The battle for student loan forgiveness isn’t over just yet. Democratic lawmakers, including Senate Majority Leader Chuck Schumer (NY) and Senator Elizabeth Warren (MA), reintroduced a resolution calling for President Biden to forgive up to $50,000 in federal student loan debt per borrower.
Supporters of the proposal claim that the student loan debt forgiveness will help millions of Americans in need. Student loan debt has been a major issue in the U.S., long before the coronavirus pandemic began. In mid-2019, 15% of borrowers were at least 90 days past due or in default on a student loan, and in February 2020 total student loan debt reached a record $1.6 trillion. Today, student loan debt is creating even more financial issues to those who are struggling with job losses and income reductions due to the public health crisis.
While President Biden expressed support for student loan forgiveness during his campaign, it was not included in his coronavirus relief bill in January. However, Biden did take executive action to extend the automatic forbearance and temporary 0% interest rate for federal student loans through at least September 30, 2021, and stopped involuntary collections on defaulted student loans.
But Democrats say more help is needed, especially in underserved communities. $50,000 in student loan forgiveness per borrower would eliminate debt 36 million federal loan borrowers and help to close the racial wealth gap. The proposal highlights that excessive student loan debt has hit Black and Brown communities, women and seniors harder than other groups.
- Blacks hold the most debt compared to other races, mainly due to racial inequalities in incomes and wealth.
- Almost 50% of Black borrowers owe more in student debt four years after graduation than they did when they left college.
- Twenty years after starting college, the median Black borrower owes 95% of their student debt, compared to only 6% for the median White borrower.
- During the first six years of college, Latinx borrowers are twice as likely to default on student loans than White borrowers.
- Forgiving up to $50,000 would help over 90% of Black and Latinx borrowers in the lowest income quartile become debt-free.
- A 2020 report from the American Association of University Women revealed that women hold 2/3 of student loan debt in the U.S., totaling around $1 trillion.
- On average, women of color borrow more in student loans than any other group. This is especially true of Black women.
- Parents and grandparents over age 50 are most likely to default on student loans
- From 2004-2018, the growth of student loan balances has been greatest for borrowers age 50 and older, according to an AARP study.
- Borrowers who default on student loans risk having their Social Security benefits garnished as a form of repayment. This has already happened to over 114,000 retirees.
Current Loan Forgiveness Programs
Most Republicans disagree with the proposal to forgive such a large amount of debt per borrower, which may make the resolution difficult to pass. Fortunately, there are a number of federal student loan forgiveness programs and flexible repayment options already available.
Borrowers who work in certain occupations, or who borrowed money to pay for a college that has misled them or engaged in illegal misconduct may qualify for loan cancellation or discharge. Individuals who are struggling financially may be able to lower their payments with an income-based repayment plan or an extended repayment plan.
Keep in mind, however, that these existing and proposed forgiveness programs only apply to federal student loans. Most private student loans are not forgivable. Private student loan borrowers who have trouble managing their debt can contact their lender about options for forbearance and refinancing.