The Corner

Education

We’re Forgiving Way Too Much Grad-Student Debt

Last month I highlighted a Moody’s report about student debt. It discussed the fact that many borrowers are making only minimal payments on purpose — because they are enrolled in “income-based repayment” options the Obama administration expanded, in which their debts are simply forgiven after 20 years or so. As I pointed out, this system is far more generous to people who chose to spend tons of money on grad school than it is to the folks who actually have the most trouble with student loans: those who borrowed smallish sums to attend lower-tier colleges and often didn’t even graduate.

The Congressional Budget Office has a new report about the program. There’s interesting stuff throughout, but the case against the status quo can be made by quoting three sentences:

Of the loans disbursed from 2020 to 2029 and repaid through income-driven plans, CBO estimates that undergraduate borrowers would have $40.3 billion forgiven and graduate borrowers would have $167.1 billion forgiven. . . .

The forgiven amounts are equal to 21 percent of the disbursed amount for undergraduate borrowers and 56 percent of the disbursed amount for graduate borrowers. . . .

Graduate borrowers are projected to hold 50 percent of the volume of student loans disbursed from 2020 to 2029 — including 61 percent of the volume of loans in income-driven plans — but to account for 81 percent of the amount that is forgiven.

Why are we forgiving four times as much debt for grad students as we are for undergrads, when the latter folks are both more plentiful and more sympathetic?

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