Life without loans

The Dispatch

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What the repayment freeze meant to people

When one of your monthly bills— maybe even one of the biggest — suddenly disappears, what do you do with that newfound cash? That’s been the question for roughly 40 million Americans during the pandemic as the federal government froze repayments on student loans.

The moratorium, first put in place under President Donald Trump in the spring of 2020, is set to expire on May 1. But it’s already been extended four times, and the Biden administration is signaling they might do that yet again.

These two years have given millions a chance to envision a life without student loans. With the pause set to end (maybe), our friend Chris Quintana and his colleague Craig Harris at USA Today talked to borrowers about exactly how the freeze had changed their lives:

The 24-year-old economic analyst who used the pause to accelerate her payments — throwing more than $2,500 a month at her student loans.
A teacher who used the break to focus on credit cards and building a new home.
An auto mechanic who, at first, kept making loan payments until a friend said keep your money in case the government might forgive all loans. Instead, he traveled more, paid down credit-card debt, and saved $5,000.
A defense analyst who welcomed the “breathing room” that not making $580 a month in payments provided — but who sold one family car in anticipation of restarting the payments.
A 23-year-old golf pro who saved up money during the pandemic and just paid off all of his $8,500 in student loans.

I asked Chris what jumped out to him after those conversations. He said while frustrated about debt and sometimes questioning the value of college, the people he spoke with had a genuine desire to repay their loans — but under more flexible terms.

Often that discussion was focused on interest rates and the borrowers’ struggles to actually pay down their principal. At least two others also wished the government would make it easier to enroll and deliver on the promises of established debt relief initiatives like the Public Service Loan Forgiveness program, which still requires 10 years worth of payments. To me, that challenges the narrative that people are simply seeking debt relief as a handout or because they choose to study the “wrong” subject in college.

While Chris explores the human version of this freeze, a report last week from the New York Federal Reserve Bank shows the economic one. It used a sample of credit reports to examine how payment relief has played out — and suggested that the experience of the sliver of borrowers who weren’t eligible for the freeze portends struggles for millions more once repayment begins.

The analysis took a deeper look at those who had loan prior to October 2017, so they could see repayment patterns both before and during the pandemic. First, a reminder that even before the pandemic, more than 40 percent of borrowers weren’t paying down their loans at all — some because they’ve fallen behind, many others because they’re in some income-based repayment plan.

So perhaps it’s little surprise that the ones that were paying down loans before the crisis were more likely to keep paying them down (about 1 in 3). In contrast, fewer than 1 in 10 borrowers with increasing balances before the pandemic made any progress on their loans.

No one is happy with the current moratorium as policy.

This week, Democrats in Congress urged the administration to extend the pause again — this time till the end of the year — and “provide meaningful student debt cancellation.” The freeze, they said, had saved borrowers an average of $393 per month and that many are not prepared to face another bill as they deal with rising costs for food and gas.

Conservatives, meanwhile, want to restart payments. Back in the fall, for instance, Beth Akers at the American Enterprise Institute argued that the moratorium was a windfall for some wealthier borrowers. That’s because the pause was created to count all these months of zero payments toward the total number of required for income-driven repayment programs.

“It is important to provide relief for borrowers who are truly struggling. But this moratorium, like so many other popular progressive proposals, fails to target those who are truly in need and is providing a payday, at taxpayer expense, to many high earners.”

As for Chris himself, he’s still got $12,000 in student loans from his University of New Mexico degree. Yes, it’s been nice to have some more room in his monthly budget, he told me. But restarting payments? He’s not worried.

—Scott Smallwood

Bucking the test-optional trend

This week the Massachusetts Institute of Technology announced that it would reinstate the requirement that applicants submit SAT or ACT scores.

Will this be the move that stops the momentum test-optional policies gained during the pandemic? Or is MIT such a highly-selective, math-oriented outlier that it doesn’t foretell much for the rest of higher ed?

I turned to Akil Bello, an admissions and testing expert who is the senior director of advocacy and advancement at FairTest, for his take.

My biggest shock about the MIT announcement is how vague and seemingly contradictory the rationale given was. I’ve long expected that MIT would be one of the places that could offer a convincing data-supported argument for the tests value at their institution, this wasn’t that argument.

Bello thinks MIT — with its unique curriculum and small student body — is less of a trendsetter than the California public universities. And he pointed out that the recent decision in Georgia to revert several public colleges back to test-optional may signal that less-selective places could struggle if they go back to requiring the tests.

I’m fairly certain the era of required admissions tests is over and we’re entering the test-optional era, where requiring the test is the outlier. I suspect that before long we’ll be making lists of the colleges that do require the SAT rather than the ones that don’t.

—Scott Smallwood

Elsewhere on Open Campus

In The Job: Time is a barrier for frontline workers with college benefits Many people without degrees also had negative experiences in school and often have no desire to resume a formal education. (Sign up for Paul Fain’s newsletter about education and work.)

In The Intersection: A network for closing degree gaps. A national advocacy group is putting a new focus on improving college completion by supporting two types of minority-serving institutions: historically Black colleges and predominantly Black community colleges. (Sign up for Naomi Harris’ newsletter about higher ed, race, and equity.)

In Mississippi: ‘From the ground up’: How one community-run program is getting more kids to college. In Greenville, Miss., 19 percent of adults over 25 have a bachelor’s degree, compared with the national average of 33 percent. A new initiative is focusing on helping more local students get financial aid.

In Pittsburgh: A Pitt creative writing program is archiving local LGBTQ stories. “Oftentimes, as we get older, I think we feel invisible, and I think that’s especially true with LGBTQ folks. We can feel like our stories don’t really matter.”

In Northeast Ohio: Will colleges’ test-optional policy continue post-pandemic?

In Colorado: Better jobs in less time: Colorado plan aims to connect higher ed, workforce. A package of bills backed by Gov. Jared Polis lays out how the state will spend roughly $95 million in federal relief money to improve access to higher education and connect education to in-demand jobs.