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Millions of Americans having student loans are waiting for President Joe Biden to take action on student loan forgiveness.
In his campaign trail, President Biden said as a way to stimulate the economy amid the coronavirus pandemic, he supported canceling $10,000 in student loan debt per borrower.
While some members of Congress were asking him to forgive $50,000 per borrower.
Right now more than ten million Americans are unemployed, so forgiving $50,000, or even $10,000, worth of debt would have a huge impact on what Americans could afford each month.
If we assume that most borrowers would not require to pay the average $393 monthly payment they could:
- Cover about 30 % of the average monthly mortgage payment in America.
- According to the U.S. Department of Agriculture, they could buy a month’s worth of groceries for a family of four on a thrifty food plan.
- Pay for 2 weeks’ worth of child care.
- They could cover the monthly payment for a 60-month loan for purchasing a $22,000 vehicle.
Student Loan Debt At A Glance
The calls for student debt cancellation certainly aren’t unjustifiable.
According to the Brookings Institution, the student loan debt makes up the second-biggest share of household debt.
In February 2021, even as most repayments were paused as part of the CARES Act passed in March 2020, student loan debt hit an all-time high.
During that time in the United States, the outstanding student loan debt has grown at double the rate it had in earlier years.
According to credit reporting agency Experian, the loan debt now sits at a shocking $1.57 trillion, an increase of $166 billion since 2019.
Last year, the average student loan debt per person was $38,792.
According to Experian data borrowers in all 50 states and the District of Columbia recorded growth in their student loan debt in 2020.
Last year the borrowers in D.C. had the highest amount of student loan debt, with an average balance of $60,651.
And borrowers in South Dakota had the lowest at $30,449.
The median monthly payment for a bachelor’s degree is about $444, $695 for a master’s degree, and about $1,210 for a doctoral.
According to data compiled by educationdata.org., it takes about 20 years for most borrowers to repay their student loan debt.
When you add the interest of about 6 % over 20 years the average student loan adds up to $26,000 in interest alone.
Pressure Mounts
During a news conference on Monday, according to a CNET report, Sen. Bob Melendez said that they are calling on President Biden to use his authority to forgive up to $50,000 in student loan debt.
Also supporting the student loan forgiveness among lawmakers lobbying is Sen. Elizabeth Warren of Massachusetts.
During a recent hearing on student loan debt, Sen.
Warren said that even after 20 years after borrowing the median Black borrower still owes 95 % of the original amount.
While after the same period, the median white borrower just owes 6 % of the original amount.
According to the CNBC report, Sen Warren said that with this single most powerful executive action President Biden could take to advance racial equity and give everyone in America a chance to build a future.
In one day itself, more than 415 organizations had signed a letter requesting Biden and Vice President Kamala Harris to cancel student loans.
The American Civil Liberties Union, the National Association for the Advancement of Colored People (NAACP), and the Consumer Federation of America are included as signatories.
The effect of forgiving student loans on the U.S. economy depends on whom you ask.
The effects of student loan debt forgiveness were looked at by the Levy Economics Institute of Bard College in 2018.
And at that time, the authors wrote that a one-time cancellation of outstanding student debt of $1.4 trillion would result in an increase of $86 billion to $108 billion a year, on average, to the country’s GDP.
While the bipartisan Committee for a Responsible Federal Budget feels that canceling student loan debt would be a poor stimulus to the economy.
They say even while student loan forgiveness would increase cash flow by $90 billion per year, it would come at a cost of $1.5 trillion.
Their report states that just extending the current executive action to delay loan repayments and cancel interest would achieve much of the economic benefit of loan cancellation at comparatively a very small fraction of the cost.
Reference Source: Patch.com
