US Cities and Counties Demand Promised Student Debt Relief From Biden

Leaders of 20 U.S. cities and counties, representing more than 1.2 million borrowers with nearly $50 billion in student debt, wrote to President Joe Biden on Thursday demanding swift action on long-promised and long-delayed relief.

Biden's first plan to cancel up to $20,000 per borrower was struck down by the U.S. Supreme Court in June. The administration is now working on a new relief plan involving the Higher Education Act (HEA) of 1965 but has chosen to initiate a drawn-out rulemaking process that campaigners say is unnecessary.

While welcoming the HEA effort, the letter stresses the urgent need among borrowers whose loan payments are set to resume October 1 after being paused for over three years in response to the Covid-19 pandemic.

"Given the crushing weight of the student debt crisis on borrowers and their communities, and the extended economic limbo millions of borrowers have been forced to endure as partisan lawsuits blocked transformative debt relief in the courts, we urge you to continue the necessary work to deliver on your promise of up to $20,000 in student debt relief and enact your new debt relief plan as swiftly as possible," local leaders from more than a dozen states wrote to the president.

"The Supreme Court's decision to ignore the clear letter of the law and strike down your life-changing debt relief plan is further evidence of its willingness to put politics and special interests before the American people," they argued.

The letter is signed by mayors, city attorneys, and other officials from Little Rock, Arkansas; Berkeley, Oakland, and San Francisco, California; Evanston, Illinois; Gary, Indiana; Mount Rainier, Maryland; Boston, Massachusetts; Ann Arbor, Lansing, and Washtenaw County, Michigan; Kansas City, Missouri; Carrboro and Hillsborough, North Carolina; Hoboken and Newark, New Jersey; Cleveland, Ohio; Philadelphia, Pennsylvania; Travis County, Texas; and Madison, Wisconsin.

As they detailed:

America's cities are on the frontlines of the $1.7 trillion student debt crisis. This crisis has spiraled out of control, reinforcing deeply embedded inequities in our country and creating financial despair in our communities—and the pandemic has exacerbated these challenges. Relief is urgently needed to help alleviate the financial burden on residents, helping families cover rising costs and invest in our local economies and their own future. As officials in your administration have consistently stated, resuming loan payments this fall without first providing broad-based student debt relief would result in a catastrophic wave of borrower distress, dealing a punishing blow to millions of families in our communities while destabilizing our local economies and increasing demand for public benefits and services.

As the letter notes, the Consumer Financial Protection Bureau said in June that around 2.5 million student loan borrowers already have a delinquency on another loan. The federal agency also found that about 1-in-5 student loan borrowers "have risk factors that suggest they could struggle when scheduled payments resume."

Recent polling suggests that number could be even higher. As Common Dreams reported last month, 49% of borrowers surveyed by Intelligent.com said they aren't sure they can afford the looming loan bills, and 62% said they are likely to boycott repayments.

"Your administration is now only days away from restarting a fundamentally broken and underfunded student loan servicing system, throwing 45 million Americans into chaos," the new to Biden letter warns. "While we appreciate your administration's announcement to shield borrowers from the most severe economic consequences of default, millions of borrowers will be forced to navigate the complex system for the first time in more than three and a half years."

Potentially compounding the stress for borrowers, the resumption of payments could coincide with a looming government shutdown—and as Insider reported Monday, the U.S. Department of Education "does not yet have a contingency plan for managing Federal Student Aid's operations without funding in two weeks."

Whether or not the government will be shut down when payments resume, borrowers are bracing for the impacts of another monthly bill, as are restaurants, retailers, and overcrowded animal shelters—and economists are warning of the consequences for the U.S. economy.

Pausing payments "helped ensure that people did not face financial ruin as a part of a pandemic they did not cause, and borrowers found themselves on more solid financial footing, for many, for the first time in years," Angela Hanks, chief of programs at Demos and a former Biden administration official, told Newsweek on Thursday.

"This meant that people were able to pay other bills on time, including basics like rent and groceries," Hanks said. "For the millions of borrowers who will be forced into repayment in just a few weeks, this transition will undermine whatever stability they've been able to create for their families over the last few years."

"The end of the student loan forbearance risks disrupting an otherwise growing economy," she added. "Wages are outpacing inflation, and unemployment is down, but saddling families with another expensive bill risks undermining our collective economic progress."