Skip to main content

Sign up for our newsletter.

Quality journalism. Progressive values. Direct to your inbox.

Even before the coronavirus crisis upended our economy and sent millions all at once into unemployment, student loan debt threatened the economic security of every borrower.(Photo: YouTube/screenshot)

Even before the coronavirus crisis upended our economy and sent millions all at once into unemployment, student loan debt threatened the economic security of every borrower.(Photo: YouTube/screenshot)

Canceling Student Loan Debt Isn’t Just the Right Thing to Do—It Makes Economic Sense

Forty-five million Americans hold a whopping $1.6 trillion in student loan debt. Eight million of those individuals have defaulted on their loans.

Remington A. Gregg

This week, Public Citizen urged congressional leaders to take bolder action in the next stimulus package by canceling a portion of every student’s federal student debt. This action will be needed to help jumpstart the economy at what could be a long economic downturn.

Forty-five million Americans hold a whopping $1.6 trillion in student loan debt. Eight million of those individuals have defaulted on their loans. Sadly, a person defaults on their student loans every 26 seconds. Even before the coronavirus crisis upended our economy and sent millions all at once into unemployment, student loan debt threatened the economic security of every borrower. 

With the increasingly grim predictions about the economy, this crisis is about to get a lot worse unless Congress acts. One way that Congress can help the economy is to grant student debt borrowers even more relief in the months to come.

This month, Congress passed the CARES Act, which will grant temporary relief to workers, consumers, small and large businesses, and many student borrowers. However, the CARES Act does not do enough to address the looming economic crisis that student borrowers face. First, while the law grants a six-month suspension on federally-held federal student loans, it excludes an estimated one in five borrowers who owe commercially-held FFEL loans or Perkins loans (which are directly paid back to a college or university).

Second, even for the eighty percent of borrowers who benefit from a six-month suspension, many will face the daunting prospect starting in October of choosing between paying for necessities including food, medical care, and rent, or making their student loan payment. With the increasingly grim predictions about the economy, this crisis is about to get a lot worse unless Congress acts. One way that Congress can help the economy is to grant student debt borrowers even more relief in the months to come.

This week, we urged Congress to cancel a portion of student loan debt for all borrowers. We also urged congressional leaders to extend the suspension of federal student loan payments that was passed in the CARES Act law through at least March 2021, so those who will continue to have payments will have more breathing room to get back on their feet. In parallel, U.S Rep.s Ayanna Pressley and Ilhan Omar introduced a bill to cancel a minimum of $30,000 in federal student loans that a person holds. Public Citizen supports this important bill. And the presumptive Democratic nominee Joe Biden announced a policy to forgive all tuition-related undergraduate federal debt from public colleges and universities for anyone making less than $125,000, which is in addition to his previous plan to immediately cancel a minimum of $10,000 of student debt per person and require a borrower to pay no more than five percent of discretionary income for those making more than $25,000. (Those making less than $25,000 would not have to make monthly payments and would not accrue interest.)

The burden of student loan debt falls greatest on people of color, who borrow at higher rates and in larger amounts due to racial inequities in incomes and wealth. Additionally, women hold two-thirds of the country’s student debt and on average borrow $3,000 more than men to attend college—yet because of the wealth and wage gaps, women find it harder to repay their loans. And three million Americans over the age of 60 still have student debt. More than 40,000 people over 65 have their Social Security payments, tax refunds, or other government payments offset or garnished because they have fallen behind on their student loan payments.

According to a Consumer Financial Protection Bureau (CFPB) Snapshot report, older borrowers are more likely than those without outstanding student loans to report that they have skipped necessary health care needs such as prescription medicines, doctors’ visits, and dental care because they could not afford it. 

Opponents of student debt cancelation argue that it would be a windfall for the most privileged like doctors and lawyers who, like me, hold a lot of student debt. But the data show the exact opposite. Those with the least debt are more likely to default on their loans, for example, those who drop out of school before finishing their degree, but are still on the hook paying back their loans. Therefore, canceling even $10,000 of student loan debt—which makes up almost two-thirds of those who default—would be incredibly impactful for those struggling to make ends meet. 

Now more than ever, we must ensure that all people prioritize their health and economic wellbeing and that of their families and neighbors. Federal student debt cancelation is an essential factor in making that possible. It will also stimulate the economy by allowing millions to put the money they otherwise would use to pay off their student loans into buying a new car, injecting much needed cash into local businesses, and making the out-of-reach dream of buying a home seem possible.

It’s clear that we are entering a worldwide contraction that will be as bad, or worse, than the 2008 financial crisis. By the time you read this blog, about seven people defaulted on their student loans. But there’s hope. Congress can take strong, bold action. It’s time to cancel student loan debt and provide meaningful relief to people and strong economic stimulus that will benefit all.

You can find the letter here. And a recent explainer on how the CARES Act impacts student loan borrowers here.


Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.

Remington A. Gregg

Remington A. Gregg is Counsel for Civil Justice and Consumer Rights where he leads the fight to protect individuals from corporate abuses, working on a portfolio that includes promoting a fair and accessible justice system, consumer rights, and product safety. He is an expert in areas of civil rights, civil justice, and forced arbitration.

... We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.

Critics Warn Biden 'Summit for Democracy' Will Highlight Democrats' Failures at Home

"President Biden can't champion democracy across the globe without fulfilling his promise to protect our voting rights at home."

Jessica Corbett ·


'Like a Teenager Promising to Clean Their Room in 30 Years': Biden Net-Zero Climate Goal for 2050 Ridiculed

"2050 is an extremely weak goal for the federal government to free itself from climate-heating pollution. It ignores existing technology and adds decades to GSA's own commitment to 100% renewable energy by 2025."

Brett Wilkins ·


Biden Should Cancel Student Debt or Watch $85 Billion Evaporate From US Economy: Analysis

Far-reaching cancellation enacted by Biden could add more than $173 billion to the nation's GDP in 2022 alone.

Kenny Stancil ·


Given Cover by Red-Baiting GOP, Corporate Dems Rebuked for Tanking Biden Nominee for Top Bank Regulator

"If you think that Senate Democrats rose up to [Republicans'] shameful display of modern McCarthyism by rallying around President Biden's nominee or her ideas that banking should work for the middle class, then you don't know the soul of today's Democratic Party," wrote one columnist.

Julia Conley ·


'S.O.S.!': Groups in Red States Nationwide Plead With Democrats to Pass Voting Rights Bill

"We can tell you firsthand that our Republican senators have no interest in joining this effort."

Jake Johnson ·

Support our work.

We are independent, non-profit, advertising-free and 100% reader supported.

Subscribe to our newsletter.

Quality journalism. Progressive values.
Direct to your inbox.

Subscribe to our Newsletter.


Common Dreams, Inc. Founded 1997. Registered 501(c3) Non-Profit | Privacy Policy
Common Dreams Logo