Student Loan Debt Forgiveness Plan: W.Va. Impact

Kelly Allen, the Executive Director at the West Virginia Center on Budget and Policy says more than 200,000 West Virginians could see relief on student loans as part of a forgiveness plan announced by President Joe Biden.

Randy Yohe discussed the West Virginia impact of student debt relief with Dr. Rodney Hughes, an assistant professor of higher education administration at West Virginia University’s School of Education. His research interests include college access and affordability.

Randy: Dr. Hughes: give me first of all, your overall view on President Biden’s student loan forgiveness plan?

Hughes: It appears to be trying to do multiple things. And then we think about the timing of the announcement. I think the overall picture is that it definitely will have both immediate implications for borrowers, and also implications for higher education and for education policy going forward.

Randy: The West Virginia Higher Education Policy Commission says with all the grants and free community college available, about one third of West Virginia graduates leave school debt free. So how does that affect the impetus of the Biden plan?

Hughes: If students are maybe a little bit too high on income to qualify for the federal need-based aid, and might be eligible for the Promise Scholarship or not, they might still have to take out loans for getting a four year degree within West Virginia. Given that picture of financial aid within the state of West Virginia, it might be the case that if we just look at the sort of national impact of the loan forgiveness, it might be focused on students in other states that don’t provide quite as much support for students attending their public institutions.

Randy: This is going to cost taxpayers more than $300 billion, is that fair to taxpayers?

Hughes: What I think this is trying to do, part of it seems like a financial assistance measure or a financial relief measure for households or individuals that might be struggling or earning, maybe not what you would think, in line with the degree or the educational attainment that they’re after. For students who might have taken advantage of the pause in payments back to 2020, students might have these federal balances, but may not have been recently making payments on them. So for some students, maybe it takes away their liability.

Randy: And then there’s the fairness aspect to those young West Virginians who are entering the working world, pursuing a vocation, plumbing, construction, something that doesn’t need a higher education degree.

Hughes: If we look at past efforts toward loan forgiveness, it’s really focused on for-profit institutions, situations that can be characterized as predatory institutions, really recruiting students heavily under false pretenses, or really without much promise of employment opportunities after students completed their degrees. Is it right for taxpayers to be subsidizing educational attainment that they themselves might not have pursued? So that goes back to like, if we want this to be a financial assistance measure, it doesn’t really make sense just to limit it to students who’ve attended college. If we want it to be promoting college access, would you want to focus as much on prospective or current students? The one part of this conversation that I think is interesting is to point out how loan forgiveness is formulated. Is this idea that Pell Grant eligible students can have more loans forgiven up to $20,000, if they received a Pell Grant before? It’s a statement from the White House saying Pell Grants should have been larger before.

Randy: When you look at this, and understand that one third of West Virginia College graduates leave debt free, and you look at President Biden’s relief program here, his loan forgiveness program, we circle back to what you first said, it’s a multi-faceted reason why this is happening. And it will have a multi-faceted effect on West Virginia and its students. 

Hughes: In addition to people who might leave debt free, there’s students who have a small amount of debt, who might attend for a semester, or might take some courses, but not complete a credentialed degree. And it’s these students with the smallest loan balances, where we often see the highest default rates, because students didn’t finish. So some of that we might say, ‘Okay, this loan forgiveness, even forgiving loans under $10,000 balances would help students at risk of default.’ It’s important that students have opportunities to think about these and then make informed decisions not assuming that college is a necessity, but thinking about what are all the sorts of possible career paths. And then if college is right for a student, and they don’t have the ability to pay out of pocket right away, borrowing can be helpful.