With a suspension of student loan payments scheduled to end early next year, three congressional Democrats on Wednesday cited a new economic analysis as they urged President Joe Biden to immediately cancel $50,000 in student loan debt per borrower.
"The cancellation of up to $50,000 of student debt would relieve an enormous burden from borrowers while pumping billions of dollars per year back into our national economy."
The new analysis by the Roosevelt Institutereferenced in a letterthat Senate Majority Leader Chuck Schumer (D-N.Y.), Sen. Elizabeth Warren (D-Mass.), and Rep. Ayanna Pressley (D-Mass.) sent to the White Housedetails the positive effects of canceling student loan debt, as well as the negative consequences that can be expected if Biden chooses not to do so.
According to the report, if Biden sticks to his plan to restart student loan payments on February 1, 2022, the budgets of more than 18 million borrowers will take a collective hit of roughly $7 billion per month, draining $85 billion from the U.S. economy next year.
By contrast, if the president cancels $50,000 in student loan debt per person, which he has the legal authority to do, it could add more than $173 billion to the nation's GDP in the first year alone.
"The pause on federal student loan payments, interest, and collections hasimprovedborrowers' economic security, allowing them to invest in their families, save for emergencies, and pay down other debt," the lawmakers wrote. "Restarting payments without canceling student debt will undermine these families' economic progress."
The Roosevelt Institute analysis shows that a failure by Biden to cancel student loan debt would exacerbate racial inequality. Resuming student loan payments would hurt Black and Hispanic households disproportionately, the report says, because "borrowers of color typically borrow more for college expenses than their white counterparts while also holding significantly less wealth."
According to another study published in September 2019, prior to the coronavirus pandemic, the median Black borrowerstill owes95% of their loans 20 years after starting college, compared with 6% for the median white borrower.
In August, the Biden administration announced its "final extension"of the student loan moratorium through January 31, 2022implying that the recovery from the pandemic-induced economic crisis would be strong enough by then to justify the move. Covid-19 and financial insecurity, however, both remain widespread, as the recent emergence of the Omicron variant and reports of declining savings make clear.
According to recent survey data compiled by the Student Debt Crisis Center, nearly 90% of borrowers said that the pause on student loan payments, first enacted in March 2020, has been "critical" to their economic well-being during the pandemic. Even among those who are fully employed, 89% said they are not financially secure enough to resume payments on February 1.
If Biden refuses to use his administration's authority to cancel student loan debt, more than a quarter of borrowers will be forced to hand over at least one-third of their income to loan servicers each month. Roughly 10% will be billed for over half of their income, making it exceedingly difficult to afford basic necessities such as rent, food, and medicine, especially as corporations hike prices.
"The cancellation of up to $50,000 of student debt would relieve an enormous burden from borrowers while pumping billions of dollars per year back into our national economy," wrote the three lawmakers, who have been leading thepush for cancellation since last year.
Their letter comes less than a week after several progressives, including Pressley, took to the House floor to demand that Biden cancel student debt before payments resume.
"We strongly urge you to act without delay,"Schumer, Warren, and Pressley said Wednesday.