School, college and other closings for Monday

MPR News helps you turn down the noise and build shared understanding. Turn up your support for this public resource and keep trusted journalism accessible to all. 

Turn Up Your Support

For months, Democrats in Washington have been debating what to do about student loan debt. About 43 million borrowers owe 

pushed for President Joe Biden to forgive up to $50,000 per borrower

 via executive order, Biden has so far only expressed support for more limited forgiveness, of $10,000, through pandemic relief legislation.

This week, the president and the White House clarified his stance. At a CNN town hall on Tuesday night, 

 if he would forgive up to $50,000 in debt. The president's reply: "I will not make that happen." He went on to say, "I understand the impact of debt, and it can be debilitating. I am prepared to write off the $10,000 debt but not $50 [thousand], because I don't think I have the authority to do it."

On Wednesday, White House press secretary Jen Psaki 

, saying the president "does not favor $50,000 in student loan relief without limitation."

Navigating a mountain of student loan debt

Should we lift the crushing burden of student loan debt? 

The sticking points between the $10,000 and $50,000 proposals revolve around which borrowers would benefit most, and the legality of forgiving student debt through legislation versus through executive action.

Some of the economists arguing for $10,000 forgiveness warn that anything higher runs the risk of rewarding borrowers who don't need the help.

"Borrowers who have the lowest student debts are the ones who struggle the most," explains Adam Looney, an economist at the University of Utah.

More than a third of borrowers owe less than $10,000 in federal student debt, according to federal data.

Often borrowers with low debt balances went to college for a semester or a year or two, and never completed a degree. Without a degree, those borrowers often earn less money, making it harder for them to pay their student loans, and making them more likely to default. Roughly 8 million federal student loan borrowers are currently in default, and most of them owe less than $10,000.

Being in default means the government can take part of your tax refund or paycheck. When you get older, you can even 

lose part of your Social Security checks.

Those garnishments make it even harder for borrowers to build wealth.

University of Pennsylvania researcher Jalil Mustaffa Bishop studies the experiences of student borrowers. He says, "What we know from research is that those who borrowed student loan debt [did it] because they come from households or personal financial situations where they don't have the assets or the income to afford higher education."

Student debt is not a burden for everyone. Economist Looney points out that many borrowers who took out loans to get a bachelor's degree are able to pay down that debt. And 

 that more than a third of student debt is owed by the top 20 percent of income-holders in the U.S.

But income is different from wealth, Bishop says. Wealth is the value of all your assets, minus your debts, and households with student debt tend to have the least amount of wealth, federal data shows.

Black families tend to have significantly less wealth than white families, 

 — and more of it — than white or Latino families. They're also 

, thanks to discrimination in the labor market.

 would target those wealth gaps, especially among Black families. About 80 percent of borrowers have student debt under $50,000, according to federal data. Advocates of this proposal also argue this level of forgiveness is about racial justice — the dollar amount comes 

 that found $50,000 would help grow the wealth of the highest number of Black households. (That research was 

"The student debt crisis is disproportionately impacting borrowers of color and communities of color, Black borrowers in particular," explains Ashley Harrington, senior policy counsel at the Center for Responsible Lending. "When we talk about cancellation, we have to start there."

Many Black and Latino families have missed out on ways to build wealth in the past — such as homeownership and job training programs — due to racist policies. Researchers who study and talk to student loan borrowers say student loan debt is a primary factor in holding them back now.

"They're experiencing the mental stress of not being able to plan or see a life passed having a student loan debt," Bishop says. "So the $10,000 doesn't really get at that kind of reality and burden."

Sens. Elizabeth Warren, D-Mass., and Chuck Schumer, D-N.Y., are among those calling for $50,000 of debt forgiveness. "Canceling student loan debt is the single most effective executive action that President Biden can take to kickstart the economy," 

Warren said at a recent press conference.

Warren and Schumer have argued the president has the power to forgive this level of debt via executive action, citing a 

attorneys at Harvard's Project for Predatory Lending

. Earlier this month, the White House signaled it 

was looking into the legality of such an executive action

. In January, before Biden was sworn in, lawyers at the U.S. Department of Education 

 concluding that forgiving federal student loan debt via executive action would be illegal.

Even if the legal issues are cleared away, Biden has repeatedly said he prefers to take action through Congress. He has also thrown his support behind other efforts to tame the federal student loan beast, including income-driven repayment plans and making college more affordable. 

Education News

Politics and Government News

Elissa Nadworny 

Author

The Biden administration is trying to figure out how much student debt to forgive and how to go about doing it — through executive action or legislation.

Debate over student loan forgiveness hinges on 2 numbers: $10,000 vs. $50,000

Go Deeper.

Like this?

News you can use in your inbox