The student debt crisis in the U.S. is out of hand and only getting worse. We are rapidly approaching $2 trillion of student debt held by over 45 million Americans. Fifty five percent of people under 30 who went to college took on debt. This is a crisis. It is not isolated and it is not regional, it is widespread and current affecting nearly one in every five adults. Even students at public universities borrow an average of $30,030 to attain a bachelor’s degree. The U.S. must act on this now to alleviate this burden as a direct form of stimulus to millions of American.
The most recent major change to student debt policy is the extended deferment period enacted during the COVID-19 pandemic, allowing for 0% interest accumulation and stopping collections on any defaulted student loans until September 30, 2021. While this is an essential first step to relieving the financial burden of Americans during the pandemic, it is much like putting a cork on a pressurized container – it may hold for now, but it will inevitably explode, hurting millions of Americans struggling to make payments. The case for cancelling student debt and reforming the system that allowed young students, some not even 18, to take out tens of thousands of dollars of debt with a click of the button must happen and it must happen immediately.
The idea for cancelling student debt is not new, but there have been increasingly widespread calls from Democratic party leadership to add cancelling student debt as part of a COVID-19 recovery strategy. Senate Majority leader Chuck Schumer, alongside Sen. Elizabeth Warren, Rep. Ilhan Omar and Rep. Ayanna Pressley called on President Biden to cancel $50,000 worth of student debt per borrower. Introduced in the Senate, this proposal could impact up to 80% of the student loan debt from 36 million borrowers, a clear sign of much needed help. Previously President Biden has made strong statements in the past supporting the cancellation of $10,000 of debt per borrower through Congressional action, but he has been quiet on the Senate resolution. However, neither of these proposals are likely to be incorporated in the next COVID-19 relief package, nor do they entirely address the problem at hand.
The student borrowing process has failed and is flawed right to its core, argues the Roosevelt Institute. Originally intended to be paid back with summer jobs, borrowers now hold debt for ten years or more before full repayment. Additionally, the student loan system may be driving up higher education tuition prices due to the greater availability of large sums of borrowing power for students. The student loan system has disproportionately hurt Black students the most, in part contributing to the racial wealth gap. Failure for repayment on debt can hurt borrower’s ability to purchase a home, get a loan, get credit cards – it can essentially financially cripple an individual, particularly those out of college who rarely have established credit. This is why major change is needed – student loan debt is more than monthly payments; it can determine credit for years and become a barrier to pursuing further education.
Even if debt is cancelled only partially, the student debt crisis will ease dramatically, freeing millions from debt and shortening the repayment period for millions more. But this approach is not comprehensive enough on its own. Cancelling student debt should indiscriminately cancel all of the current held debt – a first step in many to solve the multitude of problems stemming from this financial burden. Cancelling all debt, would ensure equal relief for those who had to borrow much larger loans for perhaps the same educational attainment as someone who may have borrowed less than $50,000. President Biden could cancel all student debt with a simple signature. Under the jurisdiction of the Higher Education Act of 1965, the President has full authority over federal loans. Cancelling all student debt, rather than a partial approach, also makes it easier to transition to a better system. This approach would symbolically and affirmatively underscore that the previous system was failed, letting us start over by rebuilding a new one.
Opposing arguments state that cancelling student debt would disproportionately benefit the rich and privileged. While it is true wealthier borrowers would tend to benefit in higher dollar amounts due to a higher frequency of expensive graduate degrees among that demographic, this is not the entire picture. Debt relief would help Black borrowers to a greater proportion in terms of repayment success and average net worth increase, as well as contributing to a larger structural relief of the racial wealth gap. Additionally, the prospect that lower income and disadvantaged communities may be able to attend college without fear of accumulating debt would be an immediate equity boost and could incentivize education. This is an equity issue.
Currently, the average student borrower pays between $200 to $300 per month to the government for their loans. Debt payments do not generate economic activity but are instead a form of debt entrapment by the same government that collects taxes. Eliminating this burden would provide a huge, long-term stimulus, to millions of Americans. This is not only good for the economy in the immediate recovery but can help economic growth for the decades to come, generating an average of $86 to $108 billion per year to the GDP.
A permanent fix is needed so that all student debt will not accumulate into the trillions and hurt the millions of borrowers. Senator Warren has devised a policy plan that seeks to pay for the student debt crisis as well as create tuition free public universities. With a 2% wealth tax on income over $50 million and an additional 1% tax on wealth earned over $1 billion – the very richest Americans – it’s hardly a radical proposal, but it would generate substantial revenue to fund these education policies. A slight tax increase on the ultra-wealthy should generate minimal opposition, while the net benefits to the average Americans would be immense. These small taxes could generate up to $2.7 trillion over 10 years, in which excess funds could fully fund historically black colleges, early childhood education, free childcare, and more.
College should be accessible to all, not burdened by the consequence of graduating with a diploma and a mountain of debt. Without prospects of taking on debt, students can focus more on genuine enjoyment studies, and come out of their studies a more educated citizen. Educating our population should be a goal, whether it be through free public education, free trade and technical schooling, apprenticeships, and more. Every American deserves the right to free education, and we should press lawmakers and the president to do what they can to make higher education more accessible. It’s the right thing to do.