3 steps that would help 'cure the disease' of the student-debt crisis after Biden's one-time relief, according to experts

3 steps that would help 'cure the disease' of the student-debt crisis after Biden's one-time relief, according to experts
  • Biden announced a plan to deliver one-time, broad student-loan forgiveness to federal borrowers.
  • Experts told Insider it's important to focus on more permanent reforms to college affordability.

One-time student-loan forgiveness is necessary temporary relief — but it's hardly enough to address future costs of higher education, experts say.

Biden's plan to forgive up to $20,000 in student debt for federal borrowers making under $125,000 a year is currently stalled in court, but it's not the silver bullet experts and advocates are looking for. Regardless of when, or if, the relief hits borrowers' accounts, some experts say Biden and lawmakers should be looking ahead to more permanent reforms to tackle college affordability.

Mamie Voight, the president and CEO of the Institute for Higher Education Policy (IHEP) — a nonprofit that focuses on success in higher education — told Insider that "the current conversation about the cost of college is a critical one for our country to have."

"We need long-term solutions to the systemic affordability challenges facing today's students — solutions like doubling the Pell Grant, increasing state investment in public colleges, and prioritizing need-based financial aid," she said.

Along with its announcement of broad student-loan forgiveness, the White House also outlined some steps it will take to protect "borrowers and taxpayers from steep increases in college costs," including increasing the maximum Pell Grant award and holding colleges accountable for contributing to the rise in student debt by publishing an annual watch list of the programs with the highest levels of debt in the country.


And after his proposal for free community college got cut from Democrats' economic spending bill last year, Biden pledged to "get it done" before his first term is up in 2024.

Phillip Levine, an economics professor at Wellesley University and founder and CEO of MyinTuition Corp, which operates a simplified financial aid calculator, told Insider that "we can think about the pros and cons of debt relief, but in terms of the big picture question, what it really misses is a solution going forward."

"We really need to figure out a way to cure the disease and fix the problem," Levine said. "The problem is transparency and affordability, and both of those problems need to be fixed going forward."

College pricing should be more transparent

Levine said that one of the key "fundamental problems" with college affordability is the lack of transparency in college pricing. Without the full picture, students might overborrow for an education they think will be more expensive, or underestimate much they'll need to borrow and commit to an education they can't afford.

Tuition and fees at private universities have increased 134% over the past 20 years, per US News, and in-state tuition and fees climbed 175% over the same time-frame. But the pandemic has muddied the trend of rising tuition over recent years as some schools froze tuition, and along with that, the sticker price to attend a college isn't necessarily what a student will end up paying, and that could lead to excessive loan borrowing, Levine said.


"Most people, when they think about going to college, focus on the sticker price, the full cost of attendance," Levine said. "That is the easiest number to find because that's what colleges are required to post on their websites. That number is great if you are a high income individual or family because that's what you will pay, but for everybody else, they will pay less than that."

Levine noted that most lower-income students will receive some form of financial aid to finance the college costs, and oftentimes, prospective students will not learn the total fees they will have to pay until after they are accepted.

"Once you find yourself in a position where you want to attend an institution that is going to charge you more than you can afford, the easiest 'solution' is to borrow to fill in the gap," Levine said. "And that can lead to excessive debt, and so on. If this college is not affordable, people are going to try to find ways to afford it one way or another, and taking out too much debt might be the only solution."

Replacing loans with grants is a good first step that some colleges are already taking

Some colleges have started to remove that scenario altogether by replacing loans in their financial aid packages with grants students do not need to pay back. As Insider previously reported, Princeton became the first university in the US to replace loans with grants in 2001, with schools like Amherst, Harvard, and Yale launching similar initiatives in the following years.

"Grants are a far better tool than loans for improving college access and success because they do not need to repaid," Voight said.


"For students to access the school that will best deliver the programs, opportunities, and social and economic mobility they desire, that school must be affordable," she added. "The rising cost of college can put valuable options out of reach for students who need them the most. Grants, when based on financial need, are a key step toward a more equitable system."

The benefits of graduating without debt have been tracked over the past decade — a 2013 study found that switching from grants to loans increased enrollment among low-income students between roughly 3 and 6 percentage points.

Bolstering aid for low-income students should come next

Levine said that "the best lever that we have available to pull to increase college affordability that would be to double the Pell Grant."

According to a White House fact sheet, Biden has increased the maximum Pell award by $400 in the 2022-2023 school year and has put forth a plan to double the award by 2029 to nearly $13,000. Every year, the Education Department determines the maximum award, and the grants are available to undergraduate students who display "exceptional financial need" based on the information they provide in their Free Application for Federal Student Aid (FAFSA) form, according to the department.

To prioritize aid to the students who need it most, Voight said that on a state level, policymakers should increase investments in public institutions so those schools do not feel pressure to prioritize high-income students. On a federal level, doubling the Pell Grant, along with simplifying the student aid process, are necessary reforms.


"The most important policies are the ones that 1) recognize that the cost to attend college is far more than simply the cost of tuition; and 2) are need-based and, thus, equity-centered," Voight said.

"Those policies must address the full cost and account for non-tuition expenses, such as housing, books, food, child care, and transportation, as well as unanticipated costs like a health or family emergency, car repair, etc.," she continued. "Costs beyond a student's budget – whether they be high tuition prices, an unexpected book expense, or an unusually high electric bill – can be the difference between completing a degree or needing to pause one's studies before earning a credential."

Biden noted his plan was a "one-time" relief measure and borrowers would not see another broad loan forgiveness action during his term. While its implications are significant — the relief would wipe out the entire balances for 20 million borrowers — it's currently blocked. Two federal courts recently ruled implementation cannot move forward until they a final decision on the legality of the debt cancellation. At this time, the Education Department is no longer accepting applications for further relief.