Brooklyn, N.Y. — In a new Blavity op-ed, Senate Democratic Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) call for the use of executive branch authority to cancel up to $50,000 in student loan debt on day one of the new administration to help begin to close the racial wealth gap in America.
By: Senate Democratic Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA)
For the first time in history, the American people have elected a President and Vice President States who committed to cancelling billions in student loan debt.
Americans outside of Washington get it.
They see their friends, family, and neighbors crushed by growing debt burdens, unable to afford their first home or start a small business. They know a senior whose Social Security check has been garnished by the federal government just to pay student loan interest. They know a mother struggling to make ends meet who never got a degree and now watches her debt load grow faster than she can keep up with.
And even if they don’t know one of our 43 million friends and neighbors buried under 1.5 trillion dollars in federal student loan debt, they understand the need to boost to our struggling economy. This is Econ 101: the best way to jumpstart our economy is to put more money in working families’ pockets — money they can spend in their communities.
Broad cancellation of student debt would give tens of millions of Americans $200 to $300 more to spend and save each month. Cancellation also means they won’t have to worry about a student debt time bomb exploding when the payments suspension ends. With more money in their pockets and a smaller debt load, they can consider bigger purchases like cars and homes and, for some, start their own businesses. That’s good for the borrower and good for our economy.
On day one, Joe Biden and Kamala Harris can use existing authority under the law to cancel up to $50,000 in federal student loan debt for all borrowers with federal loans and make sure it doesn’t result in any tax bill for borrowers.
This is the single most effective executive action available to provide massive stimulus to our economy.
Some Americans still have real questions about student debt cancellation, like: Who benefits most? Wealthy Americans with expensive degrees? People who took out loans irresponsibly? People who haven’t worked hard enough to pay back their loans? Will student debt begin to grow again after debt cancellation?
It’s easy to get so wrapped up in these questions that we forget who struggles with student debt. It’s the person whose family couldn’t afford to write a check for college but who tried to get an education anyway. Millionaires and billionaires won’t benefit because they never needed to take out student loans, nor do their kids. And just because someone can shake out the couch cushions to make their monthly payments doesn’t mean their debt load isn’t keeping them on the edge of an economic cliff or holding them back from building family wealth through things like homeownership.
We have supported limiting debt cancellation for those whose education is paying off big-time — for example, those with big six-figure incomes. But for tens of millions more, student loan debt has become an impossible burden, and we must act.
Among those struggling the hardest are people who tried college, but who never made it to a diploma whether because they didn't have the support, the childcare, the time, life intervened, whatever. Up to 40% of student loan borrowers are in a nearly-impossible situation — no diploma to boost their earnings and a debt load they simply cannot manage.
Student loan debt falls particularly hard on Black and Latinx students. These students are more likely to borrow money to go to college, borrow more money while they are in college and have a harder time paying when they leave college. The results are devastating. A third of Latinx borrowers default on their loans, and Black borrowers have about a 50-50 chance of defaulting on their loans. In fact, a decade after they start school, the typical Black borrower owes more on their loan than they originally borrowed.
Millions of these students were cheated into debt by sham for-profit colleges. And even after cancelling up to $50,000 of student debt, the price of college is still astronomical. That’s why the incoming administration should also work with Congress and higher education institutions to reign in the out-of-control college costs and crack down on predatory practices. That will help reduce the student debt crisis moving forward.
Black and brown students across the country go to college because they believe it is the surest path to build a future for themselves and their families. They did everything right. But for millions of Black and brown communities, student debt is now just another gigantic roadblock between them building real wealth.
With the stroke of a pen on day one, the Biden-Harris administration can right this wrong. They can close the Black-white wealth gap by 25 percentage points, and close the Latinx-white wealth gap by 27 percentage points, giving Black and brown families across the country a far better shot at building financial security. They can send those monthly payments back into our local communities and our economy, increasing GDP by tens of billions of dollars. They can free up cash and credit to buy homes or start new businesses and create more jobs. They can bring us a step closer to fixing a deeply broken higher education system.
After the 2008 financial crisis, young people were shoved into a weak job market and plunged even deeper into student debt. They have never recovered financially. They now face the second major economic crisis of their young lives. And many of those borrowers, especially Black and brown borrowers, are still drowning.
We can do better this time — we must do better.