University of North Texas 
Free College and Student Loan Cancellation -- Why One Expert Says that it Might Just be Possible
In the midst of a pandemic, the 2020 presidential election is underway. With that comes various conversations that are of great public interest to the people -- and one of these topics includes financial aid policy as it relates to higher education. Although many hope for change, given the past track record of the government, some are skeptical if politicians can truly live up to what they propose to do while in office.
"What we saw in the 2016 election, there was a lot of postering, a lot of promises, a lot of talk -- but not a whole lot of action," said Imani Herring, a sophomore at Spelman College. "If anything, I feel like we've regressed. So with this election coming up … of course I'm going to vote, but I feel like I'm backed into a corner with my options. The illusion of choice is so evident."
Mark Kantrowitz is the leading financial aid expert in the U.S. and a math-whiz from MIT. His research has been cited in multiple news publications and has written articles for the New York Times, Washington Post, Forbes, and Time Magazine to name a few. He has testified before Congress on multiple occasions, successfully lobbying for financial aid policy change, and is the VP of Research of Savingforcollege.com -- the leading website about planning and saving for college.
One of Kantrowitz's most recent findings was that within the last quarter, ending in June, new federal student loans dropped by 42 percent -- an unprecedented drop in loans taken out. During these times, students are borrowing less money, and fewer are borrowing at all. This is due in part to many students opting to instead take a gap year or perhaps save money by enrolling at a community college for the time being. So far, to a certain degree, the U.S. government has implemented ways to financially aid schools and students during these times. For instance, through the CARES Act which has two emergency financial aid funds.
However, what more can be done? How can certain policy proposals actually happen? Who would be affected -- and to what extent? Here's what Kantrowitz has in mind.
Can student loans be canceled?
Many argue that the government is still not doing enough and that much more needs to be done. One of the ongoing conversations amongst students is the cancellation of student loans.
"The student loan debt crisis should not be going on still when I have children," said Nana Wordie, a freshman at the University of Houston. "I feel like we need to create a plan that makes sense -- that we can use for years to come. Not just for one year and then it goes back to the way it was."
For the Trump-Pence presidential ticket, they haven't really highlighted as much within their campaign student loan cancellation and forgiveness, whereas the Biden-Harris ticket has made more of an effort in doing so.
"If you total up everything that Joe Biden has proposed, it's about $1 trillion of
loan forgiveness out of the $1.6 trillion of the national student loan debt," said
Kantrowitz. "From a public policy point of view, the arguments for loan forgiveness
is that it's going to have a positive impact on the economy. But it's usually a small
impact on the
economy."
Kantrowitz doesn't think that overall student loan forgiveness and cancelation is likely; however, it might be possible to a certain extent for certain individuals.
"I think the most likely things that we're going to see are targeted loan forgiveness,"
Kantrowitz said. "Such as forgiving the student loan debt of teachers, and more recently
than that maybe first responders and frontline workers battling the pandemic should
get
some form of loan forgiveness."
Another topic as it relates to government student loan policy is seen according to President Donald Trump's campaign. Trump has proposed to get rid of subsidized loans and abolish public service forgiveness programs.
There are two main types of student loans -- subsidized and unsubsidized.
- With subsidized loans the U.S. government pays the interest rates while the student is still in college.
- Whereas with unsubsidized loans the student pays the interest rates as soon as they take out the loan.
Therefore, Trump's proposal to get rid of subsidized loans would save the government money which could then be dispersed elsewhere in their overall budget. This has been a common trend in Trump's administration. Each year they propose significant budget cuts to public education to instead be funneled to private education or other areas of government interest. If fully enacted as intended, this would be a 8.4 percent or approximately $6.1 billion dollars cut according to the U.S. Department of Education Fiscal Year 2021 Budget Summary.
"With split control of Congress with Democrats controlling the House and Republicans the Senate those proposals aren't moving anywhere," Kantrowitz said. "If enacted, students will be paying up to one-fifth [20 percent] more depending on when they took out that loan."
The idea of abolishing subsidized loans in order to save the government money is nothing new. In fact, it has already been administered to a certain extent under the Obama-Biden presidential term. In 2012, Congress eliminated subsidized loans for graduate students, but retained them for undergraduate students.
There are two sides to this coin. The first side being that the proposed elimination of subsidized loans could actually benefit students in other areas.
"Eliminating the subsidized interest benefit on new loans would save [the government] a few billion dollars a year, which that money could be redirected towards the Pell Grant, which could reduce the reliance on debt," Kantrowitz said.
Then there's the flipside."What some public policy advocates fear is that the subsidized loans would be eliminated and the savings wouldn't be used to increase other forms of student aid, it would just disappear into the federal budget deficit."
The idea of 'free college' -- is it possible?
"We need to reduce the debt by making college free," Kantrowitz said.
However, the question of how this could be feasible remains. Kantrowitz breaks the concept down.
In the United States, students who graduate with a Bachelor's degree pay more than twice the federal income than someone with just a high school diploma. With that in mind, the overall financial aid awarded that helps them graduate is eventually paid for in a little over a decade.
"Most people work 40 to 45 years. So that 10 to 12 years of breakeven is then followed by 30 years of pure profit to the federal government. The return on investment is an annualized 14 percent return on investment. So one could make the argument that is it a good investment, to invest in our greatest asset -- which is our students -- but that there is no better investment, and the return far exceeds any other investment," Kantrowitz said.
Although Kantrowitz mapped out how this could in theory be possible, still, one college student believes that it isn't likely to happen.
"College is an industry," Imani Herring said. "I think the reason why it would be so difficult to implement [free college] is because the government knows that if the playing field were leveled .. classes would not be the same. If people had the same access to education, [the wealthy's] status and riches wouldn't matter as much because we could all get to it."
What the future for financial aid policy could look like.
As of right now, Pell Grant recipients are actually much more likely to graduate with student loan debt as opposed to those who don't have them according to Kantrowitz. With that being said, he thinks that the Federal Pell Grant should be tripled at the least and that the government should place a much greater priority and investment on post secondary education.
"The budget for the Pell Grants is a small fraction of the military budget, but is just as important for national security in the future as having another aircraft carrier or nuclear missile."
He also believes that there should be more financial aid literacy implemented and mandated by the federal government so that students and families make smarter financial decisions.
"We need to standardize the financial aid award letters to ensure that they are clear and understandable. Right now many award letters blur the distinction between grants and loans, so it's no wonder that students are graduating with more debt every year," Kantrowitz said.
Sabrina Raposo, a college senior from University of Maine at Presque Isle, also believes this and that it should be taken a step further by being more comprehensive for students and families to be financially literate.
"I feel like they sort of pry on the fact that most people don't know a whole lot about financial aid. You're able to apply that knowledge not even just like when applying for financial aid in college, but it can even help later on down the line with things like a loan for a mortgage for a house, or a loan for a car."
There's also the issue of taxation on scholarships, which have been shown to affect billions of dollars of scholarships each and every year according to Kantrowitz's research. As a result of this, the student loan debt crisis continues to grow.
"If I were to give money to a homeless shelter or a food pantry, the recipient of those benefits, is not taxed on those benefits," Kantrowitz said. "But if I give money to college students for housing or their meal plans -- which is the same exact thing -- well, it's taxable for them, and that just doesn't seem right. There's no good justification for scholarships to be taxed."
Then there's the issue of how outdated the Higher Education Act of 1965 is. This piece of legislation is what controls most federal student aid programs. It is supposed to be reauthorized every four years or so -- however the last time it was edited was 11 years ago -- the longest the U.S. has ever gone without authorizing it.
It was believed that the act would be reauthorized in 2020, but the pandemic placed that on hold. It will likely have to wait till next year, which by then will see significant changes not only because a lot has happened within 11 years, but also because there may be a new administration and shift in power.
"There is a realization that the federal student loan limits for undergraduate students, especially for students in bachelor's degree programs need to be adjusted," Kantrowtiz said. "They were last increased in 2008, and there's some evidence that students in bachelor's degree programs are running up against those limits, and that forces them to shift their borrowing from federal loans to private loans, or to parent loans."
Trump v. Biden Financial Aid Policy Proposals for Higher Education