These 328 organizations want President-elect Joe Biden to cancel student loans now.
Here’s what you need to know.
In a letter to Biden and Vice President-elect Kamala Harris, these organizations urge Biden to cancel student loans on the first day of his presidency, which is January 20, 2021. The advocacy groups include community, civil rights, climate, health, consumer, labor and student organizations. According to the letter, student loan cancellation will “boost the economy, tackle racial disparities, and provide much-needed stimulus to help all Americans weather the pandemic and the associated recession.” These groups don’t want Congress to choose who gets student loans forgiveness; they want Biden to cancel student loans through an executive order.
Here are some highlights from the letter:
1. Cancel student loans through executive order
- The Higher Education Act of 1965 empowers the U.S. Secretary of Education to cancel student loans administratively.
- Sen. Elizabeth Warren (D-MA) and Senate Minority Leader Chuck Schumer (D-NY) say that Biden should cancel up to $50,000 of student loan debt [for each borrower who earns less than $125,000 per year].
- Biden wants Congress to cancel student loans immediately.
- Student loan debt cancellation through executive action can help address “racial disparity, economic recovery, and Covid-19 relief.”
Analysis: While the Higher Education Act grants the Education Secretary power to cancel student loans, it’s not universally agreed that the same Act provides unilateral authority to cancel student loans for every borrower. The Education Department released a memo that says it’s illegal for Biden to cancel student loans through an executive order. Biden wants to cancel student loans 3 ways, but an executive order is not one of them.
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2. Student loan cancellation provides economic stimulus
- The Covid-19 pandemic could leave a “scarring” effect on student loan borrowers, which could lead to “permanently lower employment and earnings.”
- Young adults with a college degree have a median net wealth of -$1,900.
- 37% of seniors with student loans are in default.
- Student loan cancellation can improve borrowers’ ability to pay off student loan debt, improve geographic mobility, and find better job opportunities.
- Student loan cancellation also would increase GDP, create jobs and reduce unemployment.
Analysis: Congress may cancel student loans in the new stimulus package. While Biden didn’t include student loan cancellation in his new $1.9 trillion stimulus package, Congress could include student loan forgiveness or pass standalone legislation. To date, however, Congress has prioritized $2,000 stimulus checks and unemployment insurance over student loan forgiveness in the new stimulus package.
3. Cancel student loans would reduce disparity and increase health outcomes
- “The disproportionate impact of student debt on borrowers of color exacerbates existing systemic inequities and widens the racial wealth gap. “
- Cancel student loans has the “potential to increase the net wealth of Black households and could even help reduce the racial wealth gap.”
- Student loan cancellation also can improve health outcomes.
- For example, cancelling debt can reduce stress, depression, obesity and mortality.
How to pay off student loans faster
What’s the best way to pay off student loans? Biden wants student loans cancelled, but says he is unlikely to cancel student loans through an executive order. As a former U.S. senator, Biden likely believes that only Congress has the authority to cancel student loans on a wide-scale basis. To date, while some members of Congress have proposed student loan forgiveness, but student loans were dropped from the stimulus package. Even with this letter, there’s no guarantee that Biden will cancel $10,000 of student loans—on January 20, 2021 or at all. That’s why it’s important to understand your options for student loan repayment now. Start with these three options, all of which have no fees: