Joe Biden's student loan forgiveness plan isn't enough

US President Joe Biden announced a student debt forgiveness plan earlier this week that can erase up to $20,000 in loans. AFP

I’ve paid off $30,000 in student loans since graduating from the University of Iowa in 2010. It’s been more than a decade and like many of my fellow Americans in a similar situation, I’m still not done yet.

However, on Wednesday, US President Joe Biden announced his plans for student loan forgiveness, offering to erase up to $20,000 for those who meet certain criteria. This includes earning less than $125,000 or receiving Pell Grants, a federal grant given to those who need financial assistance.

While the announcement is a welcome step in the right direction, it’s just not enough.

Never mind that President Biden teased the idea of erasing $50,000 during his campaign ahead of the 2020 election, although some suggested he should have cancelled it entirely – something he openly opposed and said he wouldn't do early in his presidency.

However, there should be some credit given to President Biden for being the first to take some form of action. Student loans have long been an issue but they have been exacerbated recently by the pandemic.

The Education Data Initiative reports that 43 million Americans have federal student debt, with nearly $1.75 trillion owed in federal and private student loans. Meanwhile, borrowers who took out federal loans owed an average of $37,667 upon graduating.

One of the biggest problems with President Biden’s forgiveness plan is that it doesn’t address the predatory nature of student loans, such as their ridiculous interest rates. While it differs for everyone, mine range from 5.5 per cent to 7.9 per cent – a staggering number when compared to other types of loans.

This means that for someone who has borrowed money, they can make their payments for years and eventually pay back the original principal balance but still have to continue paying because of interest. What starts as a $10,000 loan on a 20-year payment plan with a 6 per cent interest rate ends up costing an extra $7,100 in interest if paid during the full duration.

Interest rates are essentially like quicksand in that no matter how much a person digs (or in this case pays), it feels like they’ll just keep on sinking. The only way to beat the interest rate game is to pay off quicker than the stated timeframe, but in order to do that a person needs to have extra money, which is easier said than done.

The other growing concern is the high cost of university tuition. California’s Harvey Mudd is $77,339 a year, followed by Ivy League school the University of Pennsylvania at $76,826. Meanwhile other top-tier universities such as Amherst College, USC and Tufts are also more than $75,000+ per year.

Assuming a student attends for four years for a bachelor’s degree, even with scholarships and grants, it’s likely they won’t be left unscathed when it comes to debt upon graduating.

According to the 2018 Education at a Glance report, the US spends more on college than any other country. In fact, there are many places in the world that offer free or very affordable tuition. So why is it that university costs have skyrocketed in America?

In the US, going to university is very much viewed as an experience as much as it is a stepping stone in education. This means that more money is spent on dormitories, dining halls, student recreation centres and so on. Then there are also the funds needed to pay for the cost of top facilities.

Right after I left the University of Iowa, the school announced a few months later that it was opening a $69 million Campus Recreation and Wellness Centre that included a 52.5-foot climbing wall, swimming pool with a lazy river and a fitness space.

While it’s obviously a nice touch and a big appeal to recruiting students, is it really a necessary must-have, especially at the cost of adding to rising tuition fees?

What I wish I had known when I was 17 is that it isn’t necessary and, quite frankly, not worth it. Universities shouldn't be operating like businesses, trying to lure students with flashy facilities in order to get their patronage.

Growing up, I was always led to believe that in order to get a good job, I had to get into a good school and failure to do so would mean I’d never succeed. This wasn’t coming so much from my parents, who came to the US from China and Hong Kong in the 1980s, but more from the education system itself.

Early on, this is ingrained into us, but other variables – such as student loans, debt and interest rates – are not. I never once had any financial courses offered in high school. I was just handed grant papers and told to fill them out as if they were as standard as other types of paperwork needed to attend university.

Those opposed to President Biden’s forgiveness plan often argue that people should know that if they take out loans, they need to pay them back. Yet time and time again, the US government bails out others who have borrowed money – mostly businesses and banks – so why not middle-class and lower-income citizens?

Now, almost in my mid-30s, it’s clear how student debt has affected not only me but my younger sisters and my friends. Everything from the idea of having children to home ownership no longer seems viable. If I’m barely able to financially support myself, how could I expect to be able to provide for a baby? I’m not the only one who feels this way. To me there is likely some correlation with the declining US birth rate.

While this forgiveness plan offers a glimmer of hope that the American government may one day rethink how student loans are offered, I hope the push continues for more change. Even if my student loans will never get completely wiped out, I hope the next generation can have better luck so that they can enjoy living their lives without the crippling fear that they'll never be financially free.