UPDATED 11:10 AM PT – Friday, February 5, 2021
Senate Majority Leader Chuck Schumer (D-N.Y.), Sen. Elizabeth Warren (D-Mass.) and other Democrats on Capitol Hill have proposed legislation aimed at cancelling up to $50,000 in individual student loan debt.
Canceling student debt is one of the most effective things we can do to provide relief, create economic opportunity and close the racial wealth gap. We will get this done. https://t.co/HzbW5HutCt
— Chuck Schumer (@chuckschumer) February 4, 2021
The Biden administration has also planned to cancel student loan debt at a much smaller amount, which is closer to $10,000.
“The president has and continues to support cancelling $10,000 of student loan debt per person as a response to the COVID crisis,” stated White House press secretary Jen Psaki.
The main motivation behind the relief push is a direct response to economic hardship resulting from the coronavirus pandemic. House and Senate Democrats are now pressuring Biden to put a full $50,000 loan forgiveness through with an executive order.
While many are praising the idea of student debt forgiveness at this level, the proposition certainly comes with some caveats.
Concerns have been raised multiple times over whether or not the blanket of student loan forgiveness would just be a bailout for America’s richest group: college graduates. In fact, according to a Brookings Institute study, 58 percent of all student loans are owed by people in the top 40 percent of income earners.
This effort to erase a goal of $1 trillion from the roughly $1.7 trillion in outstanding student loan debt would be a $1 trillion economic relief bill for 45 million student loan borrowers. All the while, roughly 200 million adult American taxpayers would be forced to pick up the tab on their yearly taxes. This would include some who have already paid off their student loans without government assistance.
Regardless, there is still significant disagreement among Democrats pushing this legislation. For instance, Schumer and Warren want to target the forgiveness with income limits and Sen. Bernie Sanders (D-Vt.) wants to eliminate all student debt regardless of income.
Cancel student debt. Pay for it with a tax on Wall Street. #DemDebate
— Bernie Sanders (@BernieSanders) June 28, 2019
In their press conference on Thursday, Schumer and Warren showed they weren’t entirely sure how much this would all cost.
“We do have an estimation, it’s about $1 trillion,” Schumer stated. “No, no, no, it’s about $650 billion.”
The Biden White House is considering forgiving federal student loan debt, which would only account for 30 percent of the total student loan debt nationwide. Questions surround whether or not this would just be a one time forgiveness of loans or if it would forever eliminate repayments on federal student loans.
There has been no talk yet about addressing the sharp rise in college tuition over the last 20 years, which has seen tuition rates across the board raise by nearly 200 percent. For years, experts have suggested large universities with million and billion dollar nontaxable endowments might better contribute to the student debt crisis by paying some of that money towards the financial well-being of their students and alumni.
Regardless, the student debt crisis is a complicated issue with many moving parts. Instant loan forgiveness by itself may not be enough to end the crisis for good and may cost the taxpayer far more than they really want.