Senator Elizabeth Warren, Senate Majority Leader Chuck Schumer, and several of their Democratic colleagues are pressing President Joe Biden to forgive up to $50,000 for every American burdened by federal student debt.
"If we canceled $50,000 of student loan debt right now, if Joe Biden would do that, two things would happen immediately: about 84 percent of all the people who have student loan debt would be completely debt-free and we would be able to close the Black/white wealth gap for borrowers by about 25 points and for Latinos, by 27 points," Warren told Cheddar. The wealth gap figures come from a 2019 analysis provided to the senator.
She also noted that those experts found that on average, after 20 years, white borrowers end up owing about 5 percent of what they originally borrowed while Black borrowers tend to owe 95 percent of their loan after two decades. "There's not a single other thing" Biden could do right now that would have such a massive impact improving racial equity in the U.S, she said.
"We have tangled up Black borrowers and Latino borrowers in student loan debt. We've told them they need an education. We've told them they need these credentials, and then we've put it all out of reach, pushed them into more and more student loan debt, which they then have a harder and harder time repaying," Warren said.
The issue of student loan debt, like many topics, is largely a partisan issue on Capitol Hill. In the waning days of his presidency, Trump tried to prevent the Biden administration from wiping out wide swaths of the loans, with many Republicans portraying debt forgiveness as a giveaway and suggesting there are less extreme measures that can be taken.
The issue shouldn't be a party-line problem, said the former presidential candidate, because canceling student debt is popular among large groups of voters, as some but not all recent polls have found, and providing an out for so many Americans could boost the overall economy, allowing them to spend more in their local economies.
Legal Steps Toward Student Debt Cancellation
Does the president even have the power to cancel student debt? Warren said yes, citing the 1965 Higher Education Act and noting Biden's predecessors have used it to cancel debts as well.
"The law is pretty clear, that the federal government can lend the money, and it can also modify or change the terms of the loan and that includes forgiving those loans," she stated. "And you know how I know that presidents can do that? Because they have done it. President Obama canceled student loan debt for about 70,000 people. President Trump canceled all of the accumulating interest for about 40 million people and right now, President Biden is canceling accumulated interest on loan debts to the tune of about $5 billion a month."
Hold Borrowing Agencies Responsible
A Washington state judge ruled last month that Navient, one of the nation's largest student lenders, deceived borrowers and violated consumer protection laws.
Borrowers were under the impression that co-signers would be released from a loan once consistent payments were made — usually over one to two years. In practice, however, borrowers were not told that paying lump sums early would disqualify their co-signers from being released and forced the borrower to restart the process to have them removed.
Warren said she welcomes a Department of Justice investigation into Navient and other student loan borrowing agencies to weed out any other potential or ongoing issues.
"I would like more accountability. I think the fact that the Department of Education, even after every scandal, turns right around and gives Navient more loan business, I think that's just fundamentally wrong. But understand this, we could do away with a lot of this problem if we just cancel a big hunk of student loan debt. Then we wouldn't have these middle men who are in there making hundreds of millions of dollars," she added.