Supporters of student loan forgiveness participated in a seminar last week that offered a deep dive into the debt crisis affecting about 30 percent of people who financed their education through federal borrowing programs.
One of the speakers at the seminar was Rep. Ro Khanna (D-Calif.), a progressive legislator who represents a Congressional district covering parts Silicon Valley. Khanna supports federal legislation that would forgive student debt, which has mushroomed into a more than $1 trillion problem. According to a Student Borrower Protection Center factsheet, student debt holders default at a rate four times higher than mortgage holders.
Ethnic Media Services, a San Francisco-based advocacy organization for minority-owned news publishers, organized the event.
Khanna said, in California, he believes the problem started ballooning during the years after Ronald Reagan’s governorship of California when the former president cut spending on higher education. Before that, state colleges had been practically free in California, but Reagan shifted the financial burden to students and that’s when debt started climbing.
On the campaign trail, President Joe Biden said he would cancel student loan debt, according to Khanna. But right now, legislators are still haggling over the amount. Biden says he’s willing to forgive $10,000 in debt. Khanna says he thinks any loan forgiveness program should only be available to people who earn an annual salary of less than $125,000.
According to Khanna, erasing student debt will free up trillions of dollars that can be spent on mortgages, car loans and consumer goods. A 2018 study released by the Levy Economics Institute of Bard College claims that cancelling student debt “would translate to an increase of $86 billion to $108 billion a year, on average, to GDP.”
“It will lift the burden on the next generation,” he said.
Khanna said college has become so expensive that it was driving students away from higher education. He also said that college education is not the only path to a good-paying job, and some students should look at credentialing and professional certifications as alternative paths to good-paying careers.
Kat Welbeck, a civil rights counsel at the Student Borrower Protection Center, said lack of generational wealth plays a role in student debt. She pointed out that Black and Latino students tend to have higher debt burdens because their families don’t have the financial resources to pay for college, so they have to borrow more money. Unfortunately, this creates a vicious economic cycle and prevents them from creating generational wealth.
Crushing student debt can keep Black and Latino students in a social bracket.
“Black and Latino students take longer to pay debt back,” said Welbeck.
Defaulting on college loans can lead to another set of problems such as higher interest rates, being denied credit, or even being rejected from a job.
Welbeck said her organization has also noticed that for-profit colleges often target Black and Latino students with predatory loans. For-profit colleges also have lower graduation rates.
The seminar also featured testimony from two students who were victims of for-profit schools.
Andrea Campos said she was targeted by Heald College, which was affiliated with the online university Corinthian College. The school went out of business and left her with $13,000 in debt. She never got a job in her field or the salary she was promised. Campos was even denied employment because of her debt load. She admits she was sold on Heald College’s promise to get her through a degree program quickly.
She was able to get her debt forgiven with the help of Housing and Economic Rights Advocates.
Gabriel Stewart also talked about his experience with Expression College, which left him $52,000 in debt. He now works as an audio-visual engineer, but the debt has saddled him with a series of financial setbacks.
His wife also had college debt, and their financial situation meant they had to move in with his father and, as a result, have not been able to start a family.
“All of my money was going to pay off debts,” he said. Stewart said that he has not been able to buy a house or a new car.
Campos, who was the first in her family to graduate high school and attend college, is now in a community college. She said that, at 19, not knowing much about finances, she was deceived by Heald College’s advertising.
“The fast way ending up being the harder way,” she said.