What the Biden student loan forgiveness plan means for Michiganders

President Joe Biden’s decision last week to provide student loan relief to up to 43 million people likely will have an impact on thousands of people in Michigan, where the average debt is around $30,000.

The Democratic president announced a plan fulfilling a campaign promise to forgive some federal loans — up to $20,000 for Pell grant recipients and up to $10,000 for individual federal loan recipients, both with a $125,000 annual income cap. The plan will aid both those with college degrees and those who didn’t finish — what the White House terms “debt with no degree.” And the pause on payments for all borrowers has been extended through the end of the year.

Up to 50% of Michiganders with federal student debt could have their loans cut in half or forgiven entirely, according to Democratic Gov. Gretchen Whitmer, who supports Biden’s student loan plan. Those who qualify will not owe state or federal income taxes on the amount forgiven.  

“The decision to cancel $10,000 in student loan debt and $20,000 for Pell Grant recipients will make a real difference for 1.4 million Michiganders that have student loans, putting money back in their pockets,” said Whitmer. 

Whitmer said that the Biden plan will help nearly 700,000 Michiganders “have their debt cut in half or eliminated entirely.”

The Institute for College Access & Success reports 59% of Michigan college graduates had student loan debt as of 2018-19. The average loan debt load was $30,677, making Michigan the 17th highest nationally.

However, Republicans have blasted the plan. U.S. Rep. Bill Huizenga (R-Zeeland) called the Biden plan “reckless” and said that it does not “solve the cost of college problem plaguing hardworking families in Michigan.” 

“First of all, it is highly questionable that President Biden even has the constitutional authority to make this decision,” said Huizenga. “Frankly, this is an insult to the students who worked their way through school as well as the parents or spouses who took a second job to make sure the bills were paid.”

Pamela Hilliard Owens, a Detroit retired career educator, praised Biden’s plan, arguing that Americans who have student loan debt are paying more for college and workforce training programs adjusted for inflation than their parents and grandparents. 

Owens also blasted student loan forgiveness critics who argue “hard-working Americans without college degrees are paying for this.”

“Guess what? Those of us with college degrees are also hard-working and pay taxes,” added Owens.

Black borrowers most negatively affected by student loans

In announcing the plan, the White House noted that the student debt burden also falls “disproportionately on Black borrowers.” 

About 45 million Americans collectively owe $1.7 trillion in student loan debt — and women hold nearly two-thirds of it, according to the Education Trust, a national nonprofit that has an office in Royal Oak. 

It released a report in April called, “How Black Women Experience Debt” that points out that because of the gender pay gap, women are more likely than men to have trouble paying off their debt. 

Black borrowers are the group most negatively affected by student loans, in large part because of “systemic racism, the inequitable distribution of wealth, a stratified labor market, and rising college costs,” the organization writes. 

African Americans compose about 14% of Michigan population and about 13% of the nation’s citizens.

The Biden effort resonated with U.S. Rep. Brenda Lawrence (D-Southfield), the only African-American member of Michigan’s congressional delegation. 

“This plan will lift up borrowers of color, especially Black women and girls, who are disproportionately impacted by the student debt crisis,” said Lawrence. “It is unacceptable that Black women have the highest average total of debt after earning their bachelor’s degree.” 

Forty percent of Black women in the United States who are in college are parents — a higher proportion than any other group, according to the Institute for Women’s Policy Research.

It found Black women receive little help when it comes to repaying their student loans. Some 12 years after starting college, Black women owe 13% more than they borrowed, while white men, on average, have paid off 44% of their debt, according to the report. 

Moreover, a year after completing a bachelor’s degree, Black women hold more student debt than any other group — with an average of $38,800 in federal undergraduate loans, according to the report.  

Black borrowers are the group most negatively affected by student loans, in large part because of systemic racism, the inequitable distribution of wealth, a stratified labor market and rising college costs, according to the report. 

Lawrence, who is retiring from Congress in January, has pledged to work with the Biden administration and her colleagues to “push for policies that reflect the needs of our communities and allow for the building of intergenerational wealth.” She is focused on gender pay equity and small business lending that better helps disadvantaged communities.  

Structural problems remain

As part of its plan, the Biden administration also directed the Department of Education to propose a rule to eliminate monthly interest payments on loans, “so that unlike other existing income-driven repayment plans, no borrower’s loan balance will grow as long as they make their monthly payments — even when that monthly payment is $0 because their income is low,” according to the department website.

The proposed rule would also forgive loan balances “after 10 years of payments, instead of 20 years, for borrowers with loan balances of $12,000 or less.” It would also require “borrowers to pay no more than 5% of their discretionary income monthly on undergraduate loans.”

“People can use these savings to buy a home, start a business, get married or start a family,” Whitmer said. “I will work with anyone to keep lowering the cost of higher education and offering more paths for Michiganders to earn a higher education tuition-free, without going into debt in the first place.” 

However, some Michiganders would like to see broader reforms that likely would have to be passed by Congress.

Auburn Hills resident Kyle Minton said he worked hard to pay off $50,000 in student debt, four years after graduating from Oakland University in 2012.

Although he is not opposed to Biden’s student loan forgiveness plan, what bothers him is that structural issues remain the same.

“We’re not changing the way in which we are lending; college is not made free and tuition is not being reduced, subsidies are not going up, etc.,” Minton said.

“So we admit that debtors have been harmed — predatory lended to — and we are rectifying that harm. However, we are going to leave the system of harm entirely in place.”

Along similar lines, Tom Armstrong of Mount Pleasant supports debt forgiveness, but sees it as a temporary alleviation to a pervasive problem.

After graduating Central Michigan University in 1981, Armstrong was able to pay off his student loans via “a long and painful process.” Now, he said, both of his sons have student debt of their own.

Advance reporter Laina G. Stebbins contributed to this story.