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New presidential administration will likely bring some student loan debt cancellation

As a new presidential administration takes office, Massachusetts Senator Elizabeth Warren hopes to cancel some student loan debt. Canceling that debt would impact about 40 percent of Brandeis students—students who rely on federal loans to pay Brandeis’ higher than average tuition.

The federal government has paused payments and involuntary collections on federal student loans due to the coronavirus pandemic—a rule that was set to expire Jan. 31, but one President-elect Joseph Biden will extend when he assumes office. As the pandemic has caused job losses and an economic slowdown, Warren renewed her calls for debt cancellation in a Dec. 7 virtual meeting with student journalists across the country. 

“For tens of millions of borrowers, student loan debt has become an impossible burden,” Warren said. “Student debt falls particularly hard on Black and brown Americans… This is the effect of long-term systemic inequality and discrimination.” Warren continued, “On day one, Joe Biden and Kamala Harris can use existing authority under the law to cancel up to $50,000 in student loan debt for all borrowers with federal loans and make sure that loan cancellation doesn’t result in any additional tax bill for borrowers.”

With Biden supporting a debt cancellation plan, though one less extensive than Warren’s, some form of debt relief could come as students face an unstable job market and a lack of government support. College students have been largely left out of the two stimulus checks the federal government has so far provided during a pandemic that has dragged on over a year. The first stimulus checks provided $1,200 in March 2020, and nine months later the second round of relief gave those eligible half that amount, according to Yahoo News. For both rounds, most college students who were claimed as dependents on their parents’ tax returns were not eligible to receive the money.

Warren voiced her concern for students struggling to make ends meet during the pandemic and said that student debt cancellation will help students and graduates build real wealth and increase access to a college education. 

“I’m really worried about what food insecurity, housing insecurity, in the middle of a pandemic, means for our students,” she said. “I’m worried about what it means for people all across this nation.”

Brandeis students are also worried. At the start of the pandemic, a few students established Brandeis Mutual Aid, a fund supporting first-generation students, low-income students and students of color, according to their website, that the university was not sufficiently supporting through the Student Emergency Grant Fund. The funds were first used to help students struggling to travel home after the Brandeis campus shutdown last spring. The fund has since been used to help students struggling with food insecurity, according to an article by The Brandeis Hoot.

Debt cancellation would affect many Brandeis students and graduates. A majority of Brandeis students, or around 60 percent, receive some type of aid and around 40 percent of students receive federal student loans, according to the National Center for Education Statistics. Brandeis’s cost of tuition, including fees, for the 2020-21 academic year is $57,615—more expensive than the national average cost of $40,793, according to U.S. News & World Report. For the about half of Brandeis’s 2019 graduating class that took out loans, each graduate owes an average of $29,449, according to U.S. News & World Report

Warren’s plan, which she originally proposed during her campaign for the 2020 Democratic presidential primary, would cancel up to $50,000 of debt for every borrower, according to Forbes. She is supported by Senator Chuck Schumer, though he said in early December 2020 that the cancellation would only apply to those earning less than $125,000 a year, according to Forbes. Biden, on the other hand, has proposed cancelling $10,000 of debt for every borrower, according to Forbes

While both plans would provide some level of debt cancellation, Warren’s would be more effective at shrinking the racial wealth gap—the wealth gap between white and Black households—according to Pokross Professor of Law and Social Policy at the Heller School of Social Policy and Management Tom Shapiro. Biden’s plan would slightly widen the racial wealth gap among student loan-holders, though not significantly enough to increase the national wealth gap, said Shapiro in an interview with The Hoot.

“In my personal view, and a view that comes from knowing the data, $10,000 is a minimalist approach,” said Shapiro. “It provides very little relief—important but very little relief—and it does zero for racial wealth inequality. In fact, the data that we are running tells us it actually makes it a little worse.”

In a 2019 report by the Institute on Assets and Social Policy (IASP), a part of the Heller School, researchers analyzed the persistence of student debt across a person’s life and how student debt relief would impact the racial wealth gap. It found that 54 percent of young Black households, those ages 25 to 40, have student debt while only 39 percent of young white households have student debt. It also found that even in young households, white households have 10 times the wealth of Black households. 

“One of the really important goalposts for reducing and forgiving student debt is to design it in a smart way that provides a lot of relief and that moves us forward in closing racial wealth inequality,” said Shapiro in an interview. “And $10,000 fails.”

The IASP report also found that total debt relief for all households would increase the racial wealth gap. That increase is likely due to white graduates being more likely to complete and pay off loans for expensive college and graduate degree programs, said Shapiro.

Heller school researchers gave some recommendations to Warren’s office on what amount of debt cancellation would decrease the racial wealth gap, said Shapiro. A 2019 letter from Shaprio and three other professors and researchers stated that Warren’s plan would allow 95 percent of households some debt cancellation, as well as lessen the racial wealth gap. Having debt cancellation phase out based on a person’s income also makes debt cancellation more effective at shrinking the wealth gap, said Shapiro. Warren’s 2019 proposal allowed debt holders with a total household income below $100,000 to receive up to $50,000 in debt cancellation, and for debt cancellation above that income to slowly phase out at $0.33 less in debt cancellation for every dollar of income above $100,000.

Shapiro expects the incoming presidential administration to cancel some amount of student debt but believes the administration will face an intense debate about how much debt to eliminate. 

“As somebody who has been behind that curtain, there’s a pretty intense debate going on about how to do it,” said Shapiro. “What President-elect Biden and his team are intending to do and what will happen around student debt I think is one of those areas that bears very close watching.” 

As Biden’s inauguration day approaches, students nationwide will be watching as the new administration tackles student loan debt, the racial wealth gap and a pandemic that has widened racial disparities in the United States.

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