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The coronavirus pandemic is a health crisis like we have never seen before, and it is about to collide with the economic crisis of this generation—student loan debt. Millions of people were already on financial thin ice before the virus broke out. As we search for ways to alleviate the coming economic crisis, we can’t leave them behind—those with debt deserve a livable future, too.
That is why the federal response to the coronavirus must include immediate relief for people already crushed by $1.7 trillion in student loan debt.
Congress and the Department of Education have the legal authority to cancel all student loan debt. They can immediately stop tax refund offset and wage garnishment for borrowers who are behind on payments, and they can put loans on pause while waiving interest. These actions will help the 45 million people with student loans while stimulating the economy precisely when it is needed most.
Coronavirus is already having a severe impact on the economy and household budgets. Lost wages and medical costs will impact families across the country for weeks, months, and years to come. Adding the persistent burden of student debt is a recipe for an economic disaster for millions of everyday people.
The new reality is that families will need all of their income and savings to weather the financial harm that is to come; they cannot afford to send money to the government for their student loans when it could be used for food and other necessities.
Last week, the federal government sent over a trillion dollars of aid and loans to businesses as officials in Washington sought to tame the volatile stock market. While some of what the federal government has already done may stimulate the economy, if a crash is to come, much of these subsidies for corporations and banks will ultimately be a waste of money. Even worse, it does nothing to uplift hard-working Americans who are hurting today.
What the country really needs is a plan that focuses on healing Main Street, not Wall Street. If the federal reserve can pump over $1 trillion into the economy in response to this pandemic, the real question is why can’t the government erase the trillion-dollar, generational student debt crisis immediately?
On March 13, President Trump declared a state of national emergency in response to the pandemic. In his announcement, he committed to waiving interest on all federal student loans. Details of the plan are still in the works, but experts fear that monthly payments for student loan borrowers will remain the same—the only difference will be that they will contribute to principal balance rather than to interest.
While any action is an encouraging start, the administration’s plan doesn’t begin to provide the immediate relief that many are calling for. Borrowers need a reduction in their debt and a serious cut to their loan payments, not just smaller interest expenses.
As Senator Elizabeth Warren highlighted during her campaign for the presidency, the president and federal government have sweeping authority to erase the catastrophic weight of student debt. Together, the president and the secretary of education can use provisions under the Higher Education Act to instantly remove the student loan obligations weighing down people who are already struggling.
A coronavirus response that includes canceling student loan debt will allow borrowers to purchase the necessities their families depend on: food on their table, a roof over their head, and critical health care. It will eliminate the worry many borrowers will face when they send their last paycheck to the government, instead of using it to keep their families secure.
A broader student debt cancellation plan will ensure that the entire economy remains functional, not just select industries impacted by travel bans and a slump in retail spending. Consumer advocates at the nonprofit Americans for Financial Reform, say, “Cancelling student debt would be a powerful tool to mitigate the impact of the coronavirus crisis on individuals, families, communities and the broader economy.”
The group says that canceling student debt would provide a short-term stimulus to the economy during the most urgent time. They point to a report by Brandeis University that shows student debt cancellation would free up hundreds of dollars each month. Americans freed from student loan debt would use that money for everyday spending and to pay other bills.
In the long term, a student debt cancellation stimulus would help prevent or reduce the impacts of a recession. Another report shows that student debt cancellation would boost GDP by up to $108 billion a year and would add up to 1.5 million jobs per year.
Student loan debt has an undeniable and significant effect on economic growth. Canceling student loan debt directly addresses this and helps mitigate the enormous impact of the Coronavirus. More importantly, it represents a glimmer of hope for millions of Americans who, with each passing day, find their futures more uncertain.
Want to take action? Tell Congress to cancel student debt to stimulate the economy in response to the coronavirus crisis here.
Need help with your student debt? Our free COVID-19 Student Loan Aid Tool helps borrowers afford emergency expenses during this time. Learn more here.