Eliminate interest to ease student debt crisis
President Joe Biden has canceled more than $15 billion in student loans for 675,000 borrowers, more than any other U.S. president. Still, this amounts to only about 1% of the $1.75 trillion of currently outstanding student debt.
The coronavirus pandemic has put this debt crisis on hold; the suspension of federal loan payments and interest charges in March 2020 has been extended until May 1.
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As we approach the return of student loan payments, dozens of American Muslim groups have come forward with a solution that stems from the values of their faith: canceling interest. (Riba, the exploitative extending of loans with interest, is a major sin forbidden in the Quran.)
Some student loan borrowers have made payments for years and still owe as much as they originally borrowed. Judaism, Christianity and Islam have traditionally discouraged lending at interest. Scholars of these traditions have differed on how these prohibitions are best observed in the context of the contemporary financial system, but this prohibition poses a special problem for Muslim students today because many cannot pay for higher education to better their lives without taking out loans that charge interest.
As a Muslim chaplain at a private university in Chicago, I often counsel students who say they feel deeply conflicted about taking interest-based loans. So they search for alternatives.
Private organizations, including religious groups, annually provide more than $3 billion to help students obtain higher education. The International Association of Jewish Free Loans and other American Jewish groups offer interest-free loans to students as well as others in need of funds. So does A Continuous Charity, an organization run by American Muslims with chapters in nine states.
Many of these resources are available to people regardless of religious background.
President Joe Biden has said he supports legislation to cancel some amount of student debt but also that he is unlikely to do so by executive order. Many Democratic congressional leaders including Sen. Charles Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., have been vocal in asserting Biden’s legal authority to do so on his own.
Some economists also question whether universal debt forgiveness, which would disproportionately benefit Americans who attended college, should be the priority in addressing poverty and financial need. Those debates will continue, but this particular proposal may be able to find unexpectedly wide appeal.
One legislative proposal for eliminating interest payments on federal student loans has come from Sen. Marco Rubio, R-Fla., who proposes the Leveraging Opportunities for Americans Now, or LOAN, act. This bill has been formally introduced but has not advanced in the committee process.
Rubio’s bill would replace interest on federal student loans with a one-time, non-compounding origination fee, and also provide for borrowers to be automatically placed into an income-based repayment plan.
While the details of Rubio’s plan may or may not satisfy the call of the Muslim groups, or the needs of student borrowers more widely, it is a bipartisan initiative that envisions student loans in a new way.
Higher education in the United States remains one of our great strengths, one which draws immigrants from all over the world seeking to improve their lives. Financing a fully accessible system that prioritizes students, and maintains the confidence of society across polarized divides, is something worth fighting for.
Abdul-Malik Ryan is Muslim chaplain and assistant director of the Office of Religious Diversity and Pastoral Care at DePaul University and a Public Voices Fellow with The OpEd Project. This column was produced for Progressive Perspectives, which is run by The Progressive magazine, and distributed by Tribune News Service.
