For many, mass debt forgiveness is the silver bullet to slay America’s student loan crisis. For others, a bailout is far from the best way to deal with education debt.
Whichever side you fall on, it seems that mass student loan debt forgiveness is at the forefront of the debate surrounding America’s student loan problem. Presidential candidates like Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) have set forgiveness proposals as one of the centerpieces of their campaigns, and editorial boards around the country are firing off opinions. Be prepared to hear more of them.
Where does the voting (and borrowing) public stand? That depends on who you listen to. For example, about 56% showed support Sen. Warren’s proposal for some $640 billion needs-based forgiveness, with 27% opposed, according to a Politico/Morning Consult poll from May. However, 52% of respondents to a separate Quinnipiac University survey said they’d oppose a federal loan forgiveness plan if it were financed by taxing the wealthy, as Warren’s plan is.
Without trying to decide who’s right or wrong, let’s relay the arguments for and against such widespread loan forgiveness. They could help as you consider your own opinion on this question.
1. For: Help fellow borrowers in need
The most basic argument supporting forgiveness is a human one — it’s as simple as offering a helping hand to those who need it.
Borrowers who enjoyed good fortune during their repayment are especially likely to wonder: If the federal government could make lives better for still-indebted student loan borrowers, why not?
Our informal Twitter poll collected such responses from borrowers who zeroed their loan balances without any public assistance. Here are responses from three of the many Twitter handles advocating mass student loan relief:
- Amanda Page (@amandadashpage): “I support it because I think giving people that relief will free up a lot of creative brainpower currently held hostage in the anxiety people feel over their loans. I had that anxiety for years before I did a drastic project and paid them off quickly.”
- Lyla Peter (@PeterPlansIt): “Totally support. Once my debts were paid off, I had a marked increase in my [quality of life], which I then used to invest in [the] economy in different ways.”
- Traci B. Fly (@tbfly): “I feel blessed to have been able to pay mine off but recognize that everyone is not as fortunate. A lot of us, including myself, were unaware of all the repercussions when we signed up for this debt in our late teens, early twenties. I don’t mind [others] getting a clean slate.”
2. Against: Many borrowers aren’t actually in need
On this side of the argument, you might point to the fact that America’s $1.6 trillion student loan debt reached its peak, in part, because some borrowers took out six figures for expensive graduate and professional degrees.
Why forgive the balances of a bunch of lawyers and doctors, the thinking goes, since these are the sort of professionals with the earning power to repay their debt without assistance?
While Sanders’ proposal offers forgiveness for all, Warren’s offers decreasing amounts of relief to borrowers with increasing amounts of income. No borrower making more than $250,000 a year, for example, would receive anything from Uncle Sam.
Still, Adam Looney of the Brookings Institution estimated that Warren’s policy would disproportionately benefit those with a second or third degree: “Borrowers with advanced degrees represent 27% of borrowers but would claim 37% of the annual benefit.”
3. For: Give borrowers a break in this up-and-down economy
For many student loan borrowers in the wake of the Great Recession, finding appealing work, let alone in the field of their college major, was a huge challenge.
Some felt they were forced to borrow to afford a prestigious school, hoping it would lead them to a stellar career. Others might have borrowed loans unwittingly in the first place, confused by the jargon of Direct Subsidized and Unsubsidized Loans and all the rest.
Forgiving all borrowers, it could be said, would help them focus on furthering their career and progressing toward other financial goals.
And it might improve the economy too — a 2018 report from Bard College projected mass student loan forgiveness would increase gross domestic product and decrease unemployment.
4. Against: You’re obligated to repay what you borrow
Macroeconomic factors have affected borrowers since the beginning of student loans, some argue, so why start using that as an excuse now?
A Twitter respondent with the handle John Holloway takes this stance, saying that despite the student loan strife he himself experienced, he still wouldn’t support mass forgiveness if it reached the ballot box.
“I knew it was a loan, even at age 19!” he said in reply to Student Loan Hero’s query. “I knew it had to be paid back.”
Matthew Burr, who repaid $74,000 worth of student loans, expresses similar concerns about whether it’s fair for the government to fund such as program.
“I look at it like this: Is it my grandmother or other family members’ responsibility to pay my debt through the taxes they pay? Not a chance,” he said. “So it isn’t my responsibility to [help] pay down or eliminate all student loan debt.”
That’s where you might consider the costs of broad forgiveness programs. Warren says her program would be funded via a 2% tax on 75,000 families with at least $50 million in the bank, while Sanders would pay for his broader forgiveness proposal through taxes on stock and bond transactions.
5. Against: Mass forgiveness sets a dangerous precedent
Maybe you wondered why some companies were bailed out over others during the financial collapse of 2008-09. There was a lot of talk about picking winners and losers, as well as whether the bailouts created “moral hazard,” encouraging banks to continue with their risky behavior.
Those arguing against a consumer bailout this time around aren’t solely concerned with which, if any, borrowers would receive relief. They’re also worried about the precedent it would set for future borrowers. Should they also expect forgiveness when they graduate?
Current borrowers who receive forgiveness might also suddenly think that other financial woes could be cured by a congressional vote or an elected official’s signature.
“What would be next — forgiving mortgages?” asked borrower Bill Fish, who reported covering his $18,000 student loan debt before helping his wife attack hers. “I’d rather have the government look at the rapidly [rising] cost of higher education.”
The gray area of mass student loan debt forgiveness proposals
Painting mass student loan debt forgiveness as a black-and-white issue doesn’t do it justice. The gray area is miles wide — just consider the suggestions of Warren and Sanders.
The Massachusetts senator promised to void debt proportionally based on borrowers’ income, costing the federal government a cool $640 billion. The Vermont senator, meanwhile, took his pledge a step further, calling for cancellation for all, which could reportedly run up to $2.2 trillion, which could cover the current student debt statistic of about $1.6 trillion.
Dissenting voices point out that forgiveness might not address the sources of the crisis, which include a swelling cost of attendance and a federal student aid system due for an overhaul. (This is why some presidential candidates have also talked about various forms of free college.)
Borrowers on both sides of the debate call for greater investment in financial literacy programs so that students understand their debt obligation. Others also favor a rewriting of the bankruptcy code, giving bankrupt borrowers the chance to get rid of their student debt.
As for forgiveness itself, there’s also the matter of whether it’s even feasible to carry out. Some student loan lawyers see passing such a program and implementing it is unlikely if not impossible.
Pursue targeted student loan forgiveness that already exists
If you’re a student loan borrower in the shadow of this spotlight issue, you might be tempted to pin your hopes on one day receiving a loan discharge. Unfortunately, it could be a long wait.
Instead, consider student loan forgiveness that already exists, including programs for federal education debt:
- Public Service Loan Forgiveness: Wipe your balance clean after 10 years of timely payments while working full-time for an eligible employer, such as the government or a nonprofit.
- Forgiveness via income-driven repayment (IDR): Receive a blank slate after 20 or 25 years of prompt payments on an IDR plan.
You might also be able to find forgiveness programs — or loan repayment assistance — for federal and private loan debt. Aid is available from states and employers, depending on where you live and what you do for work.
Investigate the available options — that beats waiting around for news that may or may not arrive at a later date.
Interested in refinancing student loans?Here are the top 7 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.45% APR (with Auto Pay) to 7.49% APR (with Auto Pay). Variable rate loan rates range from 2.14% APR (with Auto Pay) to 6.79% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of September 6, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 09/06/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for SoFi.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
Fixed rate options consist of a range from 3.75% per year to 5.80% per year for a 5-year term, 4.25% per year to 6.25% per year for a 7-year term, 4.55% per year to 6.65% per year for a 10-year term, 4.85% per year to 7.05% per year for a 15-year term, or 5.30% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan). The monthly payment for a sample $10,000 loan at a range of 3.75% per year to 5.80% per year for a 5-year term would be from $183.04 to $192.40. The monthly payment for a sample $10,000 loan at a range of 4.25% per year to 6.25% per year for a 7-year term would be from $137.84 to $147.29. The monthly payment for a sample $10,000 loan at a range of 4.55% per year to 6.65% per year for a 10-year term would be from $103.88 to $114.31. The monthly payment for a sample $10,000 loan at a range of 4.85% per year to 7.05% per year for a 15-year term would be from $78.30 to $90.16. The monthly payment for a sample $10,000 loan at a range of 5.30% per year to 7.27% per year for a 20-year term would be from $67.66 to $79.16.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
Variable rate options consist of a range from 2.50% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 4.25% per year to 6.40% per year for a 10-year term, 4.50% per year to 6.65% per year for a 15-year term, or 4.75% per year to 6.90% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.45% to 4.25% for the 5-year term loan, 1.95% to 4.30% for the 7-year term loan, 2.20% to 4.35% for the 10-year term loan, 2.45% to 4.60% for the 15-year term loan, and 2.70% to 4.85% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 2.50% per year to 6.30% per year for a 5-year term would be from $177.47 to $194.73. The monthly payment for a sample $10,000 loan at a range of 4.00% per year to 6.35% per year for a 7-year term would be from $136.69 to $147.77. The monthly payment for a sample $10,000 loan at a range of 4.25% per year to 6.40% per year for a 10-year term would be from $102.44 to $113.04. The monthly payment for a sample $10,000 loan at a range of 4.50% per year to 6.65% per year for a 15-year term would be from $76.50 to $87.94. The monthly payment for a sample $10,000 loan at a range of 4.75% per year to 6.90% per year for a 20-year term would be from $64.62 to $76.93.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
Borrowers who take out a variable loan with a term of 5, 7, or 10 years will have a maximum interest rate of 9%. Borrowers who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.
The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.
POSTPONING OR REDUCING PAYMENTS
After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.
We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.
We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.
If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of October 1, 2019 and is subject to change.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.05% effective September 10, 2019.
6 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
7 Important Disclosures for College Ave.
College Ave Disclosures
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1College Ave Refi Education loans are not currently available to residents of Maine.
2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.
4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 09/23/2019. Variable interest rates may increase after consummation.
|2.14% – 6.79%1||Undergrad & Graduate|
|2.05% – 5.98%2||Undergrad & Graduate|
|2.25% – 6.65%3||Undergrad & Graduate|
|2.43% – 7.60%4||Undergrad & Graduate|
|2.14% – 7.21%5||Undergrad & Graduate|
|2.01% – 8.88%6||Undergrad & Graduate|
|2.74% – 6.24%7||Undergrad & Graduate|