Wilson Montoya’s final student loan payment was $ 600 a month. But he said with interest that these payments still had no effect on his debt.
“I started with a $ 70,000 loan and now it’s a $ 89,000 loan,” he said. “And I paid faithfully for six years every month.”
As a social worker working in Long Island, New York, paying off loans became a balance between his student debt, mortgage, and car payments.
“It was a struggle every month,” Montoya said. “Do you know where I get the money from?”
Millions of borrowers like Montoya are waiting to see if President Joe cancels some of their federal debt after he pledged during his campaign “I’m sorry immediately” $ 10,000 per borrower.
The prospect of that pledge is now more relevant to some Americans, as the pandemic pause in student loan and interest payments is due to end on September 30, and the freeze was first approved by former President Trump in March 2020.
Lawyers and lawmakers are now calling on the Biden administration to both extend this pause and offer long-term relief by writing off federal debt.
“Borrowers are at a standstill in both personal and economic life,” said Seth Frothman, executive director of the Student Borrower Advocacy Center. “If we were to relieve them of the burden of student loan debt, you would see this huge ripple effect in the American economy.”
The cancellation will affect 45 million Americans with loans that owe a total of $ 1.6 trillion. Canceling $ 10,000 for each would cost about $ 380 billion.
Is Biden able to forgive student debt?
For now, the White House has referred the matter to the Education and Justice Departments, which are reviewing President Biden’s powers to forgive loans under executive order, in part because the move could be met with legal problems.
“These are powers that exist under the law,” said Frothman, who tracked federal student aid at the Bureau of Consumer Financial Protection. “Borrowers are eligible for many of the forgiveness programs we are talking about.”
A group of Democrats on Capitol Hill, including Majority Leader Chuck Schumer, New York, and Senator Elizabeth Warren, Massachusetts, have called on the president to do it “with a flick of the pen.”
The group that passed the $ 50,000 per person student debt write-off bill includes Rep. Mondair Jones, a freshman from upstate New York.
Jones acknowledged that it was unlikely that the loan forgiveness bill would go through an equally divided Senate.
“The idea that we get some bipartisan support to overcome the pirate, for example, with the goal of freeing an entire generation of young people by writing off student debt? [It’s] just unrealistic, ”he said.
House Speaker Nancy Pelosi, California, denied the claim Wednesday, saying that a pardon must be made by Congress.
“[The president] does not have that kind of power, ”she said at a press conference.
The price of forgiveness of $ 50,000 will be closer to $ 1 trillion.
When President Biden last spoke on the subject in February, he was not sure if the $ 50,000 forgiveness was viable.
“I’m willing to write off a $ 10,000 debt, but not $ 50, because I don’t think I have the authority to do so,” he said. CNN Town Hall…
That’s why federal agencies are scrutinizing what he’s capable of, and a Department of Education spokesman told Spectrum News that the scrutiny is “ongoing.”
How will debt relief affect the economy?
Critics of the loan forgiveness say it will result in a loss of federal revenues, which could hurt the lines either in higher taxes or in cuts in spending on other important government aid.
“Blanket loan forgiveness is not the answer,” said Republican Senator John Thune, RS.D. in the Senate Hall after the Democrats first presented their proposal. “I hope President Biden will resist Democratic calls to put taxpayers on the hook for billions of dollars in student loans.”
“If the government gets less revenue, it must either increase other revenue or cut spending. This means either taxes will rise or other programs will be cut, ”said Constantin Yannelis, an economist at the University of Chicago who recently published Analyzing Who Will Benefit from Canceling Student Debt…
“There are other strategies that aim to write off the debt of low-income people,” he said, pointing to the expansion income oriented repayment plans as one solution.
Supporters, meanwhile, say forgiveness will boost the economy.
“We want people to buy houses, for example, which has historically been the largest source of wealth in this country,” spokesman Jones told Spectrum News.
Countdown to September
As of the end of July, payments and interest payments were still suspended until September 30 due to the pandemic.
Recent polls show that most borrowers are not ready to make payments again. BUT Pew Trusts Poll about 1,500 borrowers found that two-thirds said it would be difficult to repay their loans.
And another one from a human rights organization Student debt crisis found that 86% of borrowers surveyed said that due to the payment freeze pandemic, they were more likely to support irrevocable cancellation.
Lawyers and lawmakers are calling for an extension as the time approaches fall.
“We have two months left,” said Senator Warren. told reporters Tuesday. “This is a real impact on the earth.”
“Every month, starting in September, you have to fight for money,” Montoya said.
A spokesman for the education department did not comment on the possible renewal, but told Spectrum News that they “continue to carefully analyze the data related to the repayment of repayment” and remain willing to help borrowers.