>> IT'S NOT WITHOUT CONTROVERSY,
BUT THIS WEEK BY EXECUTIVE ORDER
THE U.S. DEPARTMENT OF EDUCATION
WILL WIPE AWAY HUNDREDS OF
BILLIONS OF DOLLARS OF STUDENT
LOAN DEBT FOR SOME 47 MILLION
BORROWERS.
UP TO $20,000 OF DEBT
CANCELLATION WILL BE GIVEN TO
PELL GRANT RECIPIENTS, THOSE ARE
GRANTS GIVEN TO THOSE WITH
EXCEPTIONAL FINANCIAL NEED.
UP TO $10,000 OF FEDERAL STUDENT
LOANS WILL BE FORGIVEN FOR OTHER
BORROWERS.
ONLY THOSE EARNING $125,000 OR
LESS ARE ELIGIBLE.
ADDITIONALLY, THE PAUSE ON
FEDERAL STUDENT LOAN REPAYMENT
REMAINS IN PLACE UNTIL THE END
OF THIS YEAR.
ANOTHER PRONG OF THE ORDER CAPS
MONTHLY PAYMENTS FOR
UNDERGRADUATE LOANS AT 5% OF A
BORROWERS INCOME.
IN WISCONSIN, ACCORDING TO THE
U.S. DEPARTMENT OF EDUCATION,
MORE THAN 687,000 STUDENT LOAN
BORROWERS OWE MORE THAN
$21.4 BILLION.
WITH AN AVERAGE STUDENT LOAN
BALANCE OF JUST MORE THAN
$31,000.
TO UNDERSTAND THE IMPACT, WE GO
TO NICK HILLMAN, PROFESSOR AT
THE UW-MADISON SCHOOL OF
EDUCATION AND DIRECTOR OF THE
APPLIED RESEARCH LAB.
THANKS VERY MUCH FOR BEING HERE.
>> MY PLEASURE, THANK YOU FOR
THE INVITATION.
>> CONTROVERSY COMES FOR THOSE
WHO THINK IT'S TOO BIG A GIVE
AWAY AND THOSE WHO THINK IT'S
TOO LITTLE.
AS AN EXPERT IN THE AREA, WHAT'S
YOUR REACTION TO THE STUDENT
LOAN ORDER?
>> THAT'S RIGHT.
POLITICS OF THIS, SO THE
AGREEMENT OF WHETHER IT'S TOO
BIG OR TOO SMALL CUTS ACROSS
REPUBLICANS AND DEMOCRATS, WHERE
TYPICALLY REPUBLICANS ARE SAYING
IT'S TOO BIG, SHOULDN'T BE DOING
THIS AT ALL, EVEN IN THE
DEMOCRATIC PARTY, BIDEN'S OWN
PARTY THERE IS DISAGREEMENT ON
WHETHER IT WAS BIG ENOUGH OR
SMALL ENOUGH.
AND SO CERTAINLY THAT IS DEBATED
RIGHT NOW AND I THINK THE
RESEARCH EVIDENCE SAYS $10,000
IN CANCELLATION CAN DO A LOT OF
GOOD FOR A LOT OF BORROWERS.
>> SO YOU THINK THAT THIS COULD
HELP WISCONSIN BORROWERS?
>> YES, AND TWO REASONS.
ONE IS THAT A LOT OF TIMES THE
BORROWERS WHO HAVE SMALL LOANS,
THEY HAVE SMALL LOANS BECAUSE
THEY ONLY ENROLLED IN SCHOOL A
LITTLE WHILE AND LEFT WITHOUT A
DEGREE, AND STRUGGLE BECAUSE
THEY NOW DON'T HAVE A DEGREE TO
PAY OFF IN THE LABOR MARKET AND
DEBTS ARE OFTEN LESS THAN
$10,000, AND SO THAT COULD HAVE
A DIRECT IMPACT FOR A LOT OF
STRUGGLING BORROWERS WITH
RELATIVELY SMALL LOANS AND A LOT
OF BORROWERS WITH THAT SIZE
DEBT, $10,000 THRESHOLD HAS A
COUPLE DIFFERENT REASONS TO HAVE
BEEN CHOSEN.
>> THE WORST CASE OF THAT,
THOUGH, IS A BORROWER WHO HAS
JUST A WHOLE LOT OF DEBT AND
DIDN'T GET THAT DEGREE.
>> THAT'S RIGHT.
THAT'S RIGHT.
AND THAT'S A BIG PROBLEM THAT
THIS CANCELLATION CAN HELP A
LITTLE BIT BUT DOES NOT
NECESSARILY PREVENT FROM
HAPPENING IN THE FUTURE.
>> HOW IS THE STUDENT LOAN DEBT
LOAN BALLOONED OVER THE DECADES?
>> PROBABLY TWO BIG FACTORS
CONTRIBUTE AND THEY WORK
TOGETHER.
ONE IS THAT TUITION HAS RISEN,
BUT IT'S NOT JUST TUITION, IT'S
THE TUITION, THE FEES, THE ROOM
AND BOARD, ALL THE OTHER
EXPENSES THAT IT TAKES TO STAY
IN COLLEGE HAVE BEEN RISING
RAPIDLY.
DOUBLING SINCE THE 1990S, EVEN
ADJUSTED FOR INFLATION.
THAT'S ONE SIDE.
THE OTHER SIDE IS FAMILY INCOMES
HAVE EITHER PLATEAUED OR
DECLINED OR BARELY EVEN MOVED,
AND THE INCOMES THAT WE HAVE
JUST AREN'T KEEPING PACE WITH
THE EXPENSES OF GOING TO COLLEGE
AND AS A RESULT, MORE
INDIVIDUALS ARE HAVING TO SHARE
THAT RESPONSIBILITY OR CARRY
THAT RESPONSIBILITY THEMSELVES
THROUGH THE LOAN SYSTEM TO PAY
FOR COLLEGE.
>> IN YOUR MIND, IS THAT DEBT
WORTH IT IN TERMS OF EDUCATIONAL
OPPORTUNITY?
>> IT IS WORTH IT ON AVERAGE.
THERE ARE ALWAYS GOING TO BE
SITUATIONS THAT JUST DON'T FIT
THAT AVERAGE STORY, BUT ON
AVERAGE, STRONG EVIDENCE THAT
NOT ONLY FOR THE INDIVIDUAL DOES
THE EDUCATION PAY OFF IN THE
LABOR MARKET BUT FOR YOUR
COMMUNITY, BETTER OFF WITH
WELL-EDUCATED PLUMBERS OR
HEALTHCARE WORKERS OR YOU NAME
IT.
A NUMBER OF REASONS WHY THE
PAY-OFF IS STILL THERE BUT THE
VALUE PROPOSITION IS BEING
QUESTIONED AND KIND OF TAPPING
INTO THAT QUESTION RIGHT NOW.
>> PEOPLE WE KNOW CAN TAKE
DECADES TO PAY OFF SCHOOL LOANS.
WHAT ROLE DO INTEREST PAYMENTS
PLAY IN THE PAYMENT SCHEDULE.
>> THEY MAKE IT MORE EXPENSIVE.
TOOK OUT $10,000, IN SEVERAL
YEARS MIGHT BE HIGHER THAN THAT,
MIGHT OWE 12, 13,000, IF THE
PAYMENTS ARE ONLY GOING TO
INTEREST.
THE BIDEN ADMINISTRATION IS ALSO
PROPOSING TO CAP SOME OF THOSE
INTEREST RATES ON, AND REPAYMENT
PLANS AND THERE ARE SOME
CONVERSATIONS AROUND HOW TO
REMOVE SOME OF THOSE INTEREST
RATES OR MAKE THEM LOWER, BUT
THEY ARE STILL THERE, STILL PART
OF THE NETWORK AND THE
INFRASTRUCTURE OF OUR STUDENT
LENDING SYSTEM.
>> PART OF THE PLAN ALSO CUTS
UNDERGRAD PAYMENTS TO 5% OF
INCOME.
HOW MEANINGFUL IS THAT FOR
FOLKS?
>> I THINK THAT SHOULD BE PRETTY
MEANINGFUL.
THESE INCOME-DRIVEN REPAYMENT
PLANS, THEY ARE CALLED, AND MAY
BE 7 OR 8 DIFFERENT ONES NOW AND
BORROWERS ARE TAPPED INTO THEM,
AND 5% OF DISCRETIONARY
EARNINGS, BASICALLY THE INCOME
YOU HAVE ABOVE THE POVERTY LINE,
SO IT'S SUPPOSED TO BE A WAY TO
JUST MAKE PAYMENTS, YOU KNOW,
LESS BURDENSOME FOR INDIVIDUALS.
>> WHAT KIND OF STUDENT GETS
MOST HURT BY TAKING OUT BIG
STUDENT LOANS?
>> THAT'S A GREAT QUESTION.
YOU KNOW, THERE ARE SO MANY
DIFFERENT STORIES AND SO MANY
DIFFERENT PROBLEMS THAT HAPPEN
IN OUR LOAN SYSTEM.
AND IN MANY CASES, THE DEBT
CANNOT BE DISCHARGED IN
BANKRUPTCY OR DIFFICULT TO
NAVIGATE THE REPAYMENT SYSTEM
ITSELF AND THE PROCESSES YOU CAN
BE HARMED, ADMINISTRATIVE
PROCESSES, COMPLEXITY OF THE
LOAN SYSTEM.
AND OTHER WAYS IT HELPS STUDENTS
STAY ENROLLED IN SCHOOL.
IT'S A DOUBLE-EDGED SWORD,
WITHOUT LOANS PEOPLE MIGHT NOT
HAVE GONE TO COLLEGE IN THE
FIRST PLACE AND NOW YOU HAVE
THEM AND IT'S A HARD, HARD
PUBLIC POLICY PROBLEM TO SOLVE.
>> IN YOUR MIND, SHOULD PAYING
FOR COLLEGE BE REENVISIONED?
>> I THINK IT WILL BE
REENVISIONED.
I THINK THIS IS A BIG MOMENT IN
THAT REIMAGINATION, AND I THINK
THAT OUR LOAN-BASED SYSTEM, IT
ORIGINATED IN THE 1950S AND
1960S AND IT WAS REALLY DESIGNED
TO MEET A VERY SMALL NEED AT THE
TIME, AND OVER THE YEARS WE KIND
OF ACCEPTED THAT MODEL AND HAVE
USED THAT MODEL AS OUR CURRENT
MODEL, AND I THINK IT'S BEING
QUESTIONED ON WHETHER THAT WORKS
TODAY.
>> YEAH, INDEED.
NICK HILLMAN, THANKS VERY MUCH.