“We are facing a student loan time bomb,” says Senator Warren amid a $ 50,000 pardon attempt.

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As the U.S. student loan suspension will end after September, Senator Elizabeth Warren, Massachusetts keeps pushing for student loan forgiveness as a remedy for a potentially catastrophic scenario.

If the billing pause is paused without cancellation in October, “we will face a student loan time bomb that could detonate and throw millions of families off financial rupture,” Warren said during town hall organized by the American Federation of Teachers on Tuesday evening.

“The average borrower would have to start paying the government about $ 400 a month instead of spending that money on our economy,” she added. “Student borrowers run the risk of extreme financial hardship. When the interest gap on student loans ends on September 30, people will not know how much they owe. They will suddenly miss deadlines. They are about to commit an offense. They will pay fines for this. “

Federally backed student loan payments have been suspended since March 2020, and President Biden extended the pause at least until September 30th when taking office.

Screenshot of Warren during AFT Town Hall

Screenshot of Warren during AFT Town Hall

‘The time has come’

Student loan balances increased by $ 29 billion to $ 1.58 trillion in the first quarter. according to the Federal Reserve System of New York

At the same time, only 6.2% of student loans were seriously delinquent or defaulted in the first quarter of 2021 due to suspension of payments and a moratorium on debt collection

(Source: New York Fed)

(Source: New York Fed)

This staggering drop could be reversed, Warren argued, if payments were resumed without proper training of borrowers and widespread cancellation.

“So the time has come, let’s fix this problem now,” Warren said. “Today we need to write off $ 50,000 in debt, which wipes out all student loan debt for 84% of people, and then we can focus on the remaining 16%. We need to do this now, before there is a spike in defaults, as soon as these loans are repaid. So this is one of the reasons for the urgency of this moment. “

IN The Washington Post reported last week that White House officials are not including student debt cancellation in their upcoming budget proposal.

In March, White House Chief of Staff Ron Klein said Politico that President Biden asked Education Minister Miguel Cardona to draw up a memorandum on whether the president has the legal authority to write off the $ 50,000 student loan debt through a decree. The Department of Education did not respond to requests for comment on the memo.

“Canceling the $ 50,000 student loan debt will be the single most effective action President Biden can take to provide massive consumer stimulus to our economy and promote real racial justice throughout our country,” Warren said. “Department of Education data shows that if we cancel the student loan debt of $ 50,000, 84% of borrowers – that’s 36 million people – will have their student loans completely canceled. “

Aarti is a correspondent for Yahoo Finance. Follow her on Twitter @aarthiswami

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