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The Federal Government Owns 92% of Student Debt. Will Biden Wipe It Out?

Photograph Source: DonkeyHotey – CC BY 2.0

Washington is abuzz with ideas for actions the Biden-Harris administration could take that would not require Congressional approval. One of the buzziest: cancellation of student debts owed to the federal government.

The U.S. Department of Education owns about 92 percent of the $1.6 trillion in U.S. student loans and many legal scholars say the Department has the authority to wipe these burdens away with the stroke of a pen.

“This is the single most effective executive action available to provide massive consumer-driven stimulus,” Senator Elizabeth Warren wrote in a Washington Post op-ed.

Back in September, Warren joined with Senate Democratic Leader Chuck Schumer to call on the next president to cancel up to $50,000 in federal student debt for every borrower in the United States. That would eliminate loan obligations for more than three-quarters of the approximately 44 million Americans with student debts.

Melezia Figueroa is one of those many millions. The first in her family to graduate from college in the United States, she worked hard and was lucky enough to receive scholarships. But as the cost of living soared and wages stagnated, she still had to take out tens of thousands of dollars in loans.

“As a working adult in this country, I’ve had to decide between daily food, medicine, shelter, and paying off this debt — and daily survival will win out every single time,” she said on a November 13 webinar organized by the Congressional Progressive Caucus Center.

Now the National Coordinator of the Student Debt Campaign, Figueroa explained that debt cancellation would help her generation “fulfill our potential and contribute not just what little we can, but the best we can to society.”

Both Figueroa and Warren point out that student debt cancellation would help narrow the racial wealth gap. On average, Black students have to take out larger loans to get through college than their White peers. A National Center for Education Statistics study reveals that Black Bachelor’s degree graduates have 13 percent more student debt and Black Associate’s degree graduates have 26 percent more than White graduates with those degrees.

Black graduates also face greater challenges in paying off their student debt because of their lower average incomes. Black Bachelor’s degree and Associate’s degree holders earn 27 percent and 14 percent lower incomes, respectively, than Whites with the same degree.

Now the National Coordinator of the Student Debt Campaign, Figueroa explained that debt cancellation would help her generation “fulfill our potential and contribute not just what little we can, but the best we can to society.”

Both Figueroa and Warren point out that student debt cancellation would help narrow the racial wealth gap. On average, Black students have to take out larger loans to get through college than their White peers. A National Center for Education Statistics study reveals that Black Bachelor’s degree graduates have 13 percent more student debt and Black Associate’s degree graduates have 26 percent more than White graduates with those degrees.

Black graduates also face greater challenges in paying off their student debt because of their lower average incomes. Black Bachelor’s degree and Associate’s degree holders earn 27 percent and 14 percent lower incomes, respectively, than Whites with the same degree.

Sarah Anderson directs the Global Economy Project and co-edits Inequality.org at the Institute for Policy Studies. Margot Rathke is an IPS Next Leader.

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