March 2020
Washington – As Congress prepares a third bill to deal with the coronavirus and its effect on the economy, here are some ideas to expand on those previously offered, dealing with student loans.
First, some context. Congress and the country are looking for bipartisanship, so the most plausible actions will necessarily involve compromise. Additionally, the bill must do its best to address the health care sector, which must take priority. That means giving health care workers combat pay, so to speak, as they are putting their lives on the line. It means supporting them with supplies and equipment above all else.
As for student loans, the focus should be on borrowers who need help and who will be essential to building back the economy.
Previous suggestions:
• Convert repayment forbearances to deferments for the duration of the emergency. That will eliminate interest payments on subsidized loans.
• Allow borrowers to place their loans into deferment with conversion to forbearance at the end of the emergency. That will give borrowers in repayment an option to pause if it makes sense for them.
• Cease debt collections and wage garnishments for the duration of the emergency.
New elaboration on a previous suggestion for a Tuition Premium Tax Credit:
• Put up to $10,000 into the hands of borrowers and others who have struggled to pay tuition, through a refundable tax credit based on full-time-equivalent years of undergraduate postsecondary education in the 21st Century. A refundable tax credit means a check will be in the mail if the credit exceeds tax liability, and is therefore a means test to target the aid. Basing the credit on years of tuition paid addresses issues of equity among borrowers, and between borrowers and non-borrowers. It also addresses generational equity to recognize higher tuition burdens in the past two decades compared to earlier years.
This would achieve fairly wide coverage of many borrowers in distress. More than two out of three students have borrowed to pay tuition. The credit would be a maximum of $10,000 for a person with a full-time, four year postsecondary education, proportionately reduced for lesser time of enrollment.
The $10,000 figure comes from recent proposals in Congress to assist borrowers. It also is a rough approximation of the average tuition premium paid by this generation compared to the previous one.
This approach is a way to overcome objections to distributing federal funds to those who don't need them, and to objections based on equity concerns between individuals' choices in paying for college. It can stand on its own as sound policy as part of a coronavirus bill, or independently.
