Debt forgiveness plan would provide relief but falls short of addressing the heart of the student loan crisis

by Erin Gretzinger

The first time Emerson Boettcher cried about the cost of college, she was in sixth grade. 


It was the height of the Great Recession. Then, her mother started to lose her vision — and eventually her job. As her family’s finances tightened under the strain of unemployment, the dreaded question arose in Boettcher’s mind. 

“I remember so clearly: That message is just like, ‘You need to go to college to get a job,’” Boettcher says. “And at the [same] time, I was just being told no to new basketball shoes; being told no to go to the movies; being told no to like literally any normal child experiences.”


“And I was like, ‘Well, I’m having an abnormal life because of money. What if it doesn’t change, and I can’t go to college like everyone around me who’s having a normal life?’”


But there was one thing that Boettcher’s younger self didn’t yet understand about paying for college: “Obviously, I didn’t know what the heck a loan was when I was 11.”


Boettcher, now a 24-year-old high school teacher in Minneapolis, says she feels like she is in a “pretty decent boat” compared to others with student loan debt — with about $25,000 still remaining. 


UW–Madison graduate Emerson Boettcher, who has more than $20,000 in student loan debt, worked between 20 to 40 hours a week during college to help assuage her concerns about debt after college. (Photo by Bryce Richter / UW-Madison)

“This is defining the rest of your life,” Boettcher says of her student loans. “Not just the next four years, but also the next eight, and then, therefore, the rest of your life.”

There is a beacon of hope for the thousands of Wisconsinites — like Boettcher — with debt. In August, the Biden administration announced a plan to provide loan forgiveness of up to $20,000. The proposal could cancel the debt of almost half the nation’s borrowers, including more than 300,000 eligible Wisconsinites.

But the road to debt relief remains unclear. Legal challenges have left borrowers indefinitely waiting to see if Biden’s plan will withstand a flurry of lawsuits. Amid this period of uncertainty, experts have pointed out a blind spot in Biden’s plan: the danger of a one-time debt “jubilee.”

Regardless of whether Biden’s plan comes to fruition, experts and borrowers will continue to grapple with how to combat the student loan crisis at its sources to sustainably address debt for borrowers today — and the next generation.

How we got here

Wisconsin native Justine Mischka graduated from UW–Madison and has about $35,000 left in student loan debt. She joined AmeriCorps in part to help offset her debt through its grant program. (Provided by Justine Mischka)

According to UW–Madison’s Student Success Through Applied Research Lab, an estimated 715,800 Wisconsin residents have federal student loan debt, which represents about 23% of the 3.1 million people in the state’s labor force. Collectively, Wisconsin borrowers owe $23.1 billion, putting the average balance at about $32,230 per person


Cliff Robb, a UW–Madison expert in college student financial behavior, says the number of borrowers and the amount students borrow has increased exponentially in the last decade. Accounting for inflation, tuition at public four-year institutions has more than doubled since the early 1990s.


According to Helen Faith, a student loan expert who works as UW–Madison’s director of student financial aid, the university’s tuition costs over 22 times more than five decades ago


“When you talk to folks who maybe went to college quite a while ago … [they] will say, ‘Well, you know, when I went to school, we just worked part-time and we covered our costs,’ and I think oftentimes there’s a failure to realize that the cost of education has gone up substantially,” Faith says.

Federal programs like the Pell Grant  — a means-based award that doesn’t need to be repaid — were designed to help make college affordable. But Robb and Faith say those support systems have not kept up with predictable rising costs. The Pell Grant, for example, used to cover nearly 80% of tuition at public four-year universities. Today, it is worth one-third of its original value. 


The result: Students take on more debt than previous generations. 


And that debt takes a toll. College graduates today are getting mortgages later and putting off marriage and family decisions longer than previous generations, Robb says. Multiple factors play into these outcomes, but Robb says student loan debt is certainly a key reason. 


Boettcher’s concerns about paying for college never faded after her sixth-grade epiphany. Despite being admitted to Georgetown University in Washington, D.C., Boettcher instead left her northeastern Wisconsin hometown, Two Rivers, to attend UW–Madison and save money with in-state tuition. 


During college, she worked 20 to 40 hours a week and spent her spare time on scholarship applications. After graduation, Boettcher joined an AmeriCorps program, a nonprofit that provides service-year opportunities, in part because of grant assistance that offers some student loan forgiveness


Following a similar path to Boettcher, fellow UW–Madison graduate Justine Mischka worked for AmeriCorps in part to help pay off her student loan debt. Still, she is unsure of when she will get out of debt.


“I work at a nonprofit, and we’re all 20-somethings with college debt,” Mischka says. “None of us have any sort of short-sighted goals of paying off our student loans.”

Debt remains ‘significant at the margins’

Robb and Faith note that the average borrower can successfully pay off their student loan debt. College degrees can be viewed as investments that often lead to higher-paying jobs. A college degree is estimated to provide $500,000 more in income throughout one’s life. 


However, specific cases warrant a closer look. To have a successful college investment, students must leave with a degree — yet one-third of all borrowers don’t actually obtain one. Other issues, such as massive interest accumulation or certain aggressive loan packages, can further hinder borrowers.


“It’s not like every person is in a bad situation because of student loan debt,” Robb says. “It’s more at the margins, but it’s still significant at the margins.”


Complicating the process, Robb says young people don’t always understand the magnitude of debt when they take out loans. 


This was certainly the case for Mischka, a native of Whitewater, located in southeastern Wisconsin. As a teenager, she worked at Rocky Rococo for pocket change while her single mom provided the necessities. For Mischka, even college application fees felt financially daunting. 


That is, until she got her financial aid back and saw she qualified for loans and grants. The dollar amount on the screen felt unfathomable to a 17-year-old Mischka, so she jumped at the chance.


Despite receiving the Pell Grant, Mischka, now 25, still has about $35,000 left in debt. She wouldn’t have done anything differently, but she wished she knew more about what lay ahead when she said “yes” to loans. 


Mischka adds: “It’s just like this one button on a website that you click, and then they put money in your bank account.”

Biden’s plan: promises and shortcomings

Considering people who struggle the most with debt borrow less than $10,000, Faith says that pivotal number is addressed by offering relief of up to $10,000 for non-Pell Grant recipients. The boosted forgiveness of up to $20,000 for Pell Grant recipients also provides means-based relief.

But debt relief today doesn’t account for the big-picture problems in the student loan system — or future borrowers’ inheritance of it.

“A one-time exception, a one-time forgiveness, it is problematic,” Faith says. “It’s hard for me to imagine a situation in which that could happen again.”

Robb says a one-time relief could also create perverse incentives — leaving people waiting for more debt forgiveness or causing them to take out more loans in hopes of additional debt cancellation. 

For borrowers like Mischka and Boettcher — who both received Pell Grants — Biden’s plan would be a game changer. Mischka would have her debt at least cut in half.

“The ability to have a manageable number [of debt] … would be much more doable mentally,” Mischka says. “It would certainly not feel like such a burden.”

Under Biden’s plan, Boettcher would be debt-free. But if the plan gets axed, she says she would have to “rethink teaching entirely” — and if she could afford to do what she loves.

Despite benefiting from the forgiveness, Boettcher recognizes the long-term solution is not so simple. All she has to do is think about her students to realize that.

“I see all those problems that I was also going through,” she says. “I look at my students now as they are prepping for college, and while I have this really amazing blessing, it’s like kids are still getting themselves into debt that they don’t know how to pay off.”

“When’s the next solution? Is the next solution just another big forgiveness?” Boettcher says. “When are we going to really get to the economic part of what’s causing this trouble in our system?”

What’s next?

The answer to Boettcher’s question is — unsurprisingly — complicated.


Faith admits it is not a perfect analogy, but she asks people to think about the student debt crisis as a health care situation. 


“We can stop the bleeding, but if we still have this wound, we need to figure out better ways to address emergency care and preventative care,” she says. “If we can do more on the front end to be more preventative, then we can reduce the need for emergency care.”


For Faith, this means making student aid more straightforward and reducing the amount that people borrow. Medicine number one, Faith says: increasing the value of the Pell Grant to help students better cover college costs.


Robb says making community college free would pave the way for people to start at cheaper two-year schools and transition into higher-cost institutions later – decreasing students’ overall debt.


Additional means-based grant programs could also help minimize debt. For example, under the recently implemented Bucky’s Tuition Promise at UW–Madison, both Boettcher and Mischka would have graduated debt-free. 


As the nation wrestles with the best ways to address student debt, borrowers like Boettcher and Mischka hold their breath, waiting for Biden’s promise of relief.


But until her balance is down to zero, debt will remain on Boettcher’s mind and in her actions — like picking out a birthday gift for her 2-year-old nephew. 


“I’m setting up a college investment fund for him,” Bottecher says with a chuckle. “I’m not giving him toys.”


Featured graphic by Zoe Bendoff.