Public Citizen News / November-December 2021
By Noah Henriksen
This article appeared in the November/December 2021 edition of Public Citizen News. Download the full edition here.
Public Citizen organized a coalition of 105 organizations in October that sent a letter to President Joe Biden urging him to cancel student debt under authority granted by the Higher Education Act of 1965. Almost 45 million people hold more than $1.8 trillion of student debt, which is expected to reach $2 trillion by 2022. The letter argued that canceling student debt would grow the economy and begin closing the racial wealth gap that continues to keep many Black and Brown borrowers from entering the middle class.
“There is no single action that this president can take that would have more transformational implications for millions of people in this country,” said Remington A. Gregg, counsel for civil justice and consumer rights at Public Citizen.
The letter writes note that “Canceling student debt isn’t just an opportunity to realize the full promise that higher education can provide by allowing each person to build wealth for themselves and their families but will also be a down payment towards fixing the broken higher education system.”
Borrowers are saving $5 billion per month during the student loan payment pause started by former President Donald Trump and continued by President Biden. The letter argues that canceling student debt will allow an entire generation to begin generating wealth, saving for retirement, and starting a family. Experts believe that canceling student debt would create up to 1.5 million jobs per year. Canceling student debt also would begin the hard work of closing the racial wealth gap. The Biden administration has said that “equity” would be a centerpiece of its administration.
As a result of historic and ongoing systemic racism, discrimination in the job market, lower wages, and other factors, Black borrowers experience more negative financial events, including loan default, higher interest payments, and higher graduate school debt. The letter states a shocking statistic: that “twenty years after starting college, the median white borrower has paid off 94% of their debt while the median Black borrower still owes 95% of their debt.” A majority of voters, including 80% of Black borrowers, support student debt cancellation.
The letter also notes that continuing operational challenges that have plagued the U.S. Department of Education’s implementation of the student debt program will continue to hinder the Department from ensuring a smooth transition for borrowers if the Department resumes collection of payments on Feb. 1, 2022. Broad debt cancellation will ease many of those operational challenges for those who would still hold student debt.
Canceling student debt would benefit those in the most need because families on the higher end of the wealth scale often do not take out student loans to pay for college and when they do, they are often private loans, which the President does not have the legal authority to cancel. Additionally, as the White House indicates, only three out of five students complete their degree in six years. Canceling student debt would mean that 40% of the people who don’t graduate on time or don’t graduate at all aren’t burdened with years of financial burden and personal shame.
Public Citizen maintains that Biden’s Build Back Better (BBB) agenda, which congressional Democrats are currently debating, would be enhanced by student debt cancellation because cancellation would not only allow everyday people who have been crushed under the weight of student debt to begin moving into the middle class, but also ensure relief funds are not seized from these same borrowers.
“Families across America have (or will) receive thousands of dollars in cash relief, paid out through their tax refunds, that will lift millions of children out of poverty due to the groundbreaking expansion of the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) in the American Rescue Plan,” the letter reads. “However, unless the administration takes swift and decisive action, these cash payments will be denied to struggling student loan borrowers and instead intercepted by ED.”
More than 415 organizations and over 300 faith leaders have already urged Biden to use his executive authority to cancel student debt. The student debt crisis is only getting worse and will continue to burden generations to come. According to the AARP, student loan debt has become a “threat to retirement security” and the percentage of people who are 50 or older and have student loan debt has tripled over the past thirty years. This trend will continue unless the president acts now. Public Citizen will continue to urge President Biden to take bold action that will transform the lives of millions of borrowers.