As rising college tuition rates increase student loan borrowing across the country, the government is scrambling to ease the economic burden placed on millions of Americans pursuing higher education. Students from lower-income families, students of color, and first-generation students are disproportionately impacted by student debt and make up a large portion of those struggling to repay their loans. Adam Looney, a nonresident senior fellow at the Brookings Institution, presented a spirited testimony about sustainable solutions to the student loan crisis to the U.S. Senate Committee on Banking, Housing, and Urban Affairs’ Subcommittee on Economic Policy in April.

He argued that programs intended to mitigate student loan debt, such as forgiveness programs, need to target their relief on the basis of income, race, or degree level. Otherwise, he said, these programs may end up exacerbating existing inequalities even further. Blanket student loan forgiveness programs end up intensifying disparities between more- and less-educated Americans by significantly easing the economic burden on high-income borrowers. Looney contended that programs must instead help past borrowers while also providing for future students.

‍

The problem? A lack of targeted relief for those who need it.

Looney demonstrated the difference between students with high amounts of debt and students struggling to pay their debt, quashing the misconception that these groups are one and the same. The people with high amounts of student loan debt ($100,000+) are usually white-collar professionals—from higher-income families and elite colleges—who can afford to repay their loans. In fact, approximately 36% of all student debt is incurred by people in the top 20% of the income distribution. Blanket loan forgiveness programs inadvertently focus their efforts on these individuals even though they already have the means to pay.

Meanwhile, Looney said, students who struggle with or default on their loans typically come from lower-income families or never even completed their first degree. It’s not that they have a crushing amount of debt—it’s that they face adversity in repaying any of it. In fact, the typical student from a high-income family actually “incurs about 27% more debt than the typical student from a low-income family,” according to Looney.

He stressed that “the economic circumstances of struggling borrowers has almost nothing in common with borrowers from higher-income backgrounds and successful careers.”

‍

His solution? Improve our income-based repayment system.

The most commonly-discussed policy solution for rising student debt is widespread loan forgiveness, which Looney claimed would “rank among the largest transfer programs in American history.” However, unlike many programs of comparable size such as unemployment insurance or food stamps, most beneficiaries of blanket student loan forgiveness would actually be high-income, white students. As an alternative, Looney suggested that we must target relief through income-based repayment plans.

An income-based system determines a student’s repayment amount based on their discretionary income and then forgives any remaining undergraduate debt after 20 years. According to Looney, however, our existing program is riddled with flaws, including repayment complexity, administrative barriers, and a preference for high-income graduate degree earners rather than lower-income borrowers. To improve this system, Looney advocated for “making enrollment and re-enrollment automatic, reducing paperwork burdens, and accelerating forgiveness for borrowers with smaller balances.”

‍

What else can be done to mitigate the student loan crisis?

In addition to considering a student’s economic status at enrollment, Looney proposed that federal loan policies should consider the cost and quality of the programs they attend. The government currently provides hefty loans to borrowers attending “low-quality institutions,” even when they are aware that those schools will not improve the borrower’s ability to repay their loans.

On the other side, Looney said, federal lending programs should pressure colleges to match the quality of their education to the price they charge for it. A blanket forgiveness system could incentivize schools to continue providing an average or low-quality education while hiking up tuition rates because they know students will just take out loans to pay them. Looney asserted that better financial incentives for schools to improve curriculum standards would increase access to high-quality education, so that even if students take on high debt, they will eventually obtain jobs that allow them to repay their loans.

‍

Ultimately, Looney made the point that “not all borrowers need help.” Federal programs are designed to support those in need, so a sustainable student loan program must pay heed to who is struggling rather than who holds the most debt on paper.