One way to boost the U.S. economy could be erasing student loan debt, Maryland gubernatorial candidate John King – who served as Secretary of Education under former President Barack Obama – said this week.
King told CBS News that if the $1.7 trillion Americans owe in loans is forgiven, it could help millions of people achieve financial security and speed up the nation’s economic recovery from the COVID-19 pandemic.
Although the U.S. is beginning to come out of the pandemic after more than two years, “data by state show that hardship was widespread,” as recently as fall 2021, according to the Center on Budget and Policy Priorities, a progressive think tank. Additionally, scientists are concerned that a new variant of the SARS CoV-2 virus may cause another case surge.
As of this month, the Education Data Initiative estimates 43.4 million borrowers have federal student loan debt in the U.S. and that the average federal student loan debt balance is $37,113.
“Including private loan debt, the average balance may be as high as $40,904,” said Education Data.
First-generation college students are twice as likely to report they are behind in making student loan payments.
According to the University of California, Irvine, “recent studies show how debt works as a gatekeeper for working-class and first-generation students, women, gender-nonconforming students and those of color.”
Most indebted borrowers, around 70%, are between 25 and 50 years old and 17.7% of people with a student debt loan balance are under 25. Adults age 18 to 29 are twice more likely to have student loan debt than any other age group and 35-year-olds have the highest average outstanding student loan debt at $42,600 per borrower.
In addition to King, Sen. Bernie Sanders (D-Vt.) and Sen. Elizabeth Warren have called for an end to student loan debt.
While campaigning in 2020, Biden said he supported a proposal from Warren for easing debt.
When Obama was president, he announced that he wanted America to “once again have the highest proportion of college graduates in the world,” by 2020. At that time his administration hoped the Health Care and Education Reconciliation Act would help students pay their college costs.
However, a Newsweek report from last year showed that the U.S. was ranked 11 out of the top 12 countries with the highest percentages of college graduates with just over 50.4% graduating. South Korea had the highest at 69.8% and other countries that ranked higher than the U.S. included: Canada, Russia, Japan, Ireland, Lithuania, Luxembourg, Switzerland, Austria, and the U.K.
While the COVID-19 pandemic put strain on the U.S. and global economy, the national debt loan balance in the U.S. has increased slower since the pandemic hit. Education Data shows that, compared to 2020, the total national student loan debt balance increased 52.6% slower in 2021.
“Between the second and third financial quarter of 2020, [the Coronavirus Aid, Relief, and Economic Security Act] offered student loan debt relief that affected an estimated 35 million borrowers,” said the Education Data Initiative.
Under former President Donald Trump, an interest-free forbearance on student loan payments was established amid the pandemic, said CBS News. Since it began in March 2020, there have been an estimated $195 billion worth of waived payments, according to the New York Federal Reserve. The forbearance ends May 1.
This isn’t the first time that the government has helped college students with their debt. King told CBS that the federal government paid roughly 80% of the cost of college for students through its Pell grant program in the 1980s. Today’s Pell program covers less than a third of annual tuition for grant recipients, said the outlet.
Making community college free and to increasing the amount each student receives in Pell grants could improve the current debt crisis, King said.
“We've got to make up for that policy mistake of the last 40 years by addressing the crushing burden of student debt that so many young people feel today and fixing the problem going forward by committing to debt-free college in the United States,” King said.
When people carry large debt burdens, it can impact other aspects of their lives. They can postpone buying a home, starting a business or having a family, King explained.
Current Education Secretary Miguel Cardona told CBS Mornings last week that Biden administration is looking for ways to offer more student loan debt relief.
“We’re definitely, since day one, putting borrowers and students at the center of conversations,” Cardona said. “In just one year, President Biden has forgiven over $17 billion already.”
Over the past year, there have been numerous pieces of proposed legislation aimed at improving the debt situation for U.S. students.
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