The Biden administration recently extended the student loan freeze for the fourth time since the pandemic started. For the time being, borrowers have until late August to restart their monthly payments.
As has long been the case, however, many borrowers want more from the White House, specifically an executive order that cancels student loan debt and sets the foundation for economic redistribution that favors low-income people and people of color.
The Debt Collective, a union of debtors that formed during the Occupy Wall Street movement more than a decade ago, took to the streets in defense of this cause earlier this month. Their rally at the Department of Education [DOE] in Southwest attracted 500 people, many of whom carried signs, belted chants, shared their debt stories and marched around the DOE building.
The overall message, according to Fred Bell, centers on President Joe Biden (D) following through on his campaign promise and taking away a hurdle that prevents people like him from continuing to pursue higher education and other opportunities.
“When we talk about narrowing the racial wealth gap, canceling student loan debt is one of the easiest things the Biden administration can do,” said Bell, the Debt Collective’s operations and programs manager.
“Obviously we haven’t been paying our debts for two years [and] there have been four different payment pauses. It shows the government doesn’t need our money and if they have the power to stop it, they can cancel student loan debt,” Bell added.
Pressure Mounts for the Biden Administration
As of last week, student loan debt in the U.S. totaled $1.747 trillion. The total declined for the first time in history this year. Under normal circumstances, this amount would increase six times faster than the nation’s economy. More than 43 million people have student loan debt with amounts averaging between $37,000 and $50,000 depending on whether the loan comes from a private or federal source.
The D.C. metropolitan region ranks the highest in the nation for student loan debt, with borrowers in the District averaging more than $55,000 and borrowers in Maryland and Virginia averaging $43,165 and $39.551, respectively.
The length of the Biden administration’s latest extension fell a few months short of the November midterms, which Democrats requested. Over the last few months, pressure has been mounting for the Biden administration to cancel at least $10,000 of student loan debt. Biden has turned to Congress to pass a bill that he would sign. In the interim, the White House announced plans to cancel the student loan debt of millions of borrowers who severely fell behind.
White House Press Secretary Jen Psaki recently indicated that borrowers will most likely have to start making their monthly payments at some point during the Biden presidency. When they would do so depends on a bevy of factors, including economic data, the severity of COVID and areas where borrowers need relief.
For some people, like Whitney Barkley-Denney of the Center for Responsible Lending [CRL], the student loan debt conversation should also take into account the wealth gap and how student loan debt exacerbates the struggles of borrowers who, regardless of income, cannot accumulate wealth because they have to meet several financial obligations.
A soon-to-be-released CRL paper advocates for $50,000 as the minimum student loan debt amount that the Biden administration should cancel. In explaining the rationale, Barkley-Denney said that low-income people of color would significantly benefit as they attempt to purchase a home and achieve other markers of success.
“There’s a misconception that student loan debt is good debt but by the end of the day, when it comes to paying it back, it chokes borrowers,” Barkley-Denney said. “The part we haven’t discussed was psychological. Home buying is delayed by six or seven years. Debt also delays the formation of families and starting a business.”
Helping the Next Generation Make Better Decisions
For the last three years, local educator Tyronda Boone has taught classes and conducted workshops with the intention of challenging misconceptions about student loan debt and exposing young people to strategies that would help them avoid taking out loans.
Though Boone’s parents financed her undergraduate education, she later accumulated several thousands of dollars in debt to attend graduate school. During the recession and in the years following, she struggled to pay back her loans. To this day, Boone, like other borrowers across the country, has a significant balance.
In conversations with young people about how to finance higher education, Boone often touches on the importance of scholarships, grants, work study and community college. In instances when families feel the need to take out student loans, Boone encourages her students to think about whether their college major could land them a job with high earning potential.
Boone also said it helps if families open a 529 college savings plan and take steps as early as possible in their child’s life to make sure they’re financially secure when they graduate from high school.
“We have to be better stewards of our finances and if college is a path your child is going to be on, you have to be prepared,” Boone said. “Most people take up to 20 to 40 years to pay off student loan debt and not even bankruptcy can get it off. It’s a serious financial commitment. We need to have conversations with our children.”