But I still don’t understand why if you give all loans in the past all these reforms, why it wouldn’t apply then why it wouldn’t be fair and why you then have to cancel all the debt unilaterally?

Collinge: In fact, I agree with you. In my opinion…we, the government, should not be in the lending business. They botched the student loan so badly.

Viter: Yeah, they botch most things pretty drastically. No arguments there. But I still don’t understand how it is fair to hard-working Americans who have paid their taxes and paid their loans that they are not being repaid by people who have benefited from all those loans.

Collinge: You know, Leland, it’s just a fact that the loans won’t be repaid. They will not be paid. It’s not going to happen. And I don’t call that forgiveness. I call it cancellation.

Viter: A rose by any other name. Fair enough. We had to run, but it was good to chat. You come back, this debate will continue in Washington.

Collinge: I would like.

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