Personal Finance

Pressure mounts for Biden to forgive student debt

Key Points
  • Sen. Elizabeth Warren, D-Mass., held a hearing on Tuesday urging President Joe Biden to cancel student debt.
  • More than 415 organizations sent a letter to the president pressuring him to do the same.
Alex Wong | Getty Images News | Getty Images

While the latest Covid stimulus package and a new massive infrastructure bill are the main topics of conversation in Washington of late, President Joe Biden continues to be under mounting pressure to take action on student loan forgiveness, too.

Sen. Elizabeth Warren, D-Mass., held a hearing Tuesday afternoon on the burden of student loan debt and urged Biden to cancel the loans as soon as possible.

"America is facing a student loan time bomb that, when it explodes, could throw millions of families over a financial cliff," Warren said. "The average borrower will have to start paying nearly $400 a month to the government instead of spending that money out in the economy."

Warren also discussed the racial inequities of student debt, pointing out that the median Black borrower still owes 95% of the original amount they borrowed 20 years after taking out the loans. The median White borrower, meanwhile, owes just 6% of the original amount they borrowed two decades later.

"This is the single most powerful executive action President Biden could take to advance racial equity and give everyone in America a chance to build a future," Warren said.

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Also on Tuesday, more than 415 organizations, including the American Civil Liberties Union, the American Psychological Association and the Consumer Federation of America, wrote a letter to Biden and Vice President Kamala Harris calling on the White House to use executive authority "to cancel federal student debt immediately."

"Before the Covid-19 public health crisis began, student debt was already a drag on the national economy, weighing heaviest on Black and Latinx communities, as well as women," the organizations wrote.

"Administrative debt cancellation will deliver real progress on your racial equity, economic recovery, and Covid-19 relief campaign priorities."

Former Trump official who called student loan system broken proposes forgiveness program
Former Trump official who called student loan system broken proposes forgiveness program

The Senate's top Democrat, Chuck Schumer of New York, and other Democratic legislators have also called on the White House to forgive $50,000 in student debt for all borrowers by executive action.

"You don't need Congress," Schumer has said. "All you need is the flick of a pen."

On the campaign trail, Biden said he supported $10,000 in student loan forgiveness, but he is under mounting pressure from members of his own party, advocates and borrowers to go further by canceling $50,000 per person and to do so through executive action.

White House press secretary Jen Psaki suggested recently that the administration hadn't ruled out the possibility of forgiving the debt without Congress. On his first day in office, Biden extended a pause on payments for federal student loan borrowers that has been in effect since March until this coming September.

And Biden has asked Education Secretary Miguel Cardona to prepare a report on the president's legal authority to cancel up to $50,000 in student debt per borrower. The findings of that memo are yet to be released publicly.

Critics of student loan forgiveness argue that it wouldn't significantly stimulate the economy since college graduates tend to be higher earners who would likely redirect their monthly payments to savings rather than additional spending. Others say it would be unfair to those who've already paid off their student debt or never took out loans, and would send the message that it's OK for people to ditch their debts.

Advocates say that borrowers were already struggling before the public health crisis — with more than 1 in 4 borrowers in delinquency or default — and that after a year of record-high unemployment levels, that pain has only worsened.  

The vast majority — or around 90% — of federal student loan borrowers have taken advantage of the government's option to pause their monthly payments during the coronavirus pandemicdata shows. And in a recent Pew survey, 6 in 10 borrowers said it would be difficult for them to start repaying their student loans again in the coming month. 

Proponents also point out that it's people of color bearing the brunt of the student loan crisis, and it's also Black and Latino Americans who've suffered most from the coronavirus pandemic. An aide to Sen. Warren said canceling student debt would make the biggest strides toward narrowing the racial wealth gap since the civil rights movement.

One survey found that 58% of registered voters are in support of student loan forgiveness, and a petition calling on the president to cancel student debt has now garnered close to 1 million signatures.

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