Student loans: Democrats urge Biden to extend payment pause and cancel debt in new letter
Prominent Democrats are again urging the Biden administration to extend the pandemic-era student loan payment pause beyond May 1 and cancel debt for millions of borrowers, according to a letter sent on Thursday morning.
"We are writing to urge you to act now to extend the pause on federally-held student loan payments until at least the end of the year and to provide meaningful student debt cancellation," the letter signed by Sens. Chuck Schumer (D-NY), Elizabeth Warren (D-MA), and Raphael Warnock (D-GA) and Reps. Ayanna Pressley (D-MA), Ilhan Omar (D-MN), Pramila Jayapal (D-WA) and Jim Clyburn (D-SC) stated. Another 87 lawmakers added their names to the letter.
Student loan payments and interest on federally-held debt have been suspended since March 2020, meaning that an estimated 37 million borrowers did not have to pay on their loans. The New York Fed recently found that the payment pause has led to "an estimated $195 billion worth of waived payments through April 2022." Another roughly 10 million borrowers who hold private or Family Federal Education Loan (FFEL) loans owned by commercial banks did not benefit from the payment pause.
"The payment pause has been a significant federal investment throughout the pandemic, providing essential relief to millions of families during the economic and public health crisis and saving them an average of $393 per month," the letter asserted, later adding that most borrowers "are not financially prepared to shoulder another bill as they face skyrocketing costs for necessities like food and gas."
White House Chief of Staff Ron Klain recently said that President Biden "is going to look at what we should do on student debt before the pause expires, or he’ll extend the pause." The letter noted that Klain's comments "about potentially extending the payment pause and administratively canceling student loan debt are encouraging to millions of borrowers across the country."
Biden backed broad student loan forgiveness of $10,000 on the campaign trail in 2020 amid more generous proposals from then-rivals Sen. Bernie Sanders (D-VT) and Warren. An erasure of $10,000 for all borrowers with federally-backed loans would cost roughly $371 billion and erase the loans of about a third of borrowers.
During the current administration, Democrats have repeatedly urged a seemingly skeptical President Biden to enact broad-based cancellation of up to $50,000 via executive action (as opposed to legislation passed by Congress). The letter echoed Warren's previously stated argument that student loan forgiveness would boost the economy.
"Canceling a meaningful amount of student debt will provide long-term benefits to individuals and the economy, helping families buy their first homes, open a small business, or invest in their retirement," the letter stated.
'Your administration must act as quickly as possible'
The debate surrounding another extension of the pause and potential direct student loan forgiveness increasingly has potential political implications with midterm elections coming up in November.
“The majority of Americans support you taking action; recent polling shows that over 60% of likely voters support continuing to pause student loan payments and canceling student debt, with support strongest among likely voters of color,” the letter said, adding that “your administration must act as quickly as possible to extend the pause and make clear to the American public your intention to cancel a meaningful amount of student debt."
Rep. Pressley has repeatedly argued that student loan forgiveness is "a matter of racial and economic justice" given the disproportionate burden on borrowers of color.
"Canceling student debt is one of the most powerful ways to address racial and economic equity issues," the new letter stated. "The student loan system mirrors many of the inequalities that plague American society and widens the racial wealth gap. Black students in particular borrow more to attend college, borrow more often while they are in school, and have a harder time paying their debt off than their white peers."
A recent analysis from the California Policy Lab and the Student Loan Law Initiative found that if the payment pause ends after May 1, about 7.8 million borrowers — roughly one in three student debtors — are at "high risk" of struggling to repay their loans.
'We applaud your efforts to date'
Thursday's letter was the latest in lawmakers’ and advocates’ efforts to push the administration to make a decision on loan forgiveness.
Warren, Schumer, and Pressley have repeatedly called on Biden to cancel $50,000 in student loan debt immediately via executive order on the premise that there is sufficient legal backing for the administration to do so.
The basic argument, as detailed by the Legal Services Center of Harvard Law School, is that the Education Secretary has the power “to cancel existing student loan debt under a distinct statutory authority — the authority to modify existing loans found in 20 U.S.C. § 1082(a)(4).” (Toby Merrill, who founded the Project on Predatory Student Lending at Harvard Law School and co-authored the legal analysis, currently works for the Education Department.)
A memo related to the president's legal authority on student loan forgiveness, sent to Education Secretary Miguel Cardona in April 2021, became public in November in a heavily redacted form.
The Biden-era ED has taken several actions — aside from extending the payment pause multiple times — to refine the unwieldy student loan system and erase debt. These include overhauling the troubled Public Service Loan Forgiveness (PSLF) program for student loan borrowers in public service, erasing debt held by some students who were defrauded by a predatory for-profit college, discharging debt of totally and permanently disabled borrowers, and increasing scrutiny of student loan servicers. One estimate is that 700,000 borrowers have seen more than $17 billion wiped away during Biden's tenure.
“While we applaud your efforts to date – including targeted relief for disabled borrowers, victims of for-profit colleges, and others as well as working to fix existing programs like Public Service Loan Forgiveness – these efforts still leave the majority of federal student loan borrowers out,” the new letter from the Democrats stated.
Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
Read more:
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