Warren, Schumer, Pressley Release New Analysis Showing that Resuming Student Loan Payments Will Strip $85 Billion from the Economy in 2022
Urge Biden to Cancel Student Debt Before Payments Resume In February
New Data From Roosevelt Institute Reveals Threats to Families and Economic Growth From End of COVID Payment Pause
Washington, D.C. - United States Senator Elizabeth Warren (D-Mass.), Majority Leader Chuck Schumer (D-N.Y.), Representative Ayanna Pressley (D-Mass.) sent a bicameral letter to President Joseph R. Biden releasing new data about the adverse economic impact of restarting student loan payments and calling on him to act without delay to cancel up to $50,000 of student debt.
According to the new analysis from from the Roosevelt Institute, which was provided to the members of Congress at their request, if the payments of federal student loans resume as scheduled on February 1, 2022, approximately $7 billion a month and $85 billion annually will be stripped from over 18,million student loan borrowers’ budgets. By contrast, debt cancellation could add more than $173 billion to the nation’s GDP in the first year alone.
The letter calls for the President to immediately extend the pause on student loan payments, interest, and collections until the economy reaches pre-pandemic employment levels.
“The pause on federal student loan payments, interest, and collections has improved borrowers’ economic security, allowing them to invest in their families, save for emergencies, and pay down other debt. Restarting payments without canceling student debt will undermine these families’ economic progress,” the lawmakers wrote.
Payments on federal student loans have been on pause since the beginning of the COVID-19 pandemic in March 2020. Recognizing the significant burden that student debt places on borrowers during an economic crisis, President Biden extended this pause through January 31, 2022, for the 87% of borrowers with direct federal loans. The resumption of student loan payments on February 1, 2022 could create an unnecessary drag on the economic recovery, undermining the effectiveness of the American Rescue Plan and causing unnecessary pain and stress for American families.
According to the Roosevelt analysis, “Black and Latinx households would feel a disproportionate negative impact from resuming student loan payments. Borrowers of color typically borrow more for college expenses than their white counterparts while also holding significantly less wealth.” Twenty years after starting college, the median Black borrower still owes 95% of their loans, compared to only 6% for the median white borrower.
Recent survey data from the Student Debt Crisis Center reveals that even among borrowers who are fully employed, 89% are not financially secure enough to be prepared for student loan payments to resume. More than a quarter of borrowers will be spending at least a third of their income on student loan payments when payments resume, and one in ten will see half their income go toward student loan payments. Nearly nine in ten borrowers said that the student loan payment pause has been critical to their financial well-being during the pandemic.
“(T)he cancellation of up to $50,000 of student debt would relieve an enormous burden from borrowers while pumping billions of dollars per year back into our national economy…we strongly urge you to act without delay. In the meantime, we strongly urge you to extend the pause on student loan payments, interest, and collections until the economy reaches pre-pandemic employment levels,” the lawmakers concluded.
Senator Warren is one of the nation’s leading voices calling for student debt cancellation to boost our economy, help close the racial wealth gap for borrowers, and put an end to predatory practices that harm and trap borrowers in years of debt.
- Last week, Senator Warren, along with Senators Van Hollen (D-Md.), Blumenthal (D-Conn.), and Smith (D-Minn.), sent letters to four federal loan servicers, requesting information on their plans to support borrowers when student loan payments resume.
- Last month, Senator Warren, along with Senators Sherrod Brown (D-Ohio), Blumenthal, Smith, and Van Hollen sent a letter to Maximus, the company that is assuming Navient’s federal student loans servicing contract, questioning its troubling history and seeking assurances that borrowers will receive appropriate services and protections during the transition.
- Senator Warren alongside Senators Van Hollen, Blumenthal, Brown, Smith, Edward J. Markey (D-Mass.), and Robert Menendez (D- NJ.) sent letters to the heads of Pennsylvania Higher Education Assistance Agency, Granite State, and Navient calling on them to correct past errors with borrowers’ accounts and address growing concerns over their preparedness to transfer millions of borrowers to new servicers.
- At a hearing in July 2021, Senator Warren pushed for borrower protections after a major student loan servicing shakeup.
- In July 2021, Senator Warren released a statement regarding the end of the Pennsylvania Higher Education Assistance Agency's (PHEAA) contract servicing student loans with the Department of Education .
- In June 24, 2021, Senator Warren and John Kennedy (R-La.) called on PHEAA CEO to address concerns about false and misleading statements made during a subcommittee hearing on student loans, which was chaired by Senator Warren.
- In May 2021, Senator Warren led her colleagues in sending a letter requesting information about the steps the Department of Education and the Office of Federal Student Aid (FSA) are taking to help transition millions of federal student loan borrowers back into repayment ahead of the scheduled end to the pause on student loan payments and interest in September.
- In April 2021, Senators Warren and Raphael Warnock (D-Ga.) led a group of colleagues in a letter to Education Secretary Miguel Cardona urging the Department of Education to take swift action to automatically remove all federally-held student loan borrowers from default.
- That same month at her first hearing as chair of the Senate Banking, Housing, and Urban Affairs Committee's Subcommittee on Economic Policy, Senator Warren called out PHEAA for its mismanagement of the Public Student Loan Forgiveness Program.
- Senator Warren also questioned Jack Remondi, CEO of Navient, on the company's long history of abusive and misleading behavior towards borrowers and their profiting off the broken student loan system.
- Senator Warren has also been continuing her calls for President Biden to use his existing authority to cancel $50,000 in student debt and highlighted data that she obtained from the Education Department revealing the benefit of student debt cancellation.
- In March 2021, Senators Warren and Bob Menendez (D-N.J.) applauded the passage of their Student Loan Tax Relief Act as part of the American Rescue Plan. The provision makes any student loan forgiveness tax-free, ensuring borrowers whose debt is fully or partially forgiven are not saddled with thousands of dollars in surprise taxes. During her time in the Senate, she has helped return tens of millions of dollars tax-free to students cheated by for-profit colleges.
- She demanded that the Department of Education hold student loan servicer, Great Lakes Education Loan Services, Inc., accountable for CARES Act blunder that likely lowered credit scores for millions of borrowers.
- She has worked with House Majority Whip James E. Clyburn (D-S.C.) to close the racial wealth gap by introducing legislation, the Student Loan Debt Relief Act, which would cancel student loan debt for 42 million Americans.
- She prioritized student debt relief and fought to lower student loan interest rates, introducing the Bank on Students Loan Fairness Act as her first bill in Congress.
- She conducted rigorous oversight of the for-profit college industry and helped secure three-quarters of a billion dollars in debt relief for students who were cheated by predatory for-profit colleges, including 4,500 Massachusetts students and more than 28,000 students across the country.
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