However, the second installment of the Fed’s study reveals that these strides look quite different when broken down by race. While white and Hispanic families saw improvement in building wealth, the study states, Black families experienced the reverse as they fell further below wealth expectations between 2007 and 2019.
From 2016 to 2019, white families of this older millennial cohort saw wealth levels go from 40% to 5% below where they should be. That wealth deficit doubles to 10% for Hispanic families, but that is still less than their 2016 wealth deficit of 15%. The deficit soars for Black families, who were 52% below wealth expectations in 2019 – a significant increase from 39% three years prior.
These differences look just as staggering when framed as median wealth for the same year. For older white millennial families, that’s $88,000 – four times the $22,000 median wealth for Hispanic families and roughly 17 times the $5,000 median wealth for Black families.
The report doesn’t take into consideration effects from coronavirus recession, as full data for that period isn’t yet available.
Black millennials bear a bigger student debt burden
Despite these wealth differences, the St. Louis Fed found that all three groups had income levels that aligned with expectations, indicating that earnings weren’t preventing wealth accumulation.
The report suggests that one reason older Black millennials are increasingly falling below wealth expectations is because of their staggering student-loan debt.
Black students shoulder a heavier debt burden than their white peers: About 87% of Black students attending four-year colleges take out student loans compared to about 60% of white students. They also owe $7,400 more on average than their white peers after graduating, per the Brookings Institute.
Black borrowers under the age of 40 were also more likely to be behind on payments in 2019 than white or Hispanic borrowers, according to the Federal Reserve. Black graduates are nearly five times as likely to default on their loans than their white peers.
The racial wealth gap is why some politicians and lawmakers are advocating for student-debt cancellation. Several experts previously told Insider that communities of color would be one of the groups that will gain the most from student-debt cancellation plans.
Right now, it looks like this socieconomic divide isn’t close to narrowing any time soon. As the St. Louis Fed report’s authors, Ana Hernández Kent and Lowell Ricketts, wrote, “Given the large wealth deficit and negative trend, the disparities among older Black millennials may persist as these families age, inhibiting their full participation in the economy.”
President Joe Biden has started to act on the $1.7 trillion student debt crisis in the country.
His Department of Education has already canceled student debt for about 72,000 defrauded borrowers, and for over 41,000 borrowers with disabilities. That means more than 113,000 people in the country are getting $2.3 billion of debt relief.
Another 44 million Americans still have student-loan debt and wonder if their turn will ever come.
During his presidential campaign, Biden said he was willing to cancel $10,000 in student debt per person, but he did not believe he had the authority to cancel up to $50,000 in student debt per person, a key progressive lawmaker’s agenda item.
While White House Press Secretary Jen Psaki said in a press briefing that the Justice Department will review Biden’s ability to cancel student debt through executive action, and while Biden asked the Education Department to compile a memo on the subject, Senate Majority Leader Chuck Schumer said there’s no reason it cannot be done.
“If it’s OK legally to do a small amount, it’s OK legally to do a larger amount,” Schumer said in a press call following Psaki’s remarks.
Here’s what the Biden administration has done so far to help Americans with student debt:
(1) Canceled debt for defrauded borrowers
On March 18, Education Secretary Miguel Cardona canceled student debt for about 72,000 borrowers who were defrauded by for-profit schools, such as Corinthian Colleges and ITT Technical Institutes.
Under the new regulations, borrowers eligible for relief would receive a 100% discharge of federal student loans, a reimbursement of any amounts paid on loans, requests to remove any negative credit report, and if applicable, a reinstatement of federal student aid eligibility.
Insider previously reported on five of the biggest colleges that were accused of defrauding their students through deceptive advertising and persuading students to take out loans knowing they would likely default. Of those, the University of Phoenix is the only one still open and which hasn’t admitted to any wrongdoing. Last week, the Federal Trade Commission sent $50 million in refunds to more than 147,000 former Phoenix students “who may have been lured by allegedly deceptive advertisements.”
(2) Canceled debt for borrowers with disabilities
In his second move on student-debt cancelation, Cardona on Monday canceled student debt for over 41,000 borrowers with permanent and total disabilities, and removed a requirement to submit income documentation for over 230,000 eligible borrowers.
A previous rule established under President Barack Obama required borrowers with disabilities who wished to receive debt cancelation to submit documentation verifying that their incomes did not exceed the poverty line, but Cardona waived that requirement, given that 98% of reinstated disability discharges occurred because borrowers did not submit the required paperwork.
(3) Expanded the scope of the debt payment pause
On Tuesday, Cardona expanded the pause on student-debt collections to 1.14 million borrowers with private loans. In January, Biden had extended a pause on student loan payments through September, but that didn’t apply to borrowers under the Federal Family Education Loan (FFEL) Program, whose loans were held by private lenders. Cardona’s new rule also applies a 0% interest rate on borrowers’ student debts.
The FFEL Program ended in 2010, but recent data from the Education Department showed that 11.2 million borrowers still have outstanding FFEL loans totaling over $248 billion, and while the department acquired some of the outstanding FFEL loans, many are still privately owned and were not affected by the pause on federal student loan payments.
Overall college costs are twice what they were in the 1970s, according to a recent GoBankingRates report that assessed generational differences among college expenses. It signals a rough road ahead for Gen Z, the first of whom just began to graduate college in 2019.
The report looked at the College Board’s estimates for average annual costs of tuition, fees, and room and board. It assumed that students attended a four-year institution between ages 18 and 22 for baby boomers, Gen X, millennials, and Gen Z, adjusting estimates for inflation.
The chart below shows just how much college costs have climbed.
From fall 1973 to spring 1977, boomers paid around $39,780 in today’s dollars for four years of public college. That’s a little more than half the cost for millennials attending public college from fall 2006 to spring 2010: $70,000. And what Gen Z is paying today is more than double that: $90,875.
The numbers are even starker for private tuition, which cost around $80,000 in inflation-adjusted dollars for boomers, compared to $165,000 for millennials and a whopping $210,000 for Gen Z.
Gen X experienced the beginning of this uphill battle, as tuition costs rose at a compounded annual growth rate of more than 7% a year from fall 1973 through the fall 1990 in real dollars. From fall 1990 to spring 1994, they would have paid $43,857 at a four-year public university and $115,000 for a private college, adjusted for inflation.
College has become so expensive, some question its value
College is expensive for many reasons, including an increase in financial aid, a lack of state funding, a need for more faculty members and money to pay them, and ballooning student services.
A surge in demand is also driving the price hike, Richard Vedder, an author and distinguished professor emeritus of economics at Ohio University, previously told Insider: “The rewards for college have expanded and grown from 1985 to a little after 2000 and sort of leveled off in the past decade.”
The “advantage of a degree today is less than it was 10 years ago, because of the rising cost,” he added. “The return on investment has fallen.”
Just ask the 49% of indebted millennials still paying off their student loans who said in an Insider and Morning Consult survey that college wasn’t worth the cost.
The pandemic scrambled this equation somewhat, with remote learning leading some to question the value proposition. Insider’s Bradley Saacks and Shana Lebowitz reported in summer 2020 that at least some colleges faced the prospect of students not returning for the upcoming school year, with potentially huge hits to revenue.
Harvard projected last spring that it would lose out on hundreds of millions of dollars during the current school year due to fewer students and no room-and-board revenue. NYU professor Scott Galloway said at a December Insider event that academia is ripe for disruption and likened Harvard to a “$50,000 streaming platform.” But even Galloway said tuition costs haven’t started coming down yet, and don’t seem likely to.
The overall increase in students attending college now compared with previous years indicates that the advantages college offers still outweigh its increasing costs for many, which will fuel costs further. And getting a degree has become increasingly important, according to Joel Anderson, author of the report.
As he wrote of Gen Z, “Not only will they need more money – comparably – than any previous generation, but the shift toward a service economy also means that a career without that pricey education is harder than ever.”
With student debt in the US totaling approximately $1.7 trillion, there is no question that forgiving that debt would be a welcome relief for many Americans. But whether $10,000 or $50,000 in student debt is cancelled per person, experts found middle- and high-income families would reap most of the benefits.
A new report from JPMorgan Chase examined four different cancellation scenarios: universal cancellation of up to $10,000, cancellation of up to $50,000 for people earning less than $125,000, cancellation of up to $25,000 for people earning less than $75,000 and phasing out at $100,000, and cancellation of up to $50,000 with the same phaseout.
The report found that income cutoffs would significantly reduce the total amount of debt forgiven and make a cancellation effort less regressive.
“This relative regressivity is driven by the fact that higher-income households carry larger debts, often from professional or graduate degrees,” the report said. “Conversely, more aggressive income targeting does not necessarily result in a greater share of forgiveness going to borrowers in a debt trap or facing long repayment horizons.”
Here are the main findings of the report:
A $10,000 cancellation would forgive 27% of the total outstanding debt, a $50,000 cancellation with the income limit would forgive 50% of the debt, a $25,000 cancellation with a phase out would forgive 28% of the debt, and a $50,000 cancellation with a phase out would forgive 39% of the debt;
A disproportionate amount of debt forgiveness would go to middle- and higher income families since they tend to hold more student debt;
A greater share of forgiveness goes to borrowers in a debt trap or under long-term repayment plans when the cancellation ceiling is higher;
And the distribution of cancellation benefits by race is fairly unchanged under the scenarios, meaning the scenarios may not be effective at closing the racial wealth gap.
The report also noted that if people believe more debt will be cancelled in the future, they might change their behaviors by taking out more debt or repaying it slower than anticipated. An income cutoff for debt forgiveness could also reduce people’s incentives to work, whereas a one-time cancellation could avoid those problems.
Progressive lawmakers have been unrelenting in calling for President Joe Biden to cancel up to $50,000 in student loan debt. While Biden has said he would consider cancelling $10,000 in debt, lawmakers like Sen. Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer have repeatedly argued that if the president can legally cancel $10,000 in debt, there’s no reason he cannot cancel $50,000.
“If it’s OK legally to do a small amount, it’s OK legally to do a larger amount,” Schumer said during a press call on Monday.
During a CNN town hall on February 16, Biden said he would support a higher amount of debt cancellation through legislation, but Schumer said executive action remained “far and away, the quickest, best, and easiest” method. White House Press Secretary Jen Psaki said during a press briefing on February 17 that the Justice Department would review Biden’s ability to cancel student debt through executive action.
But despite the calls to cancel $50,000 in student loan debt, even the “most generous” cancellation scenario would not solve the bigger problems that drive the high debt levels in the country.
“Any economic forces that contributed to the current stock of student debt today, such as increasing tuition costs and increasing enrollment among low-income families, will continue to push tomorrow’s students to accumulate debt,” the report said. “Any long-term solution to relieving students is incomplete without addressing these underlying forces.”
“Our student loan system is broken,” Sen. Elizabeth Warren, who supports student loan forgiveness, wrote in a tweet. “Income-based repayment is supposed to offer relief – but only 32 people’s loans have been forgiven by the program. Not 32,000. Just 32.”
Drew Angerer/Getty Images
The first federal income-driven repayment plan was created in 1995 and has since enrolled millions of student loan borrowers in the programs.
But only 32 people have ever qualified for full student debt forgiveness through federal repayment plans.
The report comes as House Democrats passed a stim bill provision that student debt forgiven through 2025 won’t be taxed.
Only 32 borrowers have ever qualified for full student loan forgiveness in federal income-driven repayment programs, according to a study by the National Consumer Law Center released Monday.
The first income-driven repayment (IDR) plan – then known as income-contingent repayment – was introduced in 1995, giving student loan borrowers the option to set their monthly payments based on their income.
Over the years, other IDR plans emerged – all of which serve a similar purpose in setting a “borrower’s monthly payment based on a portion of the borrower’s income and cancel any remaining loan balance after 20 to 25 years of payments” according to the NCLC report.
Over eight million borrowers are currently enrolled in the repayment programs, and two million people have been in repayment for over 20 years, citing the policy brief. But in the more-than-25-year existence of the federal repayment programs, only 32 people were ever eligible for full student debt cancellation.
“Cancellation was designed to ensure that low-income borrowers are able to eventually get out from under the burden of unaffordable debt and insulate them from the harmful financial effects of this ‘negative amortization’ – ensuring that federal student loans did not turn into the type of debt trap commonly associated with payday loans and predatory subprime mortgages,” the study read.
“If this structure worked as intended when first authorized more than two decades ago, low-income borrowers would routinely see their debts cancelled under IDR today.”
The provision in the upcoming stimulus bill came as Biden extended student loan forbearance through September. The president also expressed support in forgiving $10,000 in student loan debt, but Democrats are increasing pressure on him to cancel $50,000 per borrower.
The stimulus provision was included by Sen. Bob Menendez of New Jersey and Sen. Elizabeth Warren of Massachusetts, who previously ran a presidential campaign on the platform of student debt forgiveness. Warren shared an article by Inside Higher Ed about the NCLC report on Twitter Wednesday.
“Our student loan system is broken,” Warren wrote in the tweet. “Income-based repayment is supposed to offer relief – but only 32 people’s loans have been forgiven by the program. Not 32,000. Just 32.”
“We need to stop blaming student borrowers for this mess and #CancelStudentDebt now,” she wrote.
A graduating student wears a money lei, a necklace made of US dollar bills, at the Pasadena City College graduation ceremony, June 14, 2019, in Pasadena, California.
ROBYN BECK/AFP via Getty Images
US lawmakers are debating student debt-relief proposals, seeking help for people saddled with loans.
But the proposals on the table right now are not a comprehensive solution, experts say.
The problem is a cycle of student loan accumulation, and little education about how this debt works.
It’s a familiar sight each year: a sea of soon-to-be college graduates, seated in their caps and gowns, with families and friends watching proudly as they march, one-by-one, across the stage to receive their hard-earned degrees.
But for many of the 35 million student-loan borrowers in the US, the celebration is short-lived. Months out of college, their debts become due and payable, and for some, it will be a heavy burden.
Since entering office, President Joe Biden has encountered immense pressure to aggressively address the student-loan crisis.
Democratic Sens. Elizabeth Warren and Chuck Schumer in February announced a plan to wipe out up to $50,000 in student loans per borrower. But Biden dismissed it.
“I will not make that happen,” he said. “I’m prepared to write off $10,000 in debt, but not 50,” he said. “I don’t think I have the authority to do it.”
There is support for student debt relief across party lines. According to a national survey conducted by the Harris Poll in December, 55% of Americans favor total student loan forgiveness. And around 64% of respondents said they support writing off a fixed amount, like $10,000.
Education debt has been rising steadily for about a decade, experts told Insider. It’s also been holding people back.
“Students who graduate with debt may put off life milestones such as buying a car, owning a home, getting married, or entering certain low-paying professions like teaching or social work,” a 2006 report from the American Association of State Colleges and Universities says.
The problem persists, and has only gained momentum during the COVID-19 pandemic, which has shuttered businesses across the US and canceled out millions of jobs in the last year.
“Former students have not been able to get rid of their debt,” said Andrew Pentis, a certified student-loan counselor at Student Loan Hero by LendingTree. “So it grows with interest, sometimes multiplying over years, if not decades.”
Poor education about the dangers of debt
Too often, families of first-generation Americans reviewing financial-aid packages from colleges and universities don’t realize the loans they see being offered must be repaid with interest.
Other times, families think of education loans as “good debt.” They view it as “the price to pay for investing in your future, sometimes by getting a degree from a prestigious, but more expensive, school in order to climb the social ladder, Pentis said.
The government also doesn’t do enough to explain its federal student-loan options. “A large cohort of borrowers leave school without fully understanding the weight of their debt, or their options for repaying it,” Pentis said. “The government needs to take a more direct role in educating students about how to avoid federal student loans, not just offering them without explanation.”
High schools also tend to gloss over the topic, he said.
“The family that’s dead-set on paying six figures to send their child to the prestigious university,” he said, “might not have considered that spending two years at a community college before transferring to that better four-year school could cut their overall costs and borrowing significantly.”
Student debt is on the rise because college education is an industry in the United States, experts told Insider.
“Higher education operates as a free market,” said Chris Mullin, strategy director of data and measurement at the Lumina Foundation, an organization committed to expanding higher-education access.
“As a result,” Mullins said, “the cost a student pays can be set at what the market will bear.”
Peter Cade/Getty Images
The cost of tuition depends on a number of factors
College tuition is not regulated federally, and there are distinctions between the way private and public universities set them, which directly affects how much money students and their families will pay. Private university tuition costs are decided by the institutions themselves, student debt experts told Insider.
“Private schools obviously have more leeway when it comes to setting tuition and fees,” Pentis said.
That’s one of the reasons private institutions like New York University set much higher “sticker prices” on their tuitions than public colleges do. The sticker price is the tuition cost a student can expect to pay before grants, loans, and other types of financial aid kick in, which means not everyone pays the full or same amount for higher education.
And because private institutions have more leverage in setting tuition costs, the decision-making process behind it varies from one institution to another. This can lead to differences between the sticker price and the net price of tuition, with the net price being what a student ultimately pays for their education after financial aid has been applied.
Donna Desrochers, principal researcher at the education program run out of the American Institutes for Research, says higher-cost private universities may simply set those prices with the intention to subsidize the cost of tuition for students receiving financial aid.
“It may be that [for] NYU, or any other school, the higher price is taking some of those full-pay dollars from full-pay students, and trying to reallocate to provide aid for other students,” Desrochers said.
Meanwhile, public-university tuition, which is typically more affordable, is set by individual states.
“Perhaps they have a lower sticker price, and maybe they’re not reallocating as much aid to students,” Desrochers said.
Sticker prices are a type of “complex marketing,” according to Desrochers
“It’s kind of like an airline, right? And people compare it to that, sometimes. You’re paying different prices for different seats, depending on when you purchased it. And so, it’s quite similar,” she said. “They’re trying to attract the class that they want.”
Sticker prices also help institutions maintain their costs of operation, Desrochers said. Public colleges benefit from raising sticker prices, especially when states are contributing less money to higher-education budgets.
“That pays for less of the institution’s costs,” Desrochers explained. “It actually ends up shifting those costs onto students.” Because of the recession brought on by the coronavirus, Desrochers expects to see states investing less in higher education, leading to institutions shifting those costs onto students instead of trying to minimize their spending.
“We see it every time after a recession,” she said.
This means, overall, institutions “give substantial grant aid,” said Mullin, the Lumina Foundation strategy director.
Student debt-relief measures are still needed
Collectively, student-loan borrowers in the US owe more than $1.7 trillion. Trillion with a T. So conversations about how to address that debt will continue.
They will go a long way in helping borrowers “who don’t have much of a chance to end their debt on their own,” Pentis said.
But no relief measure will address the source of the problem: brand-new student loans.
If students and family members don’t recognize the dangers of accumulating large amounts of debt at high interest rates, the pattern of rising student debt will continue, experts warn.
While tuition costs are not a federal decision, the government has two levers to pull to encourage colleges to alter tuition rates, Mullin said.
The government can change the amount of money it makes available to a single student or change who is eligible to get financial aid. That way, students will have fewer restrictions like part- or full-time status to receive federal aid. Schools might then give larger aid packages to students, Mullin said.
Additionally, the government can “provide consumer information” with the goal of disclosing data and supplying comparison points intended to help students make informed decisions about their college education.
“It can inform the public by effectively placing a warning on institutions, like the US Surgeon General’s warning on a pack of cigarettes,” Mullin said.
“This kind of ‘warning’ can take the shape of a requirement, for example, that institutions make public the workforce outcomes of their programs,” he said, effectively showing students what kind of return on investment they can expect after graduating college.
“I will not make that happen,” Biden said of the $50,000 proposal at a CNN town hall. Democrats like Warren, Schumer, and Reps. Ayanna Pressley and Alexandria Ocasio-Cortez doubled down on their support for the higher loan forgiveness.
In Insider’s most recent poll, respondents were asked: “A policy under consideration would forgive an amount of student loan debt held by Americans. Do you support this? And if so, what amount?”
Out of 1,154 respondents:
25% support “forgiving all federal student loans.”
13% support forgiving $50,000 in federal student loans, while 12% support forgiving $25,000.
19% support forgiving $10,000 in federal student loans.
22% of respondents said “I do not support any amount of student loan forgiveness.”
9% of respondents said “I don’t know.”
When it came to party affiliations, respondents varied in how much forgiveness they wanted. Here are some key statistical takeaways:
30% of respondents who said they would probably vote in their state’s Democratic primaries or caucuses in order to support forgiving all federal student loans.
15% of likely Republican voters also support forgiving all federal student loans.
30% of respondents who would “probably participate in another primary or caucus” said they support forgiving all federal student loans
25% of respondents who don’t vote in primaries also support complete forgiveness.
20% of both likely Republican and Democratic voters support $10,000 in federal student loan forgiveness.
20% of likely Democratic voters support $50,000 in forgiveness, as do 9% of likely Republican voters.
Conversely, 40% of likely Republicans don’t support any “amount of student loan forgiveness,” while 10% of likely Democratic voters don’t support any amount of forgiveness.
There was also some division between different age groups:
33% of respondents between the ages of 30 and 44 support forgiving all federal student loans, the highest percentage among age groups.
Conversely, 40% of respondents over 60 do not support any amount of student loan forgiveness, the highest percentage among age groups. Only 11% of respondents ages 18 to 29 don’t support any forgiveness, the lowest percentage among different age groups.
As Insider’s Hillary Hoffower and Madison Hoff previously reported, forgiving student loan debt – even just $10,000, like in Biden’s proposal – could benefit millions of Americans.
Importantly, student loan forgiveness could make a tangible impact in narrowing the racial wealth gap. Black students graduate with more debt than their white peers. Further, around 87% of Black students at four-year colleges take out loans, while 60% of white students take out loans.
SurveyMonkey Audience polls from a national sample balanced by census data of age and gender. Respondents are incentivized to complete surveys through charitable contributions. Generally speaking, digital polling tends to skew toward people with access to the internet. SurveyMonkey Audience doesn’t try to weight its sample based on race or income. Polling data collected 1,154 respondents February 22, 2021 with a 3 percentage point margin of error.
To help the smallest businesses in the country facing financial hardships, President Joe Biden announced on Monday that he will implement changes to provide more equitable access to the Paycheck Protection Program (PPP).
The first round of PPP loans closed in August, and in December, Congress added funding that allowed the second round of PPP loans to open on January 13.
According to a White House fact sheet released on Monday, funding for businesses with fewer than 10 employees is up by 60% compared to last year, while funding to businesses in rural areas is up by 30%, and funding distributed through Community Development Financial Institutions and Minority Depository Institutions is up by more than 40%.
The remaining funds will be available for distribution through March 31.
The changes to the PPP that the president announced on Monday, which included prioritizing businesses with less than 20 employees and expanding the program’s access to underserved communities, are intended to build on the program’s demonstrated improvements.
“Getting our economy back means bringing our small businesses back,” Biden said in an announcement on Monday. “And that’s what we’re going to do and that’s what I’m doing today.”
Here are the five specific changes Biden made to the PPP:
(1) Instituting a 2-week period where only businesses with under 20 employees can apply for the program
To further target small businesses aid, Biden will institute a 14-day period, from February 24 to March 10, where only businesses with 20 employees and under will be allowed to apply for the PPP to “allow lenders to focus on serving these smallest businesses.”
The fact sheet says 98% of small businesses have fewer than 20 employees, and that they are the “Main Street businesses that anchor our neighborhoods and help families build wealth.”
Those businesses often struggle more than larger businesses in accessing relief, according to the fact sheet, which is why the two-week period will be implemented to ensure targeted aid.
(2) Providing more funding for sole proprieters and self-employed individuals
With many businesses without employees being structurally excluded from the PPP’s loan calculations, the president’s new changes will revise the loan calculation formula to ensure it includes sole proprieters, self-employed individuals, and independent contractors.
Also, $1 billion will be set aside for businesses in that category located in low and moderate income areas.
(3) Eliminating the restriction that prevents small business owners with non-fraud-related felonies from receiving PPP aid
According to current PPP requirements, a business is ineligible for the program if the owner has had an arrest or felony conviction related to financial assistance fraud in the last five years, or any other felony within the previous year.
To expand PPP access, Biden will adopt provisions in the bipartisan PPP Second Chance Act, which would eliminate the second felony restriction.
“Anyone who has rebuilt their life after being incarcerated should be celebrated and supported,” Sen. Ben Cardin of Maryland, one of the co-sponsors of the bill, said in a statement. “Congress created PPP to help all small businesses keep their employees on payroll, and there is no reason why a business owned by someone with an unrelated criminal record should be treated any differently.”
(4) Eliminating the restriction that prevents small business owners with student loan debt from receiving PPP aid
Business owners who are delinquent on a federal debt in the last seven years, including student loan debt, are currently ineligible to apply for the PPP.
With millions of Americans holding student loan debt, Biden called on the Small Business Administration to work with the Depts. of Treasury and Education to remove the student loan delinquency restriction, meaning that those who are late on paying back their loans will not be cut out of PPP eligibility.
(5) Ensuring access for non-citizens who are lawful residents to apply for PPP relief
While the PPP requirements specify that any lawful US resident can access the program, a lack of guidance from the SBA created inconsistencies for those using Individual Taxpayer Identification Numbers, making it difficult for them to get relief.
Biden directed the SBA to make clearer guidance so all eligible applicants will not be denied access to the PPP.
“We will ensure every dollar is spent well,” Biden said on Monday. “These changes will bring much-needed, long overdue help to small businesses who really need help staying open, maintaining jobs and making ends meet.”
President Joe Biden has a $1.9 trillion plan and a $1.7 trillion problem. He wants to go big on the former, but, unlike several prominent Democrats, more conservative on the latter.
The $1.9 trillion, of course, is the stimulus plan that Biden was touting in last night’s CNN town hall in Wisconsin. But when asked about proposals to cut into the $1.7 trillion in outstanding student-loan debt (as of the third quarter of 2020), the president expressed caution.
Democratic lawmakers including Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren, and Rep. Alexandria Ocasio-Cortez have called on Biden to use his executive power to cancel up to $50,000 in student debt per person.
“I will not make that happen,” Biden said at CNN’s town hall.
Instead, he said he will go smaller – in fact, that he has to.
“My point is: I understand the impact of debt, and it can be debilitating,” Biden said at the town hall. “I am prepared to write off the $10,000 debt but not $50 [thousand], because I don’t think I have the authority to do it.”
The case against using executive power
One of Biden’s first executive actions was extending the pause on student loan payments through September, providing relief to those with student debt that are struggling financially during the pandemic.
However, when the subject of canceling $50,000 in student loans has come up, he has not gone beyond the $10,000 of relief that he proposed during his presidential campaign. As president, he’s said he does not believe he has the executive authority to do so.
Warren and Schumer were part of a group that reintroduced a resolution to urge Biden to cancel up to $50,000 in a press conference in the beginning of February. At the time, Schumer said, “there’s very little that the president could do with the flick of a pen that would boost our economy more than canceling $50,000 in student debt.”
Press Secretary Jen Psaki responded soon after in a tweet that Biden would look into the prospect of executive action to cancel student debt, but the White House’s position since has been consistent – this is Congress’ job.
During the CNN town hall, Biden said that he would support Congress canceling debt through legislation, which would make the policy harder to undo than an executive action, and that loan forgiveness should depend on whether someone attended a private or public university.
At one point, Biden questioned the fairness of forgiving “billions of dollars of debt, for people who have gone to Harvard and Yale and Penn.”
The president did note that he supports extending student loan forgiveness for those going into public service jobs, like teaching, along with making community college free.
The case for using executive power
Warren and Schumer argue that Biden has the full authority to use his executive power under the Higher Education Act of 1965 to cancel $50,000 in student loan debt.
The Act provides the secretary of Education the authority to “modify, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption,” meaning that since the Dept. of Education holds the debt, Biden can direct the secretary to cancel it.
“The US Department of Education holds that debt and can cancel it, too,” Warren and Schumer wrote in a late January op-ed. “This is exactly what Joe Biden and Kamala Harris should direct their Education secretary to do.”
In addition, a letter to Warren from from the legal director Eileen Connor of Harvard Law School’s Legal Services Center, as well as attorney Deanne Loonin, and Toby Merrill, director of the Project on Predatory Student Lending, says the secretary of Education has full authority under the Higher Education Act to cancel student debt.
In fact, Biden used the Act to extend the pause on student loan payments, and Democrats in the Senate and House, such as Ocasio-Cortez, are pushing for him to do the same with student debt cancelation.
“Cancelling $50,000 in federal student loan debt will help close the racial wealth gap, benefit the 40% of borrowers who do not have a college degree, and help stimulate the economy,” Schumer and Warren said in a statement responding to Biden’s town hall remarks. “It’s time to act. We will keep fighting.”
President Joe Biden effectively rejected on Tuesday evening a Democratic plan put forward by Sens. Elizabeth Warren and Chuck Schumer to wipe out up to $50,000 in student loan debt per borrower. Instead, he said he backed a measure to provide up to $10,000 in forgiveness.
“I will not make that happen,” he said of the $50,000 relief measure. Instead, he told a CNN town hall audience he believed loan forgiveness “depends on whether or not you go to a private university or a public university.”
Biden said he was reluctant to forgive debt for people who attended elite institutions, listing Harvard University, Yale University, and the University of Pennsylvania as examples. He also said each of his three children graduated with a six-figure debt load and paid it off over time.
“I don’t think anybody should have to pay for that, but I do think you should be able to work it off,” he said. “I understand the impact of the debt, and it can be debilitated.”
Instead, the president touted a proposal to provide free community college to families earning less than $125,000 each year. “Everyone should be able to go to community college for free,” he said. “That costs $9 billion, and we should pay for it.”
He later said: “I’m prepared to write off $10,000 in debt, but not 50. I don’t think I have the authority to do it by the sign of a pen.”
The $10,000 loan forgiveness measure does not form part of Biden’s $1.9 trillion rescue package, which is now making its way through Congress. Biden has ordered the Education Department to pause all federal student loan payments through Sept. 30 and waive interest.
Many Democrats are urging Biden to take aggressive action to cut student debt. Schumer and Warren introduced their plan earlier this month, arguing it’s a critical step to rein in inequality and strengthen the economy.
“There is very little that the president could do with a flick of a pen that would boost our economy more than canceling $50,000 in student debt,” Schumer told reporters. “This is one of those things the president can do on his own.”
White House press secretary Jen Psaki said at a news conference on Feb. 4 that the Biden administration would favor legislation from Congress to provide loan forgiveness instead of taking executive action.
