The President Doesn’t Need Congress to Cancel Student Loan Debt. Democrats Will Push For Action in 2021
By Senate Democratic Leader Chuck Schumer and Senator Elizabeth Warren
America is facing historic and overlapping crises during the coronavirus pandemic. Small businesses are closing left and right. Parents are struggling to make sure their kids keep up with school over a computer. And nearly 200,000 Americans have lost their lives. The consequences of the coronavirus and a Trump administration that has simply given up on fighting the spread of this virus threaten the well-being of every American family.
But some crises existed long before this pandemic, and have been deepened by it. Prior to 2020, the United States faced a historic student debt crisis, which looks like a self-inflicted wound on our now struggling economy. Over 40 million Americans are being crushed by over $1.5 trillion in federal student loan debt. That’s generally hundreds of dollars each month that borrowers spend paying down loans in addition to rent or mortgage payments and other costs of living.
With over 9 million borrowers in default, student loans have much higher rates of delinquency than any other type of household debt. This massive student debt burden is preventing people from being able to start a small business or buy a home, and forcing students to drop out of school before completing their degree.
In the middle of an economy that’s been badly hit by the pandemic, the student debt crisis acts like an anchor, preventing a swift recovery and restricting opportunity and prosperity for millions of American families. Even worse, students with large debt burdens are often at the beginning of their careers and can be the most susceptible to layoffs or difficulty entering the workforce during a period of high unemployment.
That’s why we have been fighting for a coronavirus relief package that includes some student debt cancellation. But Donald Trump and Congressional Republicans have blocked debt cancellation at every turn, and Mitch McConnell has made it clear that he has no intention of helping struggling students. That’s why today, we’re introducing a Senate resolution outlining a bold plan for how the next President of the United States can use his executive authority to deliver meaningful relief to struggling Americans and broadly cancel up to $50,000 in student loan debt. Democrats will push for this action in 2021.
Canceling student loan debt as soon as possible would mean substantial and immediate relief for tens of millions of Americans, many of whom have suddenly been laid off or are worried that their jobs are next.
Our country’s growing student debt burden has Americans less prepared to weather this coronavirus recession, which has compounded decades of stagnant wages, labor market discrimination, and rising costs of living, making it nearly impossible for many to ever fully repay their student loans.
And communities of color, which have been hit hardest by the health and economic consequences of the coronavirus pandemic, disproportionately bear the burden of student debt.
Black students are on average nearly 20 percentage points more likely to take out federal student loans. Half of Black borrowers and a third of Latinx borrowers default on their loans within 20 years. Canceling student loan debt would increase wealth for Black and Latinx families, help them avoid default, and start to close the racial wealth gap.
Economists agree that canceling student loan debt would also help boost our struggling economy through a consumer-driven economic stimulus, greater home-buying rates and housing stability, expanded access to more affordable financial products including car loans and mortgages, higher college completion rates, and greater small business formation. This is a no brainer for our economy.
Congress, through the Higher Education Act, has already given the President and his Secretary of Education the ability to modify, compromise, waive, or release student loans. This authority provides a safety valve for federal student loan programs, letting the Secretary use her discretion to wipe away loans even when they do not meet the eligibility criteria for more specific cancellation programs like disability discharge.
America needs that safety valve now more than ever. With this action, we could immediately put hundreds and thousands of dollars back in the pockets of millions of Americans during the coronavirus recession.
In fact, Donald Trump and Betsy DeVos reportedly used this tool to implement some modest student loan relief. But Trump’s relief memo didn’t go nearly far enough and won’t make balances go down at all. The President has existing authority to cancel student loan debt on his own and make sure the loan cancellation doesn’t result in any additional tax liability for borrowers. He just chose not to use it.
We both saw what happened in 2008. After the financial crisis, young people were shoved into a weak job market and plunged even deeper into student debt. And today, as workers face layoffs and frozen wages in the wake of the coronavirus pandemic, student loan borrowers who were barely staying afloat are now drowning. When Americans can’t fully participate in our economy, we see a ripple effect across our entire economy and a slowdown in economic growth. This affects all of us, including those of us who don’t have student loans or have already paid off their student debt.
We can do better than this. And Democrats will.
New polling from Data for Progress also finds that forgiving student debt is extraordinarily popular with voters and that it enjoys broad, bipartisan support.
Chuck Schumer (@SenSchumer) is a Senator from New York and is the Senate Democratic Leader.
Elizabeth Warren (@SenWarren) is a Senator from Massachusetts.
From September 11 through September 14, 2020 Data for Progress conducted a survey of 1,221 likely voters nationally using web-panel respondents. The sample was weighted to be representative of likely voters by age, gender, education, race, and voting history. The survey was conducted in English. The margin of error is +/- 2.8 percentage.