Around 4 million Californians have some amount of student loan debt, and many of them could receive some relief this winter thanks to a federal plan announced in mid-August.
Borrowers who earned less than $125,000 (for individuals) or $250,000 (for couples) during either of the last two years are eligible for up to $10,000 of forgiveness, which rises to $20,000 if you were a Pell Grant recipient. During the plan’s announcement, President Joe Biden added that federal student loan debt repayment would continue to be paused through the end of the year, with payments resuming in Jan. 2023.
While the plan offers support to many Californians, it still has gaps — for example, only federal loans qualify for forgiveness. Regardless, students and advocates hope it will lead to more conversation about reforming financial aid systems and increasing college access as costs continue to rise.
Student loan debt reflects and deepens existing inequities
Even with financial aid, families are still paying thousands of dollars for an education as costs of housing, food and books continue to rise.
Bailey Henderson, a senior at UC Berkeley, has spearheaded the Double the Pell campaign through the UC Student Association for the past two years.
One of the reasons he wanted to look at financial aid reform, he said, is that students in California often go into debt because of other costs outside of tuition, which may be covered through fee waivers like the Blue and Gold Opportunity Plan for University of California students or the California College Promise Grant for community college students.
“When you live in one of the most expensive places in the US to live, it becomes very difficult to actually get your education here and follow through with all the plans that you have for yourself,” Henderson said.
Scholarships and financial aid knock the average cost of attending universities in California to about 20% of a family’s household income, according to data from the Public Policy Institute of California from 2018-19. But those costs may feel higher for low-income students — for example, a CSU student whose family earns less than $30,000 would pay around $6,300, and the proportional cost of college compared to other expenses may be prohibitive.
Plus, Henderson noted that doesn’t always reflect the reality of parent contributions. While his parents are putting money toward his education, he’s taken out at least $20,000 in private loans, which aren’t forgiven under the new plan.
Jacob Johnson, a researcher at the PPIC who works on analyzing higher education data, said instead of trying to work to cover the cost difference, many Californians instead take on debt.
“On average, fewer students [in California] are in debt compared to other states, and the debt amounts are lower,” he said. “But that debt can still be problematic for students to pay back, especially students who didn’t graduate or who take longer to graduate.”
Students may lose aid if they take longer than four years to graduate, which disproportionately affects Black and Latino students, who are more likely to take more than four years to earn a degree.
Black students in particular have more student debt, across income levels and demographics — in California, three-quarters of Black graduates from CSU schools and two-thirds of Black graduates from UC schools graduated with debt.
Henderson said he’s worried about the cohort tuition model passed at UC schools this past year, which results in every incoming class of first-year and transfer students paying more.
“Student loan forgiveness is going to uplift the communities that are currently suffering,” he said. “But it's going to be all other students that are going to have to deal with that affordability crisis going into the future unless we do something about it.”
Advocates call for more work on financial aid system
Only 54% of Californians in 2019 filled out the federal application for student aid, or FAFSA, through which Pell Grants and Cal Grants are awarded. The application also qualifies a student for federal loans and scholarships.
“There has long been criticism of the way you apply for federal aid,” Johnson from the PPIC said. “You’ll have to get your parents’ tax information, fill out these things online, they’ll sometimes ask you to verify things. That can be problematic for 18-year-olds who are entering college who don’t know a lot about how to apply for financial aid or about their parents’ taxes.”
Marlene Garcia, the executive director of the California Student Aid Commission, added that other barriers to FAFSA completion include lack of knowledge that it exists, apathy toward going to college and distrust in sharing income information.
As of the 2022-23 school year, all California high school seniors are required to fill out the FAFSA — or, if they are undocumented, the California Dream Act application — to graduate unless they fill out a waiver.
As a result, starting Oct. 1, when the FAFSA opens, CSAC will be launching a campaign to convince people to apply for the FAFSA.
One of the commission’s biggest challenges is getting the message across that grants — like the Pell or the Cal Grant — are free money for students, Garcia said.
“A grant is not a loan,” she said. “It’s money the federal or state government invests in you. It’s real money you don’t have to pay back.”
Eloy Ortiz Oakley, the former chancellor of the California Community Colleges system, noted that while those “front-end solutions” are important for helping parents and students understand how to navigate higher education, he’d like to see more on the back-end with institutions making it easier to finance an education.
The underlying problem is that the cost of education has gotten out of control.– Eloy Ortiz Oakley, President and CEO, College Futures
The underlying problem is that the cost of education has gotten out of control.
Along with institutional support, like colleges making free or low-cost textbook options available, Oakley — now the president and CEO of higher education nonprofit College Futures — says he’d like to see more general reform of the financial aid system, including programs like CalFresh.
“If a student shows a college or university that they are low income, that they're basically poor, they shouldn't have to prove that they're poor every time they go into another office to get aid,” he said.
Still, while Oakley acknowledged that there was more to be done and the debt forgiveness plan isn’t perfect, it sends “the right message that we need to reset the system.”
“We can’t just stop with the debt forgiveness,” he said. “The underlying problem is that the cost of education has gotten out of control. We are putting money out there for students who get further and further in debt to help pay for that education that doesn’t always translate into better jobs or a better economic future. We’ve got to resolve that part.”
Even if you don’t hit the income threshold for loan forgiveness under the new plan, borrowers employed by nonprofits, the military or federal, state, tribal or local government may be eligible to have all their student loans forgiven through the Public Service Loan Forgiveness program. You can check eligibility at PSLF.gov. The deadline to apply is Oct. 31.
To see if your loans are federal or private, you can call 1-800-4-FED-AID or visit studentaid.gov.
If you do qualify for loan forgiveness under the recently announced plan, you’ll need to verify your income information with the federal government, and the application to do so will open in early October. To be notified when the application opens, you can sign up for emails from the U.S. Department of Education (click “NEW!! Federal Student Loan Borrower Updates”).