What Borrowers Need to Know About Student Loan Forgiveness – NBC Connecticut
Patrick Gourley, an associate professor of economics at the University of New Haven, has important information for borrowers looking to get their student loans forgiven under the new federal program.
Mike Hydeck: Would you like to get rid of a debt of around $10,000 fairly quickly? Well, depending on how much you earn, your college loan could be forgiven in the near future, thanks to President Biden’s student loan forgiveness program. But it may not be as easy as advertised. Joining me now is Patrick Gourley, an associate professor of economics at the University of New Haven, to help us dig into some of the details on this. Mr Gourley. Welcome to Facing the Facts.
Mike Hydeck: So let’s start with who is eligible for federal loan forgiveness. Who can register for this?
Patrick Gourley: Yes, so first of all you must have had a federal loan that was issued by the United States government. If you got a loan and went to graduate school through a private bank or something like that, you won’t be eligible. And then the other big eligibility criteria is that you must have earned less than $125,000 in a recent tax year. So if you earned more than that, as an individual, you wouldn’t qualify.
Mike Hydeck: So when President Biden started announcing this, there was a lot of tussling. People who have already paid off their loans, maybe looking for a break, like, look, we did it the right way over time, we paid off our loans. And U.S ? Does the president say anything about this?
Patrick Gourley: Yeah, so we’ll see what happens in the future. For the time being, this is a program that targets people who have student debt. I know there has been talk of possibly extending it. But the big difference is that if you were to get a refund for a debt that you’ve already paid, it’s actually the government writing a check, as opposed to canceling an existing debt that the government is already the lender.
Mike Hydeck: So there are lawsuits, as we know, in many places to try to stop that saying that lenders could be negatively affected here. Do you think these lawsuits will actually delay any debt relief in some of these states? Or maybe here in Connecticut?
Patrick Gourley: It’s interesting for me to see. There are a lot of legal issues and I’m more on the economic side of things. But there’s certainly some concern about whether the president has the power to cancel that and cancel a student loan against a delay or some of the other programs that were originally launched under the Trump administration and then ended. prosecuted under the Biden administration.
mike hydeck: So now you are in economics, as you say, you are also in education. So let’s take that with a grain of salt when I ask this next question. Tuition and fees have outpaced inflation for decades, even at places like UConn. The saving could be in the tank, and UConn gets a 6% raise. Is this program just putting a band-aid on a bigger solution that still needs to be supported?
Patrick Gourley: I wouldn’t even give him that much. I think there is a real problem here because you are not really addressing the underlying problem which, as you mentioned, is the increase in tuition fees. This, if at all, would actually incentivize schools to raise their tuition even faster, because they could tell prospective students, hey, take out all the debt you want, it’ll just be forgiven later. So I’m really concerned about the long-term impact this will have on tuition fees and higher education.
Mike Hydeck: So how do we change that from a perspective, you know, nationally. Should things be reconfigured at the college level or at the public university level to get the government out of trying to fund the college?
Patrick Gourley: Well, I think the system would be better if we went back in time 50 years when states basically funded their public university systems. And here in Connecticut, you would expect UConn tuition to be very low in the 1970s. And that’s because the state of Connecticut would have funded the system. When they backed down, and that’s across the country, almost every state backed down, it meant that public universities had to raise their tuition and private universities because it also raised their tuition.
Mike Hydeck: Is it possible to roll out such a system? And how could you even take the first step? It seems so intertwined in our society, as you were saying, in every state. How can we, we can’t just turn the clock back 50 years, can we?
Patrick Gourley: Now, well, that would be a major change in the state budget, but again, it would go back to what it was before. We would therefore probably need cuts elsewhere or tax increases. But again, it was the norm in every state for the state government to fund its flagship and its university, the public university system. So we could definitely come back to that. But yes, that would require sacrifices elsewhere.
Mike Hydeck: So my producer Katherine says there was a change that happened last month. Do you know this?
Patrick Gourley: Was it, there was a select group of people, I think the last eligibility that were private loans.
Mike Hydeck: Right. It’s one of the things she was talking about. So private lending is also going to be a target, apparently, of President Biden moving forward. Do you think this will help level the playing field or is this just another little group helper?
Patrick Gourley: Well, from what I understand, there are actually private loans that are not eligible for loan forgiveness. So that would make him less likely to do all of that.
mike hydeck: From what I understand, that encompasses about 800,000 Americans who are now protesting and preparing a petition to try to manufacture some sort of relief. Do you think that has a chance?
Patrick Gourley: It’s hard to say. I think with any of these programs there are winners and losers within the original plan. If you had already paid off your debt, you’re out of luck. Now, if you’ve paid off your debt or have this type of private loan, you’re out of luck. So no matter what, there have always been people who want to be included in some sort of debt cancellation.
mike hydeck: Patrick Gourley, a very difficult subject to broach. We appreciate your expertise, associate professor of economics at the University of New Haven. Thank you for joining us in the face of the facts and giving us your opinion.