Every year, students across the country borrow money to get an education. However, upon graduation, millions of borrowers are left with debts of tens of thousands of dollars. In this regard, the U.S. Congress directly impacts student loans, as they make decisions that can change students’ lives.
These decisions are integral to Congress’s work, from passing new bills to debating debt forgiveness. But how do legislative initiatives affect debt forgiveness, and what does this mean for the future of education in the country? This article examines some key points that show how influential Congress has been and continues to be regarding student debt.
Historical Context of Student Loans in the United States
Over time, the system has evolved, and here’s how Congress has influenced those changes.
Beginning: 1958
The National Defense Education Act was enacted in 1958. That act reacted to the Cold War, in which the United States resolved to increase its number of specialists in science and technology. For the first time in history, the federal government gave loans to students as financial support to help them get an education. At that time, priority was given to engineers, scientists, and teachers, extremely important professions for the country.
Creating the Federal Student Loan System: 1965
The Higher Education Act of 1965 was another milestone. The law gave the legal framework for the federal student loan system and established what is now called the Guaranteed Student Loan Program. Under this new program, private banks were given the right to issue student loans if the government assumed responsibility for repaying the debt if the student failed to repay the money. This allowed more students to enroll in higher education because the loan allowed them to pay for their education.
Introducing Direct Loans: 1990s
During the 1990s, Congress thought the system needed to be even more direct. The birth of the Direct Loan Program allowed the federal government to supply money straight to the students without needing private banks. This makes loans more accessible to the pupils.
Increasing Flexibility: 2000s
Starting in the 2000s, Congress began to reform the loan repayment process. Loan limits were increased, and programs were instituted that made the repayment process more flexible. For example, students under the Income-Based Repayment (IBR) program could make loan payments based on their income, which became important in response to rising tuition and debt loads.
Major Changes: 2010
Further, in 2010, another major change was promoted when Congress altogether axed the program through which private banks issued loans and instead switched to Direct Federal Loans. This action saved the government billions of dollars and made the system more respectable, organized, and effective.
Modern Changes
Over the past years, Congress has played a major role in regulating student loans. It changed the interest rate loan forgiveness programs and provided temporary benefits like the CARES Act, which suspended payments throughout the COVID-19 pandemic.
Congress’s Role in Student Loan Forgiveness
The US Congress plays a major role in passing laws that help students get out of debt:
HEROES Act
The HEROES Act was originally passed in 2003 and has been updated regularly. It is designed to help borrowers survive crises like natural disasters or pandemics. The Act allows the Department of Education to modify loan terms or forgive loans if borrowers have specific repayment issues. For example, during the COVID-19 pandemic, loan repayments were suspended, and interest was not charged.
Student Loan Forgiveness Act
The Student Loan Forgiveness Act, proposed in 2012, aims at making paying debt easier. The major ideas put forward include:
- Monthly payments must be at most 10% of the borrower’s income.
- Borrowers working in the public sector, such as teachers or doctors, have their loans completely forgiven after ten years of payments. Others would have forgiveness after 20 years of payment.
Though the bill did not eventually pass, its ideas helped pave the way for other initiatives aimed at helping borrowers, like the Public Service Loan Forgiveness program.
New Debt Forgiveness Initiatives
Congress continues to debate new measures to ease the burden of debt. These include:
- Changes to existing programs, such as PSLF.
- Introducing income-driven repayment plans that forgive debt over time based on the borrower’s earnings.
- Temporary measures like the CARES Act paused payments during the pandemic.
Debates and Controversies in Congress
Student loan debt forgiveness has divided Congress. Some call the action necessary to aid students and boost economic activity. In contrast, others argue it is very expensive and unfair to the federal government.
Arguments for Debt Forgiveness
Proponents of student loan forgiveness argue that it could relieve borrowers. Since many people struggle to pay off their loans, forgiveness could help them avoid that situation. Additionally, people without debt could spend more on housing, goods, and services, benefiting the economy. Another claim in favor of student loan forgiveness is that it would help reduce the income gap between different population groups.
Arguments of Opponents of Debt Forgiveness
Opponents of debt forgiveness, in turn, argue:
- Unfair. This decision will be unfair to those who have already paid off their loans or who did not take out student loans in the first place.
- High costs. Forgiving loans will cost the government billions of dollars, increasing the national debt.
- Not a solution. Forgiving loans does not solve the main problem – the high cost of education. Moreover, it may encourage future students to take out more loans in the hopes that they will be forgiven.
The Future of Congress’s Role in Debt Forgiveness
In the future, you can expect Congress to pass laws that will change the debt forgiveness process and help borrowers get out of debt faster. Here are some possible changes to the laws:
- Increasing debt forgiveness programs: One potential idea is to scale up programs like PSLF, which currently helps public sector employees, like teachers and doctors, get their debt forgiven after 10 years of payment. Congress could reduce that time or include new professions in the eligibility program. This would allow more people to get out of debt faster.
- Complete debt forgiveness for all: Some lawmakers have mentioned the possibility of canceling a portion or all student loans. For example, in 2021, there was a suggestion to write off as much as $50,000 on each borrower’s loans. Though this would lift a burden off millions of people, the government would then have to spend more on doing this, which might raise taxes or increase the nation’s debt.
- Forgiving debt for specific groups: Congress might focus on helping those who need it most, like low-income people or graduates who attended for-profit colleges and are struggling to find jobs. Targeted assistance will provide support to those who are particularly vulnerable, but other borrowers may not receive assistance.
Final Thoughts
Student debt isn’t just a personal problem for each borrower. It’s also an economic problem, as massive debts prevent people from building a career, buying a home, and generally moving forward. That’s why Congress has a big responsibility for student debt. It passes laws determining how loans work and whether they can be forgiven. Congress’s actions help solve the debt problem that millions of students face.
To make things better, people need to get involved in politics. Voting in elections helps you choose who will advocate for you in Congress. The more people who speak out about debt and support bills, the more likely it is that something will change for the better. Every vote can create a fairer system where students can attend school without fear of debt.