Rep. Ilhan Omar (D-MN) added her voice to the growing chorus of elected officials calling for widespread student loan forgiveness. “Abolish student loan debt,” Omar said in a Tweet on Friday.
Omar, who beat back a strong primary challenge earlier in August, echoed earlier comments by Representative and fellow “squad” member Ayanna Pressley (D-MA), who called for universal cancellation of student loan debt earlier this year. “The average borrower has $30,000 worth of [student loan] debt — [cancelling that] will jump-start the economy,” Pressley said in an interview with Yahoo Finance in July. “Black student borrowers borrow, and default more than anyone else because of our inability to build generational wealth. I see that as a racial justice issue.”
With 44 million Americans struggling with unprecedented levels of student loan debt (which now exceeds $1.6 trillion), widespread student loan forgiveness has been gaining traction as a means of economic stimulus. Over 100 civil rights and consumer protection organizations recently wrote to Congress calling for broad student debt cancellation. And consumer advocates increasingly view student loan forgiveness as a mechanism to also address racial inequalities.
Critics dispute this, arguing that student loan debt may actually be good for the economy and that the benefits of widespread cancellation of student loans may be skewed towards wealthier households. Widespread student loan forgiveness could have tax consequences and could also substantially increase the deficit, which is already growing due to recent stimulus relief in response to the COVID-19 pandemic.
At the same time, studies have shown that student loan debt disproportionately impacts communities of color, and Black people in particular. Federal data released in 2017 showed that nearly half of Black student loan borrowers who entered college in the 2003-04 academic year had defaulted on at least one student loan 12 years later. This same data shows that Black students who enrolled in school in 2004 owed more on their student loans after 12 years than the amount originally borrowed.
According to the National Center for Education Statistics (NCES), 77.7% of Black students borrow federal student loans to pay for a higher education. This figure is significantly higher than the national average for all students (60%) and for white students (57.5%). Black students are also more likely to attend for-profit institutions, which are often accused of deceptive and predatory conduct, and have higher drop-out rates than other colleges and universities. 75% of Black borrowers who dropped out of for-profit institutions wound up defaulting on their student loans.
Former Vice President Joe Biden is also calling for significant student loan forgiveness, although on a smaller scale. His proposal would forgive all undergraduate federal student loan debt for borrowers who attended public colleges and universities, as well as historically black colleges and universities (HBCUs) and private minority-serving institutions (MSIs). Borrowers who earn an income of less than $125,000 per year would be eligible for student loan forgiveness.
Separately, Biden has also voiced support for Congressional Democrats’ proposals to enact $10,000 in across-the-board student loan forgiveness for all borrowers in response to the Coronavirus pandemic and the associated recession. Congressional Democratic leaders in both the House and the Senate have pushed for this in recent stimulus bill negotiations. Biden’s plan also provides for debt-free community college, and free college at public colleges and universities for all families who make under $125,000 per year.
Following the recent collapse of congressional negotiations on a new stimulus package, widespread student loan forgiveness is highly unlikely to be enacted in the near term. A recent scaled-down stimulus proposal floated by congressional Republicans would reportedly include no significant student loan relief.