The Elizabeth Warren ally just picked to oversee US student loans could help make her debt-cancelation dream come true

Elizabeth Warren
Sen. Elizabeth Warren (D-MA).

  • Former CFPB head Richard Cordray will lead the Federal Student Aid office, which oversees student debt.
  • Elizabeth Warren helped create the CFPB and was key in nominating Cordray when she couldn’t helm the agency.
  • Warren wants to cancel $50,000 in student debt per person and Cordray has shared her agenda for much of his political career.
  • See more stories on Insider’s business page.

Since she was elected to the Senate almost a decade ago, Elizabeth Warren has been fighting to cancel student debt and hold loan servicers accountable. Now one of her closest allies is in charge of the federal student debt pile, and that could be a big deal.

Richard Cordray, the former head of the Consumer Financial Protection Bureau (CFPB), was selected to head the Education Department’s Office of Federal Student Aid (FSA) on Monday. Few people in Washington DC are better placed to carry out Warren’s vision of mass student-debt relief. That’s because Cordray took the job Democrats wanted Warren to have.

When Warren was a Harvard professor (and occasional blogger), she frequently cited problems within the student-loan system and the need to create something like the CFPB, which would protect consumers financially and ensures they are being treated fairly. That turned into a new federal agency created under President Barack Obama, who wanted Warren to lead it, but in 2011, Senate Republicans blocked her appointment. She ran for Senate instead, becoming a national figure, while Cordray became a close ally as the first head of the CFPB.

During her time in the Senate, Warren worked with Cordray’s bureau to conduct investigations into predatory lending practices. Now as head of the FSA, Cordray will be tasked with overseeing the government’s $1.5 trillion student loan portfolio through disbursing loans and grants, along with monitoring student-loan servicers and implementing relief and repayment programs.

@RichCordray was a fearless @CFPB leader who forced big financial institutions to return $12 billion to people they cheated,” Warren wrote on Twitter on Monday. “I’m very glad he’ll be protecting student borrowers and bringing much-needed accountability to the federal student loan program.”

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Richard Cordray.

What Cordray could do on student debt

In a statement after his appointment was announced, Cordray said he was looking forward to creating “more pathways for students to graduate and get ahead, not be burdened by insurmountable debt.”

He will be tasked with sorting through claims from thousands of defrauded borrowers who filed for debt relief, along with ensuring the smooth implementation of loan collections once the pause on student loan payments through September is lifted – although Cardona said on Monday that extending the payment pause is “not out of the question.

While Cordray has not yet commented on wiping out $50,000 in student debt for each borrower, which Democrats continue to call for, he told MarketWatch last year that under the Biden administration, he expected the CFPB and the Education Department to work more closely on student-loan issues.

At the CFPB during the Obama years, Cordray made oversight of student loan servicers his priority. The agency has returned more than $75o million to student loan borrowers since 2011 over debt collection complaints, and in early 2017, the bureau sued Navient, the largest student loan servicer in the US, in a lawsuit that is still ongoing, arguing that Navient misled students into taking on loans they cannot pay off.

At a late April hearing, Warren called for the government to fire Navient, and for Navient to fire its chief executive officer, after accusing Navient for over a decade of abusing the student loan system.

In 2019, Cordray wrote a guest essay in The Plain Dealer, an Ohio newspaper, speaking out against for-profit colleges. “I hate how these hollowed-out businesses and subpar colleges are cheating consumers, employees and whole communities,” Cordray wrote.

Education Secretary Miguel Cardona has already canceled some debt for borrowers defrauded by for-profit schools, and Warren has conducted numerous investigations into the failures of the for-profits Corinthian Colleges and ITT Technical Institutes.

The FSA head’s seat has been vacant since March, when Mark Brown, former head of the office appointed by Education Secretary Betsy DeVos in 2019, resigned amid pressure from labor groups and lawmakers. Warren wrote in a tweet that his resignation was “good for student borrowers.”

Cordray told Marketwatch in November that, as CFPB head, his approach with the Education Department had been one of “close cooperation” but “that was all nixed when Betsy DeVos came into office.” Speaking of the outlook for a Biden administration, he said he thought the CFPB and Education Department would likely go back to working closely together.

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Freezing student-loan payments saved just $2,000 per borrower, report finds

Average student loan balance
  • Student-loan payments are paused through September, with national savings of $82.7 billion on interest payments.
  • A report by Upgraded Points found this saved each borrower an average of $2,001 in interest.
  • California saved the most interest overall at over $8 billion – 10% of the national total.
  • See more stories on Insider’s business page.

President Joe Biden extended the pause on student loan payments through September 30, and while the inclusion of the 0% interest rate on those payments provided financial relief, it didn’t add up to much for the average individual.

A report released on April 5 by Upgraded Points – a travel research group – found that since student-loan payments were originally paused under the CARES Act in March, the average interest saved per borrower was $2,001, and the national average for principal paused per borrower was $34,971. The state that saved the most interest overall was California at over $8 billion (10% of the national total), with New York slightly behind at $5.2 billion in interest saved.

The report noted that while national averages and total state savings were high, “on an individual borrower level, average borrowers only saved a couple thousand dollars in interest over the 12 months. While those couple thousand dollars could have been imperative in keeping borrowers in the black during pandemic-related hardships, these borrowers are still far from climbing out of the holes they dug in college. “

When the report analyzed the states that saved the most interest per 100,000 people, DC, Georgia, and Maryland were the top three locales, which results from a combination of small populations and high savings. On the other hand, the top three states with the lowest savings per 100,000 people were Wyoming, Utah, and Alaska because although those states have smaller populations, they also generally have lower principal debts and therefore fewer interest savings.

Here are the other main findings of the report:

  • The national total interest savings is about $82.7 billion;
  • Similar to most interest saved per 100,000 people, DC, Georgia, and Maryland saved the most interest per borrower, as well;
  • And North Dakota, Iowa, and Wyoming were the states that saved the least amount of interest per borrower.
UP: National impact of student loan freeze
Via Upgraded Points, the national impact of the student loan freeze.

While the payment pause and interest freeze have been instrumental in helping borrowers financially during the pandemic, the student debt crisis still looms far beyond the pandemic, with 45 million Americans holding $1.7 trillion in student debt.

Biden has already acted on the crisis by canceling debt for borrowers defrauded by for-profit schools and borrowers with disabilities, but lawmakers and advocacy organizations continue to call for the president to cancel $50,000 in student debt per borrower to lift the debt burden.

Sen. Elizabeth Warren of Massachusetts is one of the leading lawmakers calling for student debt cancelation, and she said on Twitter on April 17 that borrowers need relief now.

“The whole student loan debt system is broken, and it’s placing a massive burden on tens of millions of people,” Warren said. “They need immediate relief. And we need big, structural change to make higher education within reach for every family.”

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2 GOP-led states are attempting to bar protesters convicted of crimes from receiving student loans and jobless aid

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  • The Minnesota Legislature introduced a bill to prevent protestors convicted of crimes from getting student loans.
  • This comes at a time when students are protesting the killings of George Floyd and Daunte Wright.
  • A bill in Indiana also prevents people convicted of protest-related crimes from getting jobless aid.
  • See more stories on Insider’s business page.

In the 11 months since the Black Lives Matter movement emerged across the country, scores of Republican-led states are attempting to crack down on protests by introducing what they call “anti-riot” legislation, The New York Times reported.

GOP lawmakers in two of those states – Minnesota and Indiana – want to step up penalties for protesters, seeking to bar people convicted of crimes during a protest from receiving student loans and unemployment aid.

On April 8, the Minnesota Legislature, led by Republican Sen. David Osmek, introduced a bill that would make anyone convicted of a protest-linked crime ineligible to receive student loans, mortgage assistance, and many other forms of state aid.

According to the bill text, a person convicted of a crime at any protest or civil rally “is ineligible for any type of state loan, grant, or assistance, including but not limited to college student loans and grants, rent and mortgage assistance, supplemental nutrition assistance, unemployment benefits and other employment assistance, Minnesota supplemental aid programs, business grants, medical assistance, general assistance, and energy assistance.”

This bill is particularly significant given the recent instances of police brutality in Minnesota, and the protests that have emerged around them. On Tuesday, Minneapolis police officer Derek Chauvin was found guilty of murder and manslaughter in the death of George Floyd. His killing last May touched off a wave of Black Lives Matter demonstrations across the nation.

As the Minnesota Daily reported, thousands of college students participated in protests in the state after Floyd’s death, and some University of Minnesota students are still awaiting their court date after being arrested for protesting in November.

And last Sunday, a Brooklyn Center police officer killed 20-year-old Daunte Wright, prompting further protests and arrests of students in the area.

Minnesota Rep. Ilhan Omar spoke out against the bill shortly after it was introduced, saying that protesting is fundamental to the nature of this country.

“This particular provision (the bill) is created because, whether you want to say it or not, it’s created because there is a particular annoyance we have with a particular group of people who have decided to organize themselves because they are tired of being invisible and tired of being ignored,” Omar said.

The bill in Indiana mirrors the one Republican lawmakers put forward in Minnesota. It would prevent people convicted of protest-related crimes from tapping into unemployment benefits, student loans, public health insurance, and public housing.

It would bar those convicted of being part of an unlawful assembly from holding a state or local government job as well.

Other states are following with their own anti-protest bills. In Florida, Gov. Ron DeSantis on Monday signed what he called an “anti-riot” bill into law which grants civil immunity to drivers who hit protesters and shields police departments from budget cuts

Civil rights advocates say that laws are already in the books to stave off riots and that Black Lives Matter demonstrations rarely turn violent. A report late last year from the Armed Conflict Location & Event Data Project, a nonprofit group, indicated that the vast majority (93%) of racial justice protests were peaceful.

The Washington Post analyzed 7,305 demonstrations last year, and found that 96% of them did not lead to destruction of property or violence against police officers.

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Student-loan borrowers are battling for relief even after Biden’s administration canceled $2.3 billion: ‘We were taken advantage of’

college graduation
  • Biden’s Education Department has canceled billions in student debt, but trillions remain outstanding.
  • Even if you qualify for relief, you may not know about it, or you could get a 0% rate of forgiveness.
  • Borrowers told Insider there’s a lack of clarity, and experts say much more needs to be done.
  • See more stories on Insider’s business page.

Nearly 45 million people in the US have outstanding student-loan debt. That adds up to a $1.7 trillion problem.

President Joe Biden, who promised during his campaign to immediately tackle the crisis, has moved to do so via the Department of Education, clearing billions of dollars in debt in just a few months.

Biden’s education secretary, Miguel Cardona, has canceled debt for about 72,000 borrowers defrauded by for-profit schools – about $1 billion worth – and moved to shake up how defrauded students go about loan forgiveness.

Cardona also waived a paperwork requirement to relieve loans for borrowers with disabilities. This affected 230,000 borrowers and canceled debt for 41,000 of them, providing $1.3 billion in student-loan relief.

But Biden hasn’t taken the actions he promised as a presidential candidate, which include canceling $10,000 in student debt per person. And while Cardona’s $2.3 billion in cumulative relief over three months might seem impressive, it comes to less than 0.2% of the outstanding student loans swimming through the system.

Finally, even if you qualify for debt relief, there’s no guarantee you’ll get it. Insider talked to borrowers directly affected by Cardona’s actions, and they’re not out of the woods yet. Experts say the student-debt crisis isn’t close to being seriously tackled.

The Education Department did not respond to Insider’s request for comment.

Defrauded borrowers still can’t get relief

After about five years of waiting, Alexander Cockerham was approved for student-loan forgiveness.

From 2007 to 2009, Cockerham, now 38, attended the for-profit ITT Technical Institute, where he got an associate’s degree. In 2015, the Securities and Exchange Commission sued ITT, accusing it of deceiving investors about late-payment rates and student-loan defaults, and the federal government cut off its access to federal loans and grants. The institution shut down shortly afterward.

Cockerham told Insider that he took out about $42,000 in private and federal loans to attend the school. He’s paid off his private loans but still has about $26,000 in federal loans outstanding.

So he applied for student-loan forgiveness in late 2015 through the Department of Education’s “borrower defense to loan repayment” program. Cockerham got his verdict in 2020.

“I was told I was approved for student-loan forgiveness but at only at a certain rate, because they said they felt that I did receive some benefit from my education there and that I wasn’t completely defrauded,” he said.

His forgiveness rate was 0%. “So absolutely nothing was forgiven at all,” he said.

In September, 48 state attorneys general and the Consumer Financial Protection Bureau secured more than $330 million in private student-loan forgiveness for 35,000 former ITT Tech students.

If the full amount of his federal loans were relieved, Cockerham said, he’d try to finally buy a house. He’s been married for nearly a decade and just had his first child. He said he’d tried looking at homes in the past, “but that student-loan debt just hung heavy over my head.” It turned away financial servicers, who told him he needed to pay down more debt.

Alexander Cockerham
Alexander Cockerham.

How the government can decide on a 0% forgiveness rate

The Trump administration would compare a defrauded borrower’s income level to that of people in similar programs, alongside other factors, to determine how much of the loan to discharge. Betsy Mayotte, the president and founder of the Institute of Student Loan Advisors, said that led to some people being approved for the program but having 0% of their loans discharged, just like what happened to Cockerham.

Mayotte told Insider that the Trump administration “was very much opposed to the whole idea of borrower defense in the first place.” She said she’d worked with people who’ve been waiting three or four years for their applications to even be processed.

“To tell somebody, ‘Yup, we agree, you were defrauded by your school, and you still have to repay all of your debt’ is insane,” she said. “I mean, there’s no other industry where they do that.”

She said the recent action from the Biden administration made her “so happy,” as it would be going back and discharging the full amount of partial discharges. People who are still pending won’t be affected though, Mayotte said.

Cockerham, who might be affected by this latest discharge, said: “I’ve only seen what I’ve heard in the news. I haven’t heard anything from the newest secretary of [education] or the Biden administration.”

‘I wish that they would have someone that would go over this a little more in depth’

Joshua Kronemeyer, 27, still has student debt from spending a semester and a half at the Art Institute of Phoenix at 16 years old.

Just getting relief from those loans – racked up at a now defunct for-profit member of the Art Institutes – would cut his student-loan debt by a fifth, he told Insider.

“Honestly, I wish that they would have someone that would go over this a little more in depth, as far as the hole you’re digging yourself,” Kronemeyer said.

Joshua Kronemeyer
Joshua Kronemeyer.

Kronemeyer may be eligible to get his loans discharged; some former Art Institute students are eligible to get their loans canceled as the result of a lawsuit against the for-profit school and the Education Department. That suit argued that the department had illegally provided loans to Art Institute schools that weren’t accredited at the time, so borrowers shouldn’t have to pay them back.

Kronemeyer said that he was planning to look into debt relief soon but that he anticipated his application would be denied the first time around, since he’d heard of that happening to others in the same position.

Borrowers with disabilities who are eligible for relief struggle to access it

Cardona’s action to relieve the burden for borrowers with disabilities shook up a three-year monitoring program in which borrowers had to submit income information every year to show that they didn’t exceed a certain threshold.

Called the Total and Permanent Disability Discharge program, it would reinstate loans if a borrower’s income rose above that level or if the borrower failed to submit income information.

Laura Speake, 26, might qualify for the program. They told Insider that they had about $30,000 in debt in both federal and private loans. They left college after three years but hope to return and finish a degree. She hopes to someday go to grad school and work in the book industry, perhaps as a small-town librarian.

But she has a concern with getting the loans discharged under the program: It’s a disincentive for continuing education.

Laura staff photo
Laura Speake.

The Federal Student Aid website says that “if you are approved for TPD discharge based on SSA documentation or a physician’s certification, and you request a new Direct Loan, Perkins Loan, or TEACH Grant during your 3-year post-discharge monitoring period, you must resume repayment on the previously discharged loans.”

“I’m not lazy. I’m not looking for an easy way out,” Speake said. “You know, I want to work. I want to learn. I want to make a difference in the world. I want to do my part. I want to pull my weight.”

Experts told Insider that while Cardona’s action on the program was worthwhile, it shouldn’t have been necessary in the first place.

Bethany Lilly, the director of income policy at The Arc, an organization advocating for people with disabilities, told Insider that the Social Security Administration already has information verifying people’s incomes, so there’s no reason the Education Department should have required that information.

The department has “some very confusing and illogical standards that really hurt the beneficiaries,” Lilly said.

To improve the process for forgiving student debt for borrowers with disabilities, Lilly said, the department should make it “as automatic as possible” and work with the SSA to permanently remove the requirement to provide income documentation.

Persis Yu, a staff attorney at the National Consumer Law Center and the director of its Student Loan Borrower Assistance Project, told Insider that Cardona was correcting something that shouldn’t have occurred in the first place.

“I think it’s disappointing that when the suspension period was put in place in the first place that these borrowers weren’t captured,” Yu said, referring to the 41,000 borrowers who had missed their paperwork. “I’m not sure how that happened, but it seems pretty obvious in retrospect, right?”

Yu also said that the design of the program was flawed from the start. “The monitoring period itself is a huge problem and a huge barrier for people with disabilities that qualify for the program actually accessing the program,” she said. “So that is certainly again exacerbated by the pandemic, as so many things have been. But it is in itself just a feature that doesn’t work.”

A ‘massively unimpressive’ amount of canceled debt

Alan Collinge, the founder of Student Loan Justice, told Insider that compared with the scale of the student-debt crisis, canceling debt for defrauded borrowers and borrowers with disabilities is “massively unimpressive.”

“We’re in a pandemic, and we’ve lost tens of millions of jobs,” Collinge said. “The people who are hurt the worst tend to be the people who have student-loan debt.”

Democratic lawmakers have been keeping the pressure on Biden to cancel up to $50,000 in student debt per person. Sen. Elizabeth Warren of Massachusetts, who campaigned on the $50,000 figure, said in a press call last month that executive action was the quickest way to get it done.

In early April, Biden’s chief of staff, Ron Klain, told Politico that the White House was “looking into” its legal authority to cancel $50,000 per person. Shortly afterward, the White House press secretary, Jen Psaki, said that option wasn’t being ruled out. And the Education Department released data requested by Warren showing that $50,000 cancellations would wipe out 84% of the federal student-debt pile.

Insider polling from February asked how much debt respondents would want canceled. The most popular option among the 1,154 respondents wasn’t Biden’s $10,000 proposal (19% supported that amount) or Warren’s $50,000 (13%), or no forgiveness at all (22%) – a quarter of the respondents said they supported forgiving all student loans.

As for Cockerham, he’s working in a job he landed while attending community college to study computer science, a program he turned to after his ITT degree didn’t bring him any job offers. His unpaid loans are still on his portal at Navient, the private entity the government has hired to manage some federally backed loans.

“We’re hard-working Americans, like everyone else. We were taken advantage of. And we feel that what was done to us was just completely unfair,” he said. “We need some help, and that forgiveness, for a lot of us, would just be a lifeline.”

On Tuesday, when Warren, as the chair of the Senate Subcommittee on Economic Policy, held her first hearing on student-debt relief, she invited Navient CEO John Remondi.

Citing a decade of allegations of abusive and misleading practices, she said, “The federal government should absolutely fire Navient, and because this happened under your leadership, Navient should fire you.”

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Illinois could pay off up to $40,000 of your student loans to help you buy a house

House Sold
  • The Illinois SmartBuy program pays off up to $40,000 in student loans to help buyers buy a house.
  • The program also provides $5,000 to be used for a down payment or closing costs.
  • With house prices reaching record highs, the program may help increase home equity and affordability.
  • See more stories on Insider’s business page.

If you live in Illinois and have outstanding student loans, the state could pay off some of your debt to help you buy a house.

The SmartBuy program, offered by the Illinois Housing Development Authority, helps anyone who wants to buy a home in Illinois by paying off up to $40,000 in student debt, or a loan amount equal to 15% of the home purchase price. According to the Chicago Tribune, between the start of the program in December and early April, it has paid off an average of $24,100 in student debt for each buyer, and people from outside the state have even been inclined to move there to make use of the program.

“I’m getting a lot of interest,” Chanon Slaughter, a vice president of mortgage lending at Guaranteed Rate, told the Tribune. “I am getting folks literally saying, ‘I want to move back to Chicago for this program.'”

Along with paying off student loans, the program also provides $5,000 that can be used for a down payment or closing costs.

There are a few catches, though: A buyer’s outstanding student debt must be paid in full at the time of the home purchase, and if the buyer chooses to sell the house within three years of the purchase, they must repay a portion of the student loan assistance. The other catch is that Illinois has allocated $25 million to the program, so it’s only expected to help between 600 and 1,000 homebuyers.

Here are the program’s eligibility requirements, according to its website:

  • The buyer must have at least $1,000 in student loans;
  • The buyer’s FICO “mid-score” must be 640 or higher;
  • The buyer’s income must be under or at the limits for the county where the property is located, which can be found on the IHDA mortgage website;
  • And the assistance cannot be applied retroactively – the buyer must be buying a new primary residence.

This program has the potential to tackle two simultaneous affordability crises – the $1.7 trillion pile of student debt and the skyrocketing price of the median house since the housing market reopened during the pandemic, exacerbated by a serious inventory shortage. It isn’t the only experimental economic program being offered in Illinois, either. Evanston, a city in Illinois, approved spending on March 22 for a $10 million reparations fund that compensated Black residents through $25,000 housing grants.

Insider previously reported that the average home sale price hit a record high March, and the spiking housing costs have concerned housing experts, like Redfin Chief Economist Daryl Fairweather, who said in a statement that they could be putting homeownership out of reach for too many Americans.

“That means a future in which most Americans will not have the opportunity to build wealth through home equity, which will worsen inequality in our society,” Fairweather said.

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A quarter of Americans support forgiving all federal student-loan debt

College debt
Student-loan debt reached a national high of $1.5 trillion in 2019.

  • Democrats have been going back and forth on how much federal student-loan debt to forgive.
  • President Biden supports up to $10,000, while some progressive Dems are calling for $50,000.
  • A new Insider poll found a quarter of Americans support forgiving all federal student loans.
  • Visit the Business section of Insider for more stories.

Recently, Democrats have been clashing over how much federal student-loan debt to forgive.

Sens. Elizabeth Warren and Chuck Schumer called for $50,000 in student loan forgiveness, but President Joe Biden essentially rejected that plan, throwing his support behind $10,000 in forgiveness.

“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.

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I am a mother of two kids, and my student debt is crushing my family. Forgiving student loans will help us escape the cycle of poverty.

Chuck Schumer cancel student debt
Senate Majority Leader Chuck Schumer speaks during a press conference about student debt outside the U.S. Capitol on February 4, 2021 in Washington, DC.

  • Biden has pledged to forgive $10,000 of student loan debt, but it is not enough. 
  • After graduating college, I was hit by legal fees from my divorce which caused me to default on my loans. 
  • I went to graduate school to get a higher paying job, but now the interest on my loans is burying me. I want a better future for my kids. 
  • Emily Withnall is a freelance writer and fellow with Community Change. She lives in Missoula, Montana. 
  • This is an opinion column. The thoughts expressed are those of the author. 
  • Visit the Business section of Insider for more stories.

Money to move out was at the top of my oldest teen’s Christmas list this year. Alex is a senior in high school and should be applying to college. But due to my own crippling student loan debt, my kids’ choices are limited. For now, Alex is choosing not to attend college for the foreseeable future. This choice hurts.

I don’t have the resources to give Alex money to move out. Instead, on Christmas morning, I looked on with mortification as my kids unwrapped identical gifts, their faces shining with delight. They were excited to be receiving new sheets.

My kids have had the same old sheets covered with pastel butterflies for over twelve years. As a single parent, paying my bills and staying out of credit card debt while raising two kids is an unrelenting high-wire act. Paying for dance or Taekwondo means I don’t replace our towels and sheets very often. We eat a lot of beans and rice. College accounts and retirement funds are the stuff of fantasy.

Like many other Americans, I’m what you’d call a permalancer: I juggle part-time jobs and short-term contract gigs to keep myself afloat. In 2018, I made a grand total of $18,811 for the year. In 2019, I managed to make $22,908. Going without is my main strategy, but this approach can’t solve my student loan debt. Repaying the $81,000 I owe feels utterly impossible.

Forgiving only $10,000 isn’t enough

As a senator in 2005, President Joe Biden supported a bill that expanded the amount of loans students could borrow while simultaneously making it nearly impossible for people with enormous student loan debt to declare bankruptcy. This bill helped loan companies but contributed to what has been a mounting student loan crisis for the past 15 years. Senator Elizabeth Warren, who opposed this bill in 2005, is once again pushing Biden to reverse this legislation. So far, Biden has only pledged to forgive $10,000 of everyone’s student loans

In early February, Sen. Warren, Sen. Chuck Schumer, and Rep. Ayanna Pressly reintroduced a student loan forgiveness resolution that calls on Biden to forgive $50,000 for each federal student loan borrower through executive action. During a town hall on Tuesday night, however, President Biden claimed he lacked the authority to forgive more than $10,000 per borrower – the senators and representatives behind the proposed resolution maintain that Biden does have the authority.

As a borrower, I call on President Biden and Congress to go further. Forgiving $10,000 of my student debt doesn’t even cover the interest I’ve accrued. And while forgiving $50,000 would be a significant step in the right direction, many borrowers would still struggle under the weight of their remaining balances.

I was buried in legal fees before I could pay off my loans 

I graduated from a small college in New Mexico in 2007 with a total of $24,950 in student loan debt. The average student loan debt for an undergraduate degree in the US is $25,921, so I was happy I’d kept it under the average, while raising two children under the age of four. I got divorced six months after graduating, but soon secured a stable job that paid $26,000 a year.

When my grace period ended and I started making small payments towards my student loans, my abusive ex-husband began taking me to court. His court filings were aggressive and frequent – roughly every four months, for five years. I soon realized I would need an attorney to deal with the onslaught of litigation. 

Retaining legal counsel is costly, but with careful budgeting I managed to pay off over $60,000 in legal debt. Still, there was nothing left for student loans, and I began defaulting on them. One loan company even sued me. They stipulated that I face them in court or add thousands of dollars onto what I already owed. I was no match for a student loan company, so I took the latter option and added more debt to my debt.

In the 1960s college tuition was low enough that a student could work part-time and easily pay it off. With stagnant wages, fewer salaried jobs, and soaring costs of living, this is no longer true. Student loans make a promise they can no longer keep: if we invest in our future, we’ll reap the rewards. But this future doesn’t exist anymore. Those of us who strive to pay off our loans against all odds are often pulled under when any other financial predicaments crop up. For me, it was vexatious litigation, but for others it is medical emergencies or car trouble.

When I looked for higher-paying work, every job in my field required a master’s degree. I looked for months before deciding grad school was my ticket to financial security. When I got in, I moved myself and my kids – then six and nine years old – to Montana. I received enough aid to cover tuition, but still needed to take out more loans to cover rent and bills. In 2015, I finished graduate school owing $43,441. Despite the higher cost of living in Missoula, Montana, I was able to keep my debt under the average of $66,000 that borrowers typically accrue for a master’s degree. As a single parent, I worked as much as I could outside of classes to make this happen.

Five years later, the interest rates on my loans have snowballed and I now owe almost $81,000 – almost $13,000 more than I took out in the first place. And the numbers keep rising.

Student loan debt is tied to inequality

As reported in 2020, women hold two-thirds of student loan debt. Additionally, a 2019 study reveals that student loan debt is far greater for Black Americans: “The typical Black student borrower took out about $3,000 more in loans than their White peers; yet 20 years after starting school, the typical Black borrower owed about $17,500 more than their White peers. In that time, nearly half of White borrowers were student debt free (49 percent), while just a quarter of Black borrowers were able to pay off all of their loans (26 percent).”  

Not only would forgiving student loans keep more people housed and fed, but it would also help narrow the gender wealth gap and the racial wealth gap. 

Naysayers argue that student loan forgiveness wouldn’t be fair to people who have paid their loans off, but it’s a move that would boost the economy and benefit everyone. A 2018 report concludes that universal student debt forgiveness would increase the GDP by roughly $100 billion per year and would result in the creation of up to 1.55 million jobs per year. As the Debt Collective, a union organizing around debt forgiveness, writes, “Most people are not in debt because they live beyond their means; they are in debt because they have been denied the means to live.” This should not be a partisan issue.

While my kids received more than just sheets for Christmas, I remain troubled by their delight in a basic household item. I want more for them. I want Alex to be able to attend college, but I don’t want either of my kids to be trapped by a predatory system designed to keep them pinned down by crippling debt. Full student loan forgiveness would give families like mine more opportunities, and help my kids escape the cycle of poverty.

Read the original article on Business Insider

Forget fairness: Canceling all student debt makes great economic sense for America – here’s why

student loans graduate
Countless Americans are burdened with student loan debt that can hold them back from buying homes or starting businesses.

  • Paul Constant is a writer at Civic Ventures, a cofounder of the Seattle Review of Books, and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In this week’s episode of Pitchfork Economics, Hanauer and Goldstein spoke with Fenaba Addo, an associate professor at University of Wisconsin Madison whose research focuses on racial disparities and student debt.
  • Addo says her research has uncovered, like many economic disparities in the US, that black student loan borrowers are disproportionately saddled with higher average loan balances as well more issues with defaults and delinquencies.
  • She says forgiving the $1.5 trillion in student loan debt would serve as a direct re-investment into the economy, as more graduates would then be able to afford cars and homes and start their own businesses.
  • Visit Business Insider’s homepage for more stories.

The word “fairness” comes up a whole lot when we talk about the incoming Biden Administration’s plans to pass some form of student loan forgiveness. Supporters argue that it isn’t fair that the current generation has to pay tens of thousands of dollars more for a decent college education than generations before, while wages have stayed largely flat and other expenses have skyrocketed. Some opponents argue that it’s not fair to forgive student loans when they have already worked hard to pay back their own loans.   

It’s easy to get caught up in the morass of fairness arguments. 

As sharing animals, humans are hard-wired to be obsessed with the concept of fairness. But ultimately, the student loan forgiveness debate is an economic issue – and it makes great economic sense to cancel student debt.

We’ll get back to that in a bit, but first let’s consider the size of the problem. In this week’s episode of “Pitchfork Economics,” Nick Hanauer and David Goldstein spoke with Fenaba Addo, an associate professor at University of Wisconsin Madison whose research focuses on racial disparities and student debt.

Addo points out that “approximately 45 million borrowers” owe more than $1.5 trillion in college loans. And while a few disingenuous pundits would like to claim that figure is largely made up of people spending above their means to attend overpriced elite institutions, the truth is that only six percent of student loan borrowers owe more than $100,000

“A lot of people with student loan debt actually are concentrated towards the lower end of the student debt distribution – so, below $20,000,” Addo said. 

Read more: This couple paid off $114,000 of debt in less than 2 years – then saved up $431,000. Here are the side hustles they started and how much money they made from each one.

Like so many economic disparities in America, Addo’s research finds that student loan debt doesn’t land evenly along racial lines.

“Black borrowers in particular have higher average loan balances,” Addo said. “They tend to accumulate more debt, and then they have higher problems with defaults and delinquencies. So we see a disproportionate number of black borrowers with student loan debt.”

So what student loan debt cancellation plans are on the table right now? Addo says several ideas are wrestling for primacy. 

“The Biden [administration] is proposing a $10,000 debt cancellation for individuals with student loans that would phase out at an annual income of $125,000,” Addo explained, adding that Biden’s team is considering only targeting forgiveness for debts incurred for those who attended public universities. 

She notes that more progressive politicians like Senators Bernie Sanders and Elizabeth Warren, are proposing the cancellation of “$50,000 across the board” per person – no matter what your income or where you went to school. All the other plans, Addo said, “kind of fall in between those.” 

Read more: Meet the people making the ‘financial independence, retire early,’ or FIRE, movement more inclusive by challenging norms around saving, debt, and living frugally

So how much of America’s roughly $1.5 trillion dollars in student debt does Addo believe should we forgive? 

“You know what they say: Go big or go home,” Addo said. “I think we need to cancel all of it. We admit that the current system isn’t working and has failed many people. As a society we need to fix something. And one of those fixes should be removing this debt.”

It should be noted that Addo’s proposal isn’t that far to the left of the policy that the average American wants. A recent Data for Progress poll found that more than half of all Americans – 51% – support a proposal to forgive $50,000 in debt for any American earning under $125,000 per year. More than two thirds of all respondents approve of a program that forgives $10,000 in debt for every year the borrower works in community or national service. College debt cancellation is broadly popular

That explains why forgiving student debt makes good political sense. And at the end of this week’s episode of “Pitchfork Economics,” you can hear a compelling case for why it makes good economic sense. 

Podcast listeners called in from all around the country to explain what they’d do if their student debt was cancelled. Bobby from North Carolina would use that extra money to help his young adult daughters, who are struggling to find work in the pandemic, pay their rent. A 40-year-old woman named Amy from Dallas can’t afford to go back to school to learn how to do the work she loves because it would endanger any hope she has of scraping together a retirement. 

An educator in a wealthy, good-paying public school district who’s paying off a master’s in teaching called in to say that if his debt was canceled he’d “be able to teach in a school district that needs really effective teachers, but unfortunately does not have the pay structures in place to pay a livable wage.” 

A listener named James from Los Angeles admitted that now that he’s in his 50s and he’s paid most of his student loans off, debt cancellation wouldn’t affect him that much. But James also identified what would’ve happened had he not had that debt on his back for so many years: It “would have improved my credit standing and my purchasing ability quite significantly, because I’ve been underemployed for a very long time.”

Read more: A couple who paid off $111,000 in debt in less than 5 years share the budgeting plan they used to stay on track

Student debt forgiveness makes great economic sense because it would function as a direct stimulus investment in the economy. 

Unlike the Trump tax cuts, which handed $1.9 trillion to the wealthiest Americans and corporations, that $1.5 trillion of forgiven debt would immediately begin circulating through the economy, helping the nation recover from the coronavirus recession. 

Unburdened by decades of debt, people would buy cars and homes. They’d spend money in their communities, creating jobs. Rather than writing checks to simply pay the exorbitant interest on a loan they incurred when they were 18 years old, they’d start businesses and take chances that would create economic opportunities for others. 

When Addo says she’s in favor of going big, she’s not just talking about the cost of forgiving debt – she’s thinking about the benefits we would all enjoy from its forgiveness.

Read more on Pitchfork Economics.

Read the original article on Business Insider