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Forgive, don’t forget

Student debt forgiveness programs should collaborate more with universities

The New America Foundation recently released a report which concluded student debt forgiveness programs encourage students to borrow more money, in comparison with an income-based repayment program.

The study focused on the Public Service Loan Forgiveness program, which forgave debt after 10 years for students working in the non-profit sector. Such a program could be beneficial in that it would attract students to non-profit work, and would make low- or middle-income students more likely to attend college. However, given the conclusion that debt forgiveness encourages students to borrow more, the negative effect of such a program is that it will decrease a college’s economic incentive to keep tuition costs down. If a student knows his debt will be forgiven within 10 years, he is less likely to consider tuition cost and grant aid programs when choosing a school. If students are not weighing these factors, colleges can effectively charge whatever they please and have no incentive to reduce costs or offer more need-based grant aid packages.

This does not mean that we should eliminate debt forgiveness programs altogether. As previously stated, they can be helpful at a time when the economy is being weighed down by the growing amount of cumulative student debt, and they keep options open for low-income students, because colleges can theoretically keep thriving on the dollars of wealthy students with no consideration for those in other income brackets. And there are other economic factors besides demand that influence tuition costs and the scope of programs like AccessUVa, such as state funding and competitive market salaries for professors.

The solution is that there has to be more coordination between debt forgiveness programs and colleges. In our previous editorial we suggested states motivate colleges to recruit and aid low-income students by correlating the public funds colleges receive with the number of low-income students they have enrolled. In a similar fashion, debt forgiveness programs could form partnerships with universities that keep their tuition as low as possible, offer more grant aid to low-income students and limit the amount of debt students graduate with.

Such a partnership may look like this: a loan forgiveness program could help low-income friendly colleges with recruitment and with career services, departments that are especially relevant to the missions of both parties. With this assistance, the universities could then re-allocate some funds to grant programs which would further enhance their own economic diversity. This partnership would attract more students to the colleges that graduate their students in better financial situations, so other colleges would be forced to change their practices to win back those students. The partnership itself is also a valuable commodity which colleges could only access by changing practices.

The goal of debt-forgiveness programs is to alleviate a financial burden that too many students struggle with. But to approach the issue only retroactively does not entirely solve the problem. After all, there are some students who never even make it to college because of the fear of student debt, and these students need assistance, too. Colleges also need to be motivated to make permanent changes so we can reach an ideal state of higher education — a state in which these debt forgiveness programs are not needed at all.

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