News Tip: Loan Relief Could Change Lives, But Also Could Have Been Bigger, Expert Says

Media Contact:
Samiha Khanna
samiha.khanna@duke.edu
 

DURHAM, N.C. – President Joe Biden announced plans Wednesday to forgive between $10,000 and $20,000 of student loan debt for certain borrowers, which could slash the student loan bills of as many as 43 million people.

Mallory E. SoRelle, a professor of public policy, says the announcement could yield positive results for Democrats. However, her ongoing research suggests politicians could have earned more favor with voters by relieving an amount closer to $50,000, and that they may also have gained more support if they had not limited the repayment plan benefits to loans for undergraduate degrees.

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“Today’s decision by the Biden administration to cancel up to $20,000 of student loan debt for certain borrowers, while extending the payment pause and restructuring income-based repayment, follows through on one of the president’s major campaign promises. While some proponents of student debt cancellation (not to mention many borrowers) may be disappointed that the amount of debt relief is not larger, this new policy will make a tremendous difference to the financial security of millions of American borrowers,” says Mallory E. SoRelle, assistant professor of public policy at the Sanford School of Public Policy at Duke University.

“The decision to cancel $10,000 of federal debt for borrowers making less than $125,000 per year, and $20,000 for Pell Grant recipients, is consistent with broad public support for student loan debt forgiveness (including a sizeable minority of Republican voters). While the substantive relief for borrowers will be considerable, the political benefits for Biden and Congressional Democrats are less clear. According to our ongoing research, when asked, most core Democratic constituencies are more likely to prefer and to reward policymakers who support debt cancellation of $50,000 or more. That said, this marks another in a growing list of campaign promises that Biden can credibly say he has accomplished. And many people will realize its benefits in concrete ways and understand who is responsible for them — key ingredients for reaping political rewards from a policy.”

“While debt cancellation is likely to grab the headlines, the reforms to income-based repayment could be a game changer for millions. For those with undergraduate loans, capping monthly payments at 5% of discretionary income, forgiving balances after 10 instead of 20 years, and covering additional unpaid interest so that borrower’s balances don’t continue to balloon is a major win.”

“Based on our ongoing research, it is also consistent with public perceptions that borrowers who have been paying off their debts are especially deserving of relief, potentially minimizing political backlash. However, restricting it only to those with undergraduate debt will both minimize the substantive impact for many in need and run counter to public preferences not to limit relief to undergraduate-only debt.”

“This policy has the potential to change lives, but much of its success will depend on implementation. Historically, student loan debt forgiveness programs like Public Service Loan Forgiveness (PSLF) have not been well designed, making it hard for borrowers to benefit from them. If the rollout is botched or it is too burdensome for people to navigate smoothly, this policy will fail to fulfill both its potential to transform people’s financial situation and to boost Democrats electoral prospects.”

Bio 

Mallory E. SoRelle is assistant professor of public policy at the Sanford School of Public Policy at Duke University. Her research investigates how public policies addressing credit, debt, and consumer finance influence socioeconomic and political inequality in the United States. She is the author of "Democracy Declined: The Failed Politics of Consumer Financial Protection" and has worked in both legal advocacy and electoral politics.

For additional comment, contact Mallory SoRelle at:
mallory.sorelle@duke.edu