Third Way Statement on Loan Forgiveness and Higher Ed Reform

WASHINGTON — Third Way released the following statement from Lanae Erickson, Senior Vice President for Social Policy, Education, & Politics:

"We have always said that blanket loan forgiveness was a band-aid solution. While we are heartened to see that the Biden Administration’s loan forgiveness proposal is more targeted than previously discussed, we are still extremely concerned that these actions will be struck down in court. More importantly, if we don’t use this moment to change the system and hold institutions and programs accountable for leaving students degreeless, debt-ridden, and earning less than the average high school graduate, shame on us.

"While ill-advised, this announcement does acknowledge the reason we are in this situation in the first place. It’s because we continue to send billions of dollars a year in grants and loans to institutions that leave students worse off than if they had never enrolled. We are encouraged to see the Administration take steps toward addressing that problem, including holding schools accountable for leaving most of their students with unaffordable debt, holding those who accredit those schools accountable for giving them access to taxpayer dollars, and creating transparency so that students know before they go that they’re likely to be left with debt they can’t pay off. It’s a start, but we need to see the Department of Education implement a new, stronger Gainful Employment rule which includes a high school earnings threshold. We also need Congress to reform the system to inject real accountability that ensures both students and taxpayers are getting a return on their higher ed investments.

"As far as the details of the proposal, we’ve long advocated for Congress to retroactively double the Pell grant by providing this kind of loan relief for Pell students, as the purchasing power of the grant has been reduced to an unacceptable level over the past few decades. We hope that Congress will remove the legal shadow over this action by passing legislation to enshrine it, as well as doubling Pell for students moving forward so we do not end up in this situation again, as estimates say we will in less than a decade.

"And just as importantly, we must also be careful not to promise 43 million Americans relief they will never get. Blanket student loan forgiveness is undoubtedly an act of economic and political significance, and the likelihood it is upheld within the President’s authority is dubious. It is incumbent upon the advocates and policymakers who pushed to take this unprecedented step to also communicate to borrowers that there is a strong chance it will never come to fruition. Given that the application may not be available until the end of the year, the strong likelihood is that courts will enjoin this action before it gets started—leaving borrowers in limbo. And with payments set to resume in January, there seems little hope these legal challenges are resolved before they get another bill in the mail.

"In the unlikely scenario that this action survives judicial review, implementation is still fraught. The Administration has said that 8 million who have interacted with the Department in other ways over the last few years may have a quicker path, but that leaves 35 million borrowers on the hook to apply for any relief through whatever process is later established. And while they aver that 90% of this relief would flow to borrowers making $75,000 dollars a year or less, that estimate is “assuming all those who are eligible for relief take steps to get it.” That is a huge assumption that low rates of participation in existing relief programs belie. We know that the families making $250,000 will have the means to access the relief in the unlikely chance it is legally upheld. That will not be true for most low-income families. Clear communication with those families about the details and the risk of court intervention is going to be imperative over these next rocky months.

"Whether or not this action holds up in court, we must use this moment to pivot to solutions that will fix the system. We can no longer subsidize the schools and programs that leave students worse off with a blank taxpayer check."