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Student loan repayment cliff: '30 million will have a bill coming due,' Sen. Warren warns
Democratic lawmakers continue to pressure President Biden to extend the student loan pandemic payment pause and enact student loan forgiveness.
"Tick tock, tick tock — over 30 million Americans will have a bill coming due in about two months," said Senator Elizabeth Warren (D-MA) during a press conference. "The payment pause is running out on student loan debt payments. The size of these payments for many borrowers is the size of their rent, their car payments, groceries, child care — that's going to put a lot of people making hard choices."
Surveys show that most borrowers, particularly women, do not feel ready to resume payments when the pause concludes at the end of September.
Federal actions amid the pandemic will lead to roughly $100 billion in total student loan forgiveness between March 2020 and September 2021, according to Education Department (ED) data and analysis from experts, providing a financial lifeline to the roughly 45 million student loan borrowers owing more than $1.7 trillion in outstanding federally-backed debt.
The payment pause, first enacted by former President Donald Trump in March last year and extended by President Biden, has thus far "proven to be one of the most effective steps the government has taken to help Americans get through the health and economic crises created by COVID-19," Senate Majority Leader Chuck Schumer (D-NY) said at the press conference.
But when the pause expires, he added, "the average borrower would have to pay about $400 a month ... You're getting back on your feet from COVID, you may have had a loss of income, you may have missed some rent payments ... $400 a month is much too much right now for so many people."
Faced with the possibility of falling behind on payments, student loan borrowers "live with a sword hanging over their heads, and every day that goes by, that sword draws a little closer," Warren said. "This is a matter of economic justice. It is a matter of racial justice. The president of the United States can remove this sword. The president can prevent this pain. The president can cancel $50,000 in student loan debt."
Student loan forgiveness still being discussed
Warren, Schumer, and Congresswoman Ayanna Pressley (D-MA) have repeatedly called on Biden to cancel $50,000 in student loan debt immediately via executive order.
During the presidential campaign, then-candidate Biden promised to forgive $10,000 in student debt for all federal student loan borrowers. That promise has not yet been fulfilled.
During the press conference on Tuesday, Pressley reiterated that the burden of student loan debt is disproportionately felt by Black and Brown borrowers "due to generations of what I would characterize as precise intentional policy violence." Citing systemic racism, Pressley added that minority borrowers "have been forced to take on higher rates of student debt for just a chance, the same degree as our white peers."
To "address the hurt and harm these communities are feeling," Pressley argued, President Biden should use his executive authority to cancel $50k. Data from the Department of Education previously estimated that $50,000 in cancellation would wipe out debt completely for 84% of borrowers.
Asked about the discussion with the White House, Schumer said that they are "making good progress" regarding both the payment pause and forgiveness.
"I think we've made progress — in fact some of the arguments that they used to make, they no longer make," Schumer said. "One is it'll get taxed — we took care of that ... another is they don't have the legal authority — we don't hear much of that anymore, because we think they do. So we're making progress and we're going to keep at it."
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Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
Read more:
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Schumer and top Democrats call for Biden to extend student loan pause and cancel $50k per borrower
Senate Majority Leader Chuck Schumer (D-N.Y.), joined by Sen. Elizabeth Warren (D-Mass.) and Rep. Ayanna Pressley (D-Mass.), on Tuesday called on President Biden to extend the moratorium on student loan payments and cancel $50,000 per borrower.
Why it matters: Americans owe about $1.6 trillion in student loans and the current pause on payments will end on Sept. 30, leaving more than 3o million people to begin making student loan repayments in October even as the pandemic continues.
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Flashback: The federal student loan moratorium started in March 2020 as part of the CARES Act and has already been extended multiple times.
Biden has previously indicated that he would be willing to cancel no more than $10,000 per borrower.
Earlier this month the administration canceled $55.6 million in student loan debt for victims of a for-profit college fraud
The big picture: Schumer urged the president to give people a "chance to recover" from the pandemic, and "wait till the Spring" to unfreeze the moratorium.
The average borrower has to make a monthly payment of $400, which Schumer termed "much too much."
All three lawmakers framed the extension of the moratorium as a first step, to be followed by canceling $50,000 per borrower.
Schumer noted that resuming payments would stall the country's economic recovery and "could bring millions of borrowers to the edge of financial crisis.”
Wiping out student loan debt would help close the racial wealth gap, Schumer added.
What they're saying: The student loan moratorium has “proven to be one of the most effective steps that the government has taken to help Americans get through the health and economic crisis created by COVID-19," said Schumer.
“To make borrowers repay their debts now would be unfair, would be harsh, in many instances would be cruel," he added.
“The size of these payments for many borrowers is the size of their rent, their car payments, groceries, child care," Warren said, adding that many borrowers "live with a sword above their heads."
"This is a matter of economic justice, it is a matter of racial justice," Warren added.
“Failure to act would be unconscionable," Pressley said.
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