Democrats in the House and the Senate have introduced bills calling upon President Joe Biden to forgive student loan debt, which they argue is widening the racial and gender wage gaps and exacerbating the economic problems already worsened by the pandemic.
Student loan debt forgiveness could have a strong positive effect on the American economy, according to the bills’ sponsors, Senate Majority Leader Chuck Schumer, D-New York, and Rep. Ayanna Pressley, D-Massachusetts.
“The student debt crisis is a racial and economic justice issue and we must finally begin to address it as such,” Pressley said in a statement. “Canceling student debt is one of the most effective ways to provide direct relief to millions, help reduce the racial wealth gap, stimulate our economy, and begin to deliver an equitable and just recovery. ”
The bills are supported by 58 cosponsors in the House and 16 cosponsors in the Senate, and reinforced by the protections against taxing student loan forgiveness that Sens. Elizabeth Warren, D-Massachusetts, and Bob Menendez, D-New Jersey, built into the COVID relief bill passed in early March.
Some people argue that people with student loan debt are just lawyers and doctors with fancy degrees. Today expert witnesses set the record straight in the @SenateBanking Committee about why we need to #CancelStudentDebt to help working families and narrow the racial wealth gap. pic.twitter.com/ibYPmRQJci
— Elizabeth Warren (@SenWarren) March 5, 2021
But Biden has already said publicly that he will not support the passage of these bills. While he does believe that he can forgive some student debt, he does not agree with the quantity that Schumer and Pressley are proposing.
White House Chief of Staff Ron Klain told Politico Thursday that Biden has asked Education Secretary Miguel Cardona to examine the president’s legal powers to cancel student debt.
“And hopefully we’ll see that in the next few weeks,” Klain said. “And then he’ll look at that legal authority, he’ll look at the policy issues around that, and he’ll make a decision.”
Approximately $1.7 trillion is currently owed to the government in federal student loans, according to the Federal Reserve. One decade ago, federal student loan debt was approximately $845 billion, which makes the current debt amount an increase of about 102% since 2010.
By removing the weight of student loans from borrowers’ wallets, debt cancellation could increase consumer spending and boost America’s economy, according to a 2018 study published by the Levy Economics Institute of Bard College, a nonpartisan public policy think tank.
Student loan debt has lurked in the background of American politics for several years.
Eighteen bills addressing student loan debt have been introduced since the 117th Congress convened on Jan. 3.
Multiple past presidential candidates, including Biden, have included student loan forgiveness as an issue in their campaigns.
In a Medium post written during his 2020 campaign, Biden suggested that as president, he could “forgive all undergraduate tuition-related federal student debt from two- and four-year public colleges and universities for debt-holders earning up to $125,000,” as well as cancel a significant amount of student debt and expand federal student loan forgiveness plans.
These suggestions made it appear that Biden would support a student loan debt forgiveness plan similar to those suggested by Pressley and Schumer’s student loan forgiveness bills.
But Biden’s promises as president have been scaled down.
At a Feb. 16 CNN town hall, Biden was confronted with the student loan debt issue by an audience member, Joycelyn Fish from Racine, Wisconsin.
“The American Dream is to succeed,” Fish said. “But how can we fulfill that dream when debt is many people’s only option for a degree? We need student loan forgiveness beyond the potential $10,000 your administration has proposed. We need at least a $50,000 minimum. What will you do to make that happen?”
“I will not make that happen,” Biden said. He cited the theoretical graduates of schools like “Harvard and Yale and Penn,” claiming that forgiving their student loans would divert “billions of dollars” that could be spent on early education.
But universities like the Ivy League colleges are not the main sources of student loan debt, according to the Department of Education.
Very few people leave universities like Harvard and Yale with student loan debt, and even fewer continue to be in debt several years later, according to the Education Department. The majority of student loans are taken out by students attending less expensive two- and four-year schools.
Most students who borrow money for college are low- or middle-class students “who had to go into debt to access postsecondary education, and who are paying dearly for it,” Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, wrote in a Feb. 16 article responding to Biden.
But Sen. John Thune, R-South Dakota, disagreed that student loan forgiveness could support “low-income or disadvantaged individuals,” saying that “higher income Americans could end up benefiting the most,” and calling the Democrats’ proposals “unfair.”
“Yes, a number of Americans carry a significant amount of student loan debt,” Thune said. “But some of those Americans have incurred that debt for a career that will bring significant financial rewards.”
A university degree, after all, has been shown by the Education Department to positively affect a graduate’s annual wage.
But the presumption that a post-degree job will be enough to pay off student loan debt may be inaccurate, according to a recent study published by the Roosevelt Institute, a liberal think tank associated with the Franklin D. Roosevelt Presidential Library and Museum. Black students are more likely to take on debt to finance their education, but are less likely to graduate or see the benefits of a degree on their post-college wages, the study argues.
Pressley was one of the thousands of college students who defaulted on their student loans.
The student debt crisis is a racial and economic justice issue—and one that is deeply personal to me.
We must #CancelStudentDebt.https://t.co/Mt23hDOkj0
— Congresswoman Ayanna Pressley (@RepPressley) February 21, 2021
“Like 85% of Black students, I had to borrow; and like so many of those students, I also defaulted on those loans,” Pressley said. “Decades of systemic racism and discriminatory policies like redlining and predatory lending… systematically denied Black and Latinx families the opportunity to build wealth, forcing our families to take on greater rates of student debt, just for the chance at the same degree as our white counterparts.”
Hilary Shelton, director of the NAACP Washington Bureau, said in a statement that “at too many junctures in our country, the African American community and other communities of color have been shut out from real economic opportunity, relief and support.”
“Now, the student debt crisis is worsening existing economic disparities,” he said.
Over 25% of Black Americans with student loan debt are behind on their payments, and nearly 20% of Hispanic Americans are in a similar situation, according to the Fed. In Maryland and the District of Columbia, nearly a quarter of all student loan borrowers are making no progress toward their student loan payments, according to the Education Department.
“Student loans are disproportionately held by women, Black and Latinx student loan borrowers — delivering relief to these borrowers would further the interests of racial and gender equity,” Yu said. “Drawing lines to distinguish who deserves relief will inevitably leave out deserving borrowers.”
The Senate bill calling for student loan debt forgiveness has been referred to the Committee on Health, Education, Labor, and Pensions. The House bill has been referred to the Committee on Education and Labor and the Committee on Ways and Means.