Americans can’t afford more student loan repayments
The past two years have seen record job growth, rising wages and increased bargaining power for workers. But for millions of Americans, the huge debt burden overshadows those gains — and the struggles are more intense for women and for black and brown borrowers.
Just ask the 45 million Americans who have over $1.7 trillion in student debt. They will share stories about the pandemic-related pause in student loan payments helping them weather the economic shocks of the pandemic, as well as the fear that payments could suddenly restart. For some, they are just beginning to recover from lost jobs, health crises and other forms of distress caused by the pandemic. For others, recovery is still a long way off.
Even though the federal student loan payment pause was recently extended through August 31, many borrowers will find themselves in trouble again if the Biden administration withholds deeper relief. In two recent reports, the Consumer Financial Protection Bureau found that more than 5 million people are at serious financial risk if payments resume, and the Federal Reserve says payment defaults would increase for those who experience the most difficulty.
As an advocate for people in debt and an economist, respectively, we are painfully aware of the obstacles that borrowers face. At the Student Debt Crisis Center, we surveyed thousands of people and found that 85% of them are still dependent on federal student loan payments being paused, a clear indicator that many families are still struggling.
At the same time, the Roosevelt Institute’s analysis of the student loan payment pause offers a glimpse of optimism and a hint of what is possible if further action is taken. Freeing Americans from student loan payments has supported the economic security of millions of borrowers and their families and allowed borrowers to keep $7.12 billion of their earned income each month.
A growing chorus of labor, civil rights and consumer protection groups, along with dozens of lawmakers, are urging the president to keep the momentum going by canceling student debt for good. While the administration’s recent efforts with federal repayment plans and loan cancellation programs are impactful and long overdue, large-scale debt cancellation is the only plan that ensures relief gets through. everyone who needs it.
Macroeconomic trends confirm this: the pandemic has exacerbated labor market inequalities that hurt people of color and women, and price increases due to pandemic-related supply chain disruptions and price hikes business-induced spillovers have undermined many of the gains from the economic recovery.
We recently spoke with Senate Majority Leader Chuck Schumer, who described student loan debt as “the chain shackling millions of Americans to a lifetime of debt and sinking billions out of our economy every year. “, and he agrees that canceling student debt would be far-reaching. benefits for our economy. “Cancelling student debt would give these Americans a new lease on life and free them to pursue their dreams of buying a home, saving for their children’s education, or starting small businesses, and trigger a wave of economic activity absent from our country.”
Resuming student debt repayment after August 31 would jeopardize economic recovery and lead to an avoidable trade-off between debt repayment and the purchase of basic necessities. Student loan repayments drain an average of $393 per month from borrowers’ budgets, reducing household disposable income and savings. Black borrowers would suffer the greatest income and wealth losses if payments resume because they are more likely to borrow and borrow at higher levels than white students. Amid these losses, the administration’s goal of “growing our economy from the bottom up and from the middle out” will be elusive.
Extending student loan relief beyond August would allow borrowers to weather these tough times without the added shock of payments. Going further with permanent debt cancellation would help borrowers prosper in the long run. The Biden administration has the power to take such action immediately. The US economic recovery is not complete. Student debt relief and permanent debt cancellation are critical steps to making America more prosperous and more equitable. It’s time to leverage the lessons of the two-year pause in student loan payments and lock in the social and economic benefits of a debt-free education for good.