Reviews | Why President Biden should also cancel interest payments on student loan debt
Canceling at least some student loan debt is one of the few popular policy ideas that President Biden could implement on his own with the stroke of a pen. A recent national tracking poll from Morning Consult and Politico found that 64% of respondents supported the idea. Yet when the president announced on Thursday that he was “considering dealing with some [student] debt reduction”, it was clear that he has not yet recognized the urgency of this issue. President Biden’s announcement comes with an immediate caveat: “I’m not looking at a $50,000 debt reduction,” he said in reference to last month’s proposal from Senators Chuck Schumer, Elizabeth Warren and others.
Interest keeps the borrower in a cycle of cascading debt from which he is often unable to escape.
The president erred in excluding the cancellation of $50,000 of student loan debt per borrower. But even if he changes course and does, that alone will not solve the key problem behind the student debt crisis.
In 2021, student loan debt collectively owed by 45 million borrowers hit a record $1.7 trillion. This number is expected to rise to $2 trillion by 2024 and $3 trillion by 2038. Add to this crippling debt the skyrocketing prices of housing, health care, food, gas and electricity. other essentials, and it’s no surprise that a quarter of borrowers are currently estimated to be in default or delinquent on their student loans. According to a report by the Brookings Institute, that number is expected to rise to 40% by 2023 – and that report was done before the COVID-19 pandemic.
One of the main reasons why student loan debt is so detrimental to so many millions of Americans is because of interest charges. Interest keeps the borrower in a cycle of cascading debt from which he is often unable to escape. Student loan interest is particularly predatory because it tends to target people who are just starting out in life. Before they can secure jobs and careers, millions of Americans are saddled with debt that they may never be able to afford to repay.
Interest is the problem. This is why dozens of Muslim organizations have called on President Biden to waive all interest payments on current and future loans by establishing principal-only loans, in addition to extending the moratorium on payments. until January 1, 2023 and to forgive borrowers whose repayment history is equal to or greater than their principal. .
Implementing this proposal would not only provide much-needed relief to millions of Americans trapped in debt and provide borrowers with an affordable way to repay their student loans, but it would also provide a boost to the economy at a time of significant inflation and instability. . Broad student loan debt forgiveness would also advance racial justice, as 48% of black students owe an average of 12.5% more than they originally borrowed. Black and Latino students are also more likely to default on their loans than students from other communities.
Ending interest-based debt would be a positive step towards empowering students in communities of faith. Islam, Christianity, Judaism and other religions prohibit usury as a destructive and immoral practice. This means that many religious students are forced to delay higher education or compromise on their values. Loans on capital alone would allow them to continue their studies freely and without going into debt in contradiction with their deep convictions.
Student loan debt has been a burden and source of suffering for millions of Americans for decades. People and organizations have been calling for student loan reform for just as long, and for the first time, leaders are unable to ignore them. But President Biden will not be able to solve the current crisis or meet the demands of the American people with a half-baked approach. It’s time to take the burden off the backs of the American people – it’s time to end interest-bearing student loan debt.