The Sounds of Silence: Full Student Debt Cancellation Gets Nowhere

The recent State of the Union Address was very clear: student loan forgiveness is not going to happen, at least not now. It’s like a car stuck in first gear – cancel, cancel, cancel it sputters. If he’s ever going to get students on the road to college, he needs higher octane. Forgiveness, yes, but also add-ons that will definitely ease the burden on prospective students and allow families to negotiate costs with colleges.

People who ask for forgiveness focus on both principal and interest. But simply by waiving interest charges, substantial relief equal to about a quarter of the total student debt payment could be obtained. Congress could then invest major payments made by students to recover lost interest. For example, the Social Security Administration made $70 billion last year by investing payroll taxes in treasury bills.

Ending interest would allow the Department of Education to extend the term of student loans without increasing student interest charges. The longer the term, the smaller the monthly payment. The federal income-tested system already doubles the duration of student payments. College is supposed to be a lifelong advantage. So why don’t we allow student repayments to be spread over a lifetime?

Today, the average undergraduate student debt is $35,000, which translates to a repayment of $370 per month. Waiving interest and extending terms reduces that bill to just $50 per month. For the vast majority of student borrowers who only owe $50 a month, this would be a big relief.

There is a real risk, however, that lower payments for students will only encourage colleges to raise tuition. Parents must have the agency to negotiate tuition fees with college administrators. The agency comes with money. Today, the government is transferring financial aid to colleges bypassing families. Why not send the money directly to 529 college savings accounts families. After all, it belongs to them. Hard cash control will level the playing field.

The colleges want the money, but the families will get it. Congress should encourage families to form associations and require colleges to negotiate tuition and other price increases with their legal representatives. This would fill the void that currently exists, allowing colleges to waive tuition with impunity.

None of these suggestions is new. In fact, they are commonplace outside higher education. Together, they could do a lot to make college funding sustainable.

Robert Hildreth is the founder of the Hildreth Institute, a non-profit research and policy center dedicated to restoring the promise of higher education as a driver of upward mobility for all. He also founded the non-profit university access Inversant and other organizations with complementary missions to bring low-income students to college.