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The author, center, with her children when they were younger.
Courtesy of Holly Johnson
I’m happy for those who will have some or all of their student-loan debt forgiven by Biden’s plan.
But with kids ages 11 and 13, I’m more determined than ever to save for their education.
There’s no relief in sight for the high cost of college, and kids of high-earners won’t get any breaks.
When the Biden administration announced a new student-loan forgiveness plan for eligible borrowers last month, my social media accounts were automatically flooded with passionate statements on both sides of the aisle. Some people seemed to be elated at the idea of eligible borrowers having $10,000 to $20,000 in federal student loan debt forgiven, whereas others were horrified at the idea of any kind of forgiveness at all.
Because this issue and others like it are never black and white, I quickly found myself with mixed feelings on student-loan forgiveness — at least in its current form.
I am happy for eligible borrowers who are seeing some of their federal student loan debt forgiven, and I have no animosity towards those who are excited to receive it. In fact, I have a nephew in college who is set to receive forgiveness for the previous year’s student loan debt, and several other people in my life will be financially much better off.
On the flipside, I have two kids ages 11 and 13, and I am extremely worried about their future, as well as the future of their peers. This is despite the fact that I have been saving for my children’s higher education since they were babies, and I currently have close to enough to pay for four years of state school tuition and fees in a 529 account for each of them.
Why I’m still saving for my kids’ college education
While student-loan forgiveness is on its way for some borrowers, I wholeheartedly believe parents with kids approaching college age should hold off on celebrating right now. The fact is, there are several important reasons I will continue saving for my kid’s college education, and why those who can afford to do so should do the same.
Today’s forgiveness plan won’t help future borrowers
One big issue I have with Biden’s forgiveness plan is that it is a one-time action that does nothing to fix our broken higher education system. While the current plan forgives up to $10,000 in debt for borrowers with most federal student loans and up to $20,000 for Pell Grant recipients, this forgiveness only applies to individuals who already went to school.
Borrowers who are taking out student loans for college this year and in future years will note that these new debts are already ineligible.
This means this year’s high school students, my own children, and everyone else heading off to college in the next decade will face the exact same affordability issues as those who came before them. Sure, the administration proposed a new income-driven repayment plan that bases payments on 5% of discretionary income instead of 10%, and they promise to make fixes to the increasingly inefficient Public Service Loan Forgiveness (PSLF) program, but help for future students pretty much ends there.
Interestingly, the White House press release on student loan forgiveness says Biden’s plan is to “protect future students and taxpayers by reducing the cost of college and holding schools accountable when they hike up prices.”
However, it only goes on from there to explain how the administration plans to fight to double the maximum Pell Grant amount and make community college free. Since Pell Grants only go to borrowers with the lowest incomes and community college is already affordable, these measures won’t do much to help middle-income students or those who plan to attend a four-year school.
That said, the release does say that the Department of Education is “announcing new efforts to ensure student borrowers get value for their college costs,” whatever that means.
College costs will likely be higher years from now
In the meantime, though, the White House reports that the total cost of both four-year public and four-year private college has nearly tripled, even after accounting for inflation, since 1980. In other words, even government stats show that prices for higher education continue growing despite what anyone promises or says.
At this point, it’s even conceivable (and highly likely) that the average four-year degree from a four-year school will require more than $100,000 in costs for tuition, fees, and room and board by the time my oldest child reaches college. In fact, recent statistics from CollegeBoard show that average tuition and fees for public, four-year schools worked out to $10,740 per year for the 2021-22 school year. When you add in the costs of room and board, however, the one-year cost soars to $22,690.
Income caps paint a grim picture for the kids of high-earners
Another reason I’ll continue saving for my kids’ college is the fact that, like it or not, this administration and others before it have painted a line in the sand when it comes to potential assistance with higher education costs. When Hillary Clinton ran for president in 2016, for example, she proposed making state colleges and universities tuition-free for students whose families earn $125,000 or less.
Biden’s forgiveness plan once again limits relief to individual borrowers with incomes of $125,000, or couples who earn $250,000 or less.
It remains to be seen what kind of income caps might apply for free college or loan forgiveness in the future, but many high-earners are right to worry that their kids will be barred from receiving help.
For these reasons and plenty of others, we are still saving for our children’s college education on a monthly basis. While today’s forgiveness plans will help a select percentage of people who had to borrow money for higher education, I don’t see anything in the works that will help future college students save money on college or avoid overborrowing.
And with more government money pledged to help pay for higher education in the future, I won’t hold my breath for the cost of college to come down anytime soon.