Addressing Student Debt During COVID-19: What Our Partners and Allies Think
The outbreak of the coronavirus (COVID-19) has not only impacted the national economy, but is now preventing families from being able to make ends meet. With many workplaces offering insufficient paid sick leave, employees are left with the impossible decision of staying home and missing out on paychecks, or continuing to work in order to make ends meet.
Child care centers and schools are closing, COVID-19 tests are not free, and costs of caring for the sick or implementing self-quarantine are accumulating. These added costs and reduced income mean more stress on households to balance finances. Making regular payments on student loans while juggling added costs or without income is simply not feasible.
Student debt in American currently totals $1.6 trillion, and it continues to grow. Freeing up student loan borrowers from making their regular payments would mean they have the ability to spend their funds in ways that stimulate our economy. Action to relieve the forty-five million American student loan borrowers is urgently needed.
Partner organizations in the Higher Ed, Not Debt campaign will keep advocating for student loan borrowers’ well-being as the student debt crisis continues to jeopardize Americans’ economic stability. Congress and the White House have the potential to help borrowers and address student debt in light of COVID-19 and the accompanying economic crisis. To that end, the solutions presented in the statements below would serve as steps in the right direction.
See what our partners have to say about addressing student debt amid the COVID-19 outbreak.
The full statements by organizations are accessible via hyperlinks.
Americans for Financial Reform, Factsheet: Cancel Federal Student Loans to Provide Short and Long-Term Stimulus Amid Pandemic
In response to the COVID-19 pandemic and its devastating economic impact, Americans for Financial Reform calls on Congress and the U.S. Department of Education to use their authority to cancel federal student loan debt. In the short term, the Department should act with urgency to end any offsets of tax refunds and immediately halt wage garnishment for federal student loans. The Department and Congress should also consider making principal and interest payments on outstanding federal student loans.
Even prior to the COVID-19 crisis, federal student loan defaults had increased nearly 14% from federal fiscal year 2018 to 2019. This works out to approximately one default every 26 seconds. Labor shocks like those the pandemic are likely to cause will undoubtedly increase federal student loan defaults. The consequences for borrowers in default on federal student loans are punitive and severe, with tax refunds seized and wages garnished. Cancelling debt would be a powerful and efficient way to immediately relieve pressure on distressed borrowers, boost consumer spending at a time when the economy is contracting, and reduce hardship on people who lose income because of the pandemic and efforts to fight its spread.
Student Borrower Protection Center Executive Director Seth Frotman
“As policymakers look to send stimulus checks to every American, it is critical that student loan borrowers are not cut out of the deal. The federal government routinely seizes federal benefits owed to student loan borrowers in default—the very borrowers who desperately need cash in a time of crisis. Today, over 9 million student loan borrowers are in default with millions more on their way. Now is not the time to push these borrowers further down the economic ladder. Washington must not allow federal offsets to deny any of these borrowers access to critical dollars.”
Student Debt Crisis Executive Director Natalia Abrams
“The Coronavirus crisis is an economic disaster for Americans with student loan debt who are already on financial thin ice. Millions of people will need all of their income and savings to weather the financial harm that is to come; families cannot afford to send money to the government for their student loans. We are calling on Congress and Betsy DeVos’ Department of Education to do what is morally right by canceling student loan debt in response to this health crisis. The federal government is considering trillions of dollars of aid to businesses, it must also consider eliminating student loan debt to stimulate the economy and uplift everyday Americans. The country is in need of a plan that focuses on healing Main Street, not Wall Street.”
“As people become sick, and as the effects of the virus ripple through the economy, the coronavirus is going to make it harder for many student loan borrowers to pay their student loans. Public health experts are calling for people to stay home, practice social distancing, and self-quarantine. While this advice may be necessary in this public health crisis, it poses a great hardship for many people who need to work to cover their basic necessities. Lost income and insufficient paid leave will hurt people who work in the gig economy, are hourly workers, or have childcare crises and coverage concerns (especially as schools and daycare centers close). The U.S. Bureau of Labor Statistics shows that less than a third of those in the lowest income band have access to paid sick leave. Given this, the student debt crisis is a public health crisis and demonstrates why policymakers need to implement widespread debt cancellation.”
The most important thing right now is that everyone focus first and foremost on the health of our families and communities—and ensuring that no one has to worry about falling behind on a student loan payment or face default and collections during this time of crisis will help. To that end, we call on Congress to expand on the President’s announcement and provide an emergency pause on all federal student loan payments for at least 6 months—with no interest accrual and each month counting toward PSLF and IDR forgiveness. Borrowers should be able to easily opt out of this payment pause if they so choose. We also call on the federal government to stop all involuntary student loan collections during this period, including garnishments and tax offsets. Implementing this emergency pause payment will help the over 40 million Americans with student debt focus on keeping their families safe and healthy without needing to worry about their student loan payments being due or their balances growing.
The Project on Predatory Student Lending Director Toby Merrill
“COVID-19 is causing economic devastation across the country, with even greater job and income losses to come. Americans need to dedicate their incomes to their health and family instead of trying to scrape together the money to pay the government for student debt. As the federal government considers aid to small and large businesses, it must also help individuals and families by cancelling student loan debt. At this time of extreme economic uncertainty, eliminating student loan debt will stimulate the economy, and it will allow borrowers to spend their time and money on necessities, instead of worrying about sending their last paycheck to the government. It will prevent people from entering forbearances, only to face a pile of new interest down the line, in a weakened economy. And it will prevent draconian measures like tax refund offset and wage garnishment from toppling already-precarious households.
“As this public health crisis becomes a financial crisis for too many families, both Congress and the Department of Education have the obligation and the authority to protect people by cancelling student loan debt, and acting immediately to stop collections.”
Posted on 13 March 2020