The fight against the coronavirus outbreak is a global endeavor, and as local and national governments around the world scramble to manage the global health crisis, they must also prepare for another devastating reality: a global recession.
Making sure aid is equitable and effective is the burden laid upon American lawmakers and public officials—especially in a country where wealth and resources have become increasingly polarized. On Monday, Congresswomen Ilhan Omar (D-Minn.) and Ayanna Pressley (D-Mass.) proposed an ambitious plan that would be a financial game-changer for millions of Americans: alleviating student debt.
The Student Debt Emergency Relief Act would immediately cancel at least $30,000 in outstanding student loan debt for borrowers who relied on federal student loans. It would also protect them from involuntary payments and wage garnishment for the length of the pandemic. According to Pressley’s office, under this proposed legislation, 45 million workers and families could find some financial relief.
“During this unprecedented crisis, no one should have to choose between paying their student loan payment, putting food on the table or keeping themselves and their families safe and healthy,” said Congresswoman Pressley. “Our $1.6 trillion student debt crisis stands in the way of any meaningful economic recovery effort during and after this pandemic, which is why we must cancel student loan debt in order to jumpstart the economy.”
“Student debt was a crisis before the coronavirus. And it’s an even deeper crisis now,” said Rep. Omar. “There are over 750,000 student loan borrowers in Minnesota—and they owe a whopping $34,932 on average. We must not force Americans to choose between putting food on the table and paying off exorbitant student loans.”
The American economy runs on consumer spending: 70 percent of U.S. economic growth stems from this kind of business—without it, the country’s GDP would actually be in decline. It’s also a segment of the economy that will be hard-hit by efforts to manage COVID-19, the disease caused by the coronavirus.
Saving lives is contingent on not overwhelming America’s fragile healthcare system, and in order for hospitals to manage patient loads, Americans need to self-quarantine in order to limit the spread of the coronavirus, which is both more contagious and more deadly than the flu (according to the latest research, COVID-19 has between two to three times the transmission rate of the flu, and is 30 times more deadly).
In response to the pandemic, restaurants around the country have closed indefinitely, as have barbershops, nail salons, bookstores. Major retailers who have the ability to close down their brick-and-mortar stores have taken their business online—companies like Sephora and the Gap have done so.
With possibly millions of Americans suddenly out of work, and with the retail industry gutted, many will struggle to cover the costs of their monthly necessities, even with income assistance from the government. Relieving costly monthly payments, like student loan debt, would free up many Americans to spend their money meeting important day-to-day needs, said Alexis Goldstein, a Senior Policy Analyst for Americans for Financial Reform who supports the new legislation.
“The growing economic devastation caused by the COVID-19 pandemic requires bold solutions that can reduce expenses to Americans in the midst of labor shocks,” Goldstein said in a press release. “Rep. Ayanna Pressley’s bill is a powerful and efficient way to immediately relieve pressure on distressed borrowers. Rep. Pressley’s legislation would free up needed money to go to food and other essentials.”
“We failed to address student debt in the last recession and we cannot afford to make this same mistake again,” said Seth Frotman, a former Student Loan Ombudsman at the Consumer Financial Protection Bureau. “Student loan companies are shutting their doors and turning off their phones in response to the coronavirus pandemic, cutting off borrowers from access to critical protections. If borrowers have nowhere to turn to get help, lawmakers must immediately cancel student loan payments for all Americans with federal student loans.”
Pressley and Omar’s bill follows calls by Massachusetts Congresswoman and Senator Elizabeth Warren to cancel student loan debt in the emergency stimulus package currently being debated on Capitol Hill. It’s more robust than the one proposed by Senate Democratic leaders, who proposed a minimum of $10K in student debt cancellation per borrower and immediate relief from monthly payments.
Student loan debt disproportionately affects black students and students of color, who have deeply internalized the message that hard work and education is the way to advance yourself economically and socially.
There are many reasons for the higher debt rate among black grads. More black graduates will pursue graduate school degrees than their white peers, but they also have a higher rate of attending predatory for-profit institutions. Degrees from these places put them further in debt without actually advancing their employment options, and they’re more likely to accumulate a staggering amount of debt.
Black borrowers also tend to have higher default rates, which could stem from black college graduates earning less upon graduation than white grads.
America’s racial inequality is laid bare when looking at wage and occupation gaps: black workers are overrepresented in the service industry, which thus far has been hit harder by the pandemic than other sectors. Low wage workers are also less likely to be able to telework, meaning their chances of staying employed and staying healthy during the pandemic are far lower than others.
“Black and brown students who carry more student loan debt than any other group are now hit with the bulk of lost hours and layoffs. Older Americans who are at the greatest risk of defaulting on their student loans and are now unable to access the basic needs they depend on every day,” Natalia Abrams, executive director of the nonprofit advocacy group Student Debt Crisis, wrote in support of the proposed bill.
“If the federal government can generate trillions of dollars of aid to big businesses, let us not forget the vulnerable communities that carry a disproportionate student debt burden and are now facing the brunt of the financial impact of this pandemic.”