In November, CNBC published an article arguing that borrowers benefiting from President Biden’s student debt cancellation plan will largely spend their savings on “non-essential” items, citing a poll from Intelligent.com: “73 percent of anticipated recipients say they expect to spend their debt forgiveness on non-essential items, including travel, dining out and new tech.” The article caused quite a stir, including on Real Time with Bill Maher earlier this month. Maher, citing the poll to his guest, Senator Bernie Sanders, called President Biden’s plan to cancel up to $20,000 of student loan debt per borrower a “giveaway.”
Given the depth of the financial problems many borrowers are experiencing, the idea that student loan borrowers would use debt cancellation to fund a luxurious lifestyle is not only insensitive but also out of touch with reality. Sanders pushed back immediately. “I don’t know anything about that poll, but I can tell you I’ve talked to nurses who are working their asses off doing the right thing. They leave school $70,000 in debt. They can’t afford now to get married and have children,” said Sanders. “Right now these young people are leaving school deeply in debt. They’re struggling economically. They deserve a break.”
The data supports Sanders. Millions of borrowers have struggled to make ends meet because their student loan payments can eat up a significant portion of their income, at hundreds of dollars a month. According to the Federal Reserve, the total amount of student debt in the United States has surpassed $1.7 trillion, with over 45 million borrowers owing an average of $37,000. This debt burden makes it more difficult to afford essentials like food, housing, and health care, but also prevents people from saving for emergencies or investing in their future. The payment pause issued during the pandemic has kept millions of people from choosing between making loan payments and basic necessities.
Student loan debt disproportionately impacts women, people of color, and low-income individuals. According to a recent survey from Student Debt Crisis Center, nearly one in every five borrowers is unable to afford medicine and health care because of their student loan payments, a situation that invites untreated illnesses and chronic health problems. Student debt is also a major source of stress and anxiety for 51 percent of borrowers, leading to depression, feelings of hopelessness, and even suicide. Additional data suggests that student debt cancellation could help the 17 percent of borrowers who are food insecure.
When asked by SDCC what they were using their student loan payment pause savings on, 72 percent of borrowers said food, 64 percent said rent or mortgage, and 43 percent said health care or medicine. These numbers are actually reflected in the Intelligent.com poll that CNBC and Bill Maher cited, where 75 percent said they would put money towards groceries and 66 percent said rent or mortgage. Focusing only on their potential “non-essential” spending perpetuates the myth that those with student loans are irresponsible and do not care about their financial futures. These borrowers are not lazy or entitled—they are hardworking Americans burdened by a broken system.
Relieving their student debt burden would have wider effects as well, allowing borrowers to have more disposable income that they could use to contribute to the economy. A study by the Levy Economics Institute of Bard College found that canceling all student loan debt in the United States would result in an increase in real GDP by over $86 billion per year over the next 10 years, along with over 1.2 million new jobs per year.
Rather than policing the spending of some of the poorest Americans, we should help these borrowers move up the financial ladder and give them a better chance at achieving financial stability and the American Dream. Canceling student debt for millions of Americans is one of the best ways to do so.
