Millennials and Gen-X stand to be left behind without comprehensive reform

While Student Loan Relief is welcome news and a victory for all of us, we should not forget that comprehensive reform is still critical, especially for Millennial and Gen-X debtors that may not have qualified under relief means testing but need relief nonetheless.

I know what you may be thinking: why would someone who makes over $125K require assistance? Hear me on on why means testing is flawed and why only full comprehensive reform can free all of us.

First, Biden’s new debt relief program, while a step in the right direction, is heavily biased toward younger borrowers and graduates and does not take a needs-based approach. Take for example the young doctor, lawyer, or financial manager that graduates this year whose year one salary is less than $100K but could be making $200-500K in a matter of years. I am not saying that they shouldn’t get assistance, but rather that the current means testing employed by the Biden administration doesn’t really address NEED.

Now, consider Millennials and Gen-X who happen to have twice the average student loan debt as those in their 20s and have the highest total debt of all cohorts. This cohort also has the highest median salaries indicating that a higher % of them exceed the means threshold. BUT, they also are the most debt burdened, averaging at $78K for Millennials and $135K for Gen-X. Compare this to $9K for Gen-Z and you can see that if we consider debt to income, there is MUCH more need among older debtors that are less likely to qualify for means based relief. People in their late 30s to 50s are in their prime earning years but are more likely to be saddled with expensive childcare, revolving debt, and low individual wealth (due to weathering multiple recessions and wage stagnation). This is an especially critical time since older debtors have fewer earning years ahead of them.

TL;DR - Biden’s debt relief is not reaching those who may need it the most!!

What can be done?

Advocate for needs based relief as opposed to means based. Qualification criteria should examine cost-of-living, debt-income ratio, interest paid, earning years remaining, and other demographic and financial variables.

Demand comprehensive reform.

  1. Cap payments at no more than 5% of discretionary income (as opposed to 10%)
  2. Forgive loan balances after 10 years instead of 20 for low balances (12K or less).
  3. COVER UNPAID INTEREST on monthly payments so debtors don’t go deeper into debt.

It’s only through comprehensive reform that we can make further strides toward the ultimate goal of no more student loan debt.

About me: Age 40, remaining balance $57K, length of debt - 10 years


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Right there with you. What are the next steps?

The Department of Education has proposed some modest reforms, including what is mentioned above. They don’t go far enough, but I fear that this administration lacks the courage and political capital to do what is needed - especially considering the public backlash against forgiveness. I think what we can do is hold congress and the Dept of Education responsible for implementing covered interest, discretionary income limits, and forgiveness timeframes. From there we can push for better reforms. Currently they look at need from a volume perspective. They see the long tail of borrowers that have under 10K left on their loans and figure they can wipe that out for maximum political impact. However, older borrowers with higher remaining principals are not considered.

Ultimately, we need to do away with interest altogether and credit paid interest back to principals. We also need to tax companies to help defer the cost of forgiveness and change the narrative from a position of “personal responsibility” for education to sponsored training by American businesses. Look at any corporate balance sheet and you will see profit per individual employee. Corporations get that profit for free thanks to workers paying for it. That profit needs to go directly back into education expenses until they are paid off - stop them from externalizing the cost.

The $125K number is arbitrary and doesn’t take people’s life circumstances into consideration. For example, medical school, law school, veterinary school, and dental schools are extremely expensive. They also have extremely demanding academic workloads, which would make taking on other work very difficult to impossible. This graduate may have young children, aging parents or other individuals to look after – all while being crushed under student loan debt. Yet some government official has decided this graduate doesn’t “deserve” relief because their tax return says they make over $125K a year.

Consider the situation of a person who struggled with student loan debt for decades, perhaps had cancer or another serious illness, and went through periods of unemployment. This person may not have known about or had other options but to get repeated forbearances – and at 8% interest, can end up owing three or four times what they borrowed in the first place. So this person fought and scratched and struggled and finally made it to the point where they have stable employment. Cancellation of $10K won’t help them at all. For one thing, it won’t make a dent in the total balance, and for another, that amount will get tacked right back on as accruing interest in no time.

The current student loan relief isn’t relief for millions of people. It’s great if some individuals do get most or all of their student loan debt canceled. I say if because the application process is unclear and the phrase “up to” in the official announcements makes me skeptical that anyone will really see their debt canceled.

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The federal student loan debt cancellation is largely the result of having a competent, policy-driven administration and a strong, unified, relentless and widening grassroots movement to get federal student loan debt cancelled by a handful of organizations - In particular, the Student Debt Crisis Center, Student Borrower Protection Center, National Consumer Law Center’s Student Loan Borrower Assistance Project, Debt Collective, Student Loan Hero, Center for Responsible Lending, and Project on Student Loan Debt have been unremitting in their coordinated persistence through letters, research, position papers, rallies, etc., in driving this singular issue in an environment focused on far more important domestic and world issues than this one with surprising success on all fronts.

Obviously, the congress needs to do a comprehensive review of the Higher Education Act and update the sorely out of date Title IV programs. The last reauthorization of the Act was in 2008, and much has changed since then. Ad hoc changes through the budget reconciliation process is not the way to make policy. The student loan program is broken and the accumulation of debt continues.

Over $40 billion in federal loan debt has accumulated since January 2021, while $32 billion has been cancelled through 3 existing programs (expanded and improved by the administration). So, comprehensive changes need to be made to stem the accumulation of new student loan debt. And, that’s the congress’ job. Maybe with controlling Democratic majorities the Act can finally be comprehensively updated.

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Agree with this post wholeheartedly. Especially as a Black woman who knows the difference between making over 125k in California vs other places. I have a Pell grant and over 24k in grad debt and can’t qualify based on am arbitrary number. It’s devastating to me thinking of what 20k could mean to me and my family.

Here to support pushing getting rid of the means test. It has NEVER worked in policy.

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