Student Loans can be cancelled with nothing needed from the Treasury, and nothing added to the national debt.
We call on President Biden to cancel all federally owned loans by executive order. We also call on both the President and Congress to return standard bankruptcy rights to ALL student loans, by executive order and through Congress by passing S.2598 and HR.4907.
In the past two years, Trillions in stimulus (including PPP loans that don't need to be repaid) required money to be drawn from the Treasury, and added to the national debt. However, the President can cancel $1.3 Trillion in federally owned student loans with $0 needed from the Treasury, and $0 added to the national debt. He can also order the Department of Education to stop opposing student loan borrowers in bankruptcy court.
Before the pandemic, 45.4 million people were holding federal student loans, and 80% were either not paying (64.3%), or were paying but their balances were going up. Today, student debt in over one-third of U.S. states exceeds their total annual budgets. Older people outnumber younger people with student debt, and they owe 3 times more, despite having borrowed far less. The default rate for 2004 students is 40%, but they borrowed less than a third of what is being borrowed today. The default rate for current borrowers will likely exceed 75%. This is roughly four times higher than the default rate for sub-prime home mortgages. By all rational metrics, this is now a catastrophically failed, and nationally threatening lending system!
We do not have to take this.
- Cancelling these loans will greatly stimulate the economy. Analysts estimate that cancelling student loans will increase GDP by over $100 billion for the next ten years, but they don't account for increased borrowing that will enable people to buy homes, start businesses, etc.
- This is not a partisan problem. More than half of all student loan borrowers identify as being politically independent, or republican. "Red" states are being hurt significantly worse than "Blue" states.
- Claims that cancelling loans will largely benefit people who don't need it are wrong. 80% of all borrowers were "underwater" on their loans before the pandemic. All borrowers were determined to be "financially needy" as a condition for the loans. More than 40% never graduated. Most borrowers are over the age of 35, and owe far more than younger people despite having borrowed far less. The most successful student loan borrowers tend to refinance their loans out of the federal system, so they won't benefit.
- Rest assured, the taxpayers will be fine. The federal government has been profiting greatly on these loans for many years, and the Department of Education has even been making a profit on defaulted loans for decades. While it is not known how much of the $1.6 Trillion federal portfolio is unpaid principal, it is a small fraction of the total. On balance, the taxpayers will have very little- if any- net loss when these loans are cancelled.
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Petition created by Alan Collinge, founder of StudentLoanJustice.Org and author of The Student Loan Scam (Beacon Press). Contact
