The headlines don’t match the plan.
The plan is ambiguous enough to cause controversy. I’m using this White House Fact Sheet as a reference.
Since early 2020, a payback moratorium is scheduled to expire on August 31, 2022. Surprisingly, the white house wants to extend the moratorium to December 31, 2022, which will be after the November elections.
Their relief plan is scheduled to start at the same time that required loan payments resume.
Two sections of the fact sheet can produce the same result. One section would take an act of Congress to implement. The other section is at the discretion of the Department of Education.
Current plans have required monthly payments of 10% of discretionary income, and by making 240 payments, that’s 20 years, the remaining debt is canceled. The Department of Education can change these parameters. The recommendation is 5% of discretionary income and only 120 payments. This recommendation is for current loan balances of $12,000.
Effectively, within ten years, a student’s debt may be eliminated. All they need to do is make a small monthly payment.
Since the lower payments may not pay accrued interest, the plan has unpaid interest forgiven.
The section requiring an act of Congress would be the $10,000 ($20,000 for Pell Grants) reduction of loan balances. The fact sheet does not indicate payments to lendees or credits to lenders. It’s sort of up in the air.
The latter section will be a political football for the upcoming election, with the current administration returning to the former option.
Most people can’t comprehend business decisions. If they could, there would not be an issue to resolve. Post high school education is a business decision. The decision should be no different than buying money-making pieces of equipment.
Say a new graduate wants to own a pizza restaurant. They’ll buy an oven and use it to make money. The oven will make enough money to pay for itself. If it doesn’t, the investment is not worth it.
Or, the graduate wants to increase their knowledge and skills by attending college. Attending college has a cost. The investment is not worth it if they cannot get a salary to cover the college cost after getting the college diploma.
Because of the easy availability of loans, graduates are not doing the calculations to determine the value of the investment compared to the return. And colleges are charging more to take advantage of these young minds’ poor calculations.
If a person cannot get a salary to pay back their debt, perhaps the college did a good sales job rather than a good teaching job. Since the colleges benefitted, maybe they should be the ones returning the money.
Covering college costs for the few that made a poor investment is unfair to those who have paid to attain their skills. Maybe we can mark those taking debt relief with a scarlet “D” so that interviewers can see to know those underachievers.