Congress’ COVID relief student loan deferrals are set to expire at the end of January — saddling hundreds of thousands of Americans with burdensome monthly payments in the midst of an ongoing crisis. In order to avoid this impending catastrophe and set the stage for strong, equitable future growth, the Biden administration must recognize the severity of the student loan crisis and immediately move to forgive loans for borrowers as a form of economic stimulus.
Before the pandemic, we were already looking down the barrel of the oncoming student loan crisis. In recent years, total student loan debt rose to over $1.5 trillion dollars, surpassing credit card debt and making it the second-largest form of debt after mortgages. Young graduates now begin their adult lives burdened by more debt than any previous generation, with recent estimates suggesting that student debt rose by over 107% in this decade alone. It doesn’t take an expert to look at these shocking numbers to realize that this level of growth is not sustainable.
Students take on this monumental debt under the belief that it will open doors to a better life. Many see it as their only path into the middle class. But with the burden of debt increasing every year, those opportunities often fail to materialize. Student debt has delayed when graduates decide to buy homes, start small businesses, and have led to a quarter of all borrowers defaulting on their loans. Long term investments like homeownership have traditionally been the vessel to build generational wealth, but increasingly that seems like a far-fetched dream for graduates. When an entire generation of Americans is burdened with debt from a young age, it holds them back from fully participating in the economy, and that hurts everyone.
In our consumer-driven economy, we rely heavily on spending to spur growth. So if the typical young American is facing monthly payments of more than $200, their economic potential is significantly limited. That’s hundreds of dollars a month not being spent in the local economy, saving for a home, or the principal for a business loan (if they even qualify) and when you multiply that by the number of college graduates, you have a recipe for disaster. Both graduates and local business owners alike would be far better off if those $200-plus were spent in our economy rather than going back to the government. Canceling chunks of student debt would not only improve opportunities for those laden with debt, but it would create the kind of economic growth, a rising tide, that we desperately need to lift all boats.
I may be free of student loan debt now, but I can speak as a business owner and former indebted student myself — forgiving these loans will pay for itself a thousand times over from the sheer number of opportunities it will unlock for an entire generation.
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I can already hear the naysayers arguing that issuing blanket loan forgiveness would unfairly benefit wealthy individuals and those who are studying for high income fields like law or engineering. If the past year has taught us anything, it’s that means-testing relief overcomplicates policy and ends up denying significant numbers of vulnerable people the aid they need. Sometimes the best solution is to just sign the checks.
However, if giving wealthy folks a handout is your concern, be rest assured that over the course of their lucrative careers they will pay back their due, and more, through taxes.
On the campaign trail, Joe Biden promised to cancel up to $10,000 of student loan debt for borrowers who make less than $125,000 dollars a year. If we want to ensure lasting economic relief to an entire generation of Americans, President Biden needs to maintain this position as the negotiating starting point. No more pushing the deadline down the road with deferrals, and no more tinkering around the edges of the problem. We need to solve this crisis once and for all and give graduates and our economy alike the stimulus that will catapult us out of this COVID slump.
Kristin Luck is the founder of three marketing analytics companies that she led to successful private equity-backed exits. She’s now an investment banker, dog mom, and Patriotic Millionaire.
