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Senators argue over who benefits from student debt cancellation

Democrats seek policy accomplishment before midterms

Sen. Raphael Warnock, who is running for reelection this year, advocates cancelling $50,000 in debt per student borrower.
Sen. Raphael Warnock, who is running for reelection this year, advocates cancelling $50,000 in debt per student borrower. (Bill Clark/CQ Roll Call file photo)

Senators sparred Thursday over who would benefit most from student debt cancellation, as President Joe Biden weighs his options about how far such a move should reach.

Senate Banking Democrats upped the pressure on Biden to forgive a “meaningful” amount of outstanding student loans, saying at a hearing that cancellation of at least $50,000 would ease the disproportionate burden the debt places on Black borrowers. Republicans said canceling the debt would benefit wealthy households most and shift the cost from white-collar workers with advanced degrees to taxpayers. 

“It’s clear to me that the No. 1 thing that the president of the United States can do right now to lower costs for Georgians and help close the racial wealth gap is to cancel student debt,” said Sen. Raphael Warnock, D-Ga. 

The administration has forgiven about $18.5 billion in student loan debt so far through piecemeal programs, according to the Education Department. In total, about 43.4 million borrowers hold $1.75 trillion in student debt, according to research by the Education Data Initiative. 

Warnock and other Senate Democrats, including Majority Leader Charles E. Schumer, have pushed Biden to cancel at least $50,000 in student loan debt per borrower. Biden ruled that out last month and said he would reach a decision in the coming weeks. 

On the campaign trail in 2020, the president favored forgiving $10,000 a borrower. Press Secretary Jen Psaki said Tuesday that Biden was considering targeting relief at those earning less than $125,000. 

In response to questions from Warnock, Jalil Mustaffa Bishop, a professor at Villanova University in Pennsylvania and co-founder of the Equity Research Cooperative, said forgiving $10,000 in debt would not be enough to help Black borrowers. 

“If we canceled $10,000 today, that will still leave 83 percent of Black borrowers who not only still have student debt, but they have student debt where they owe more than they originally borrowed,” Bishop said. 

Bishop added that student loan debt disproportionately burdens Black students, who are less likely to have family wealth to rely on. 

Black students are more likely to borrow to pay for college — with about 90 percent doing so, compared with 68 percent of white students — and, more than a decade after graduation, 66 percent of Black borrowers hold more student loan debt than the amount they originally borrowed, Bishop said. 

“Black students not only borrow more, but they access higher institutions that are more likely to be for-profits and predatory, to be institutions that are already under-resourced themselves, and they’re navigating a higher ed system that is very different than their white counterparts as far as opportunity and accessibility,” Bishop said. He added that Black graduates also face lower wages and fewer job opportunities after graduation.

Black students are also five times more likely to default on student loans than their white peers, according to a 2020 analysis by the Brookings Institution. Default opens borrowers up to lawsuits and garnished wages.

Republicans led by ranking member Patrick J. Toomey, R-Pa., said canceling student loans would most benefit wealthy households holding advanced degrees. Forgiving debt would be a “slap in the face” to anyone who skipped college, saved for school or had already paid off their debts, Toomey said. 

“Let’s be clear about what canceling student loan debt means. It’s a massive wealth transfer from taxpayers to a small subset of mostly wealthy individuals,” Toomey said. “Over half of all student debt is taken by graduate students, many of whom happily incur the debt because they are entering high-paying fields like business, medicine and law.”

Graduate students account for about a quarter of borrowers and 56 percent of outstanding student loan debt, according to a 2020 analysis by the Brookings Institution. Another analysis by the think tank found that the top 40 percent of households by income, or those making at least $74,000 a year, account for about 60 percent of outstanding student loan debt. 

“Beyond being a massive wealth transfer to the well-off and well-credentialed, student debt cancellation is grossly unfair to every other American,” Toomey said.

Villanova’s Bishop said the analysis should focus on wealth, not income. 

“We have seen a lot of narratives and research and framing that those who carry student debt are the wealthy because they have so-called high incomes. First we have to be clear that there is a difference between wealth and income,” Bishop said. “Student debt is overwhelmingly concentrated amongst borrowers who have zero or negative wealth. So again, this is not the common sense way that we describe someone who’s wealthy.”

More than half of Black households holding student loan debt have a zero or negative net worth, compared to 32 percent of non-Black households with student debt, according to a 2021 study by Brookings. 

Vulnerable Democrats split

The issue has taken on increased prominence as Democrats search for accomplishments to tout heading into the midterms after facing defeats on legislative priorities, including voting rights and the $3.5 trillion social and climate spending package. Canceling at least some student debt is popular among voters, but Democrats on the committee facing tough races this fall were split on what Biden should do.  

An April poll from Politico and Morning Consult found strong support for debt forgiveness. Sixty-four percent of respondents favored at least some debt cancellation for some borrowers, with 19 percent supporting forgiveness of all student loan debt. Of those asked, 29 percent opposed debt forgiveness of any kind. 

Only a fifth of those surveyed had student debt themselves, indicating the issue has support even among those who wouldn’t directly benefit. 

Warnock, who is running for reelection this year, supports the cancellation of $50,000 in student loans per borrower. He won his seat by 2 percentage points in a runoff last year. Biden won Georgia by 0.2 percentage points in 2020. 

“Student debt cancellation is the right thing to do right now, and it’s the smart thing to do. And it’s just good public policy,” he said. “Too many of our children have a mortgage before they have a mortgage. It’s a scar on the conscience of our country, and I think it’s actually holding our economy back.”

About 37 percent of Georgia residents, or about 2.4 million people, have at least a college degree, according to Statistical Atlas. 

In contrast, Sen. Catherine Cortez Masto, D-Nev., focused her questions on administrative improvements to student loan servicing and would not commit to across-the-board cancellation of student debt. 

Cortez Masto said constituents pose questions about the fairness of loan forgiveness. About 31 percent of Nevada residents, about 598,000 people, hold at least a college degree, according to Statistical Atlas. 

“This is something I do hear in my state, ‘I paid for my student loans. I worked hard. I worked a second job,’” she said. “‘Why shouldn’t everybody else have to do it, not get that forgiveness?’”

Cortez Masto said she supports programs that offer loan forgiveness in exchange for doing work in rural areas. 

“I also think that for purposes of student debt in general we should be looking at income-based repayment plans,” she said in an interview after the hearing. “I think there are things that we can do comprehensively to really address this and then reform the system.”

When asked if she would support broad forgiveness of loans, Cortez Masto said she would be looking at a combination of tactics to address the issue. 

Cortez Masto last won her seat by 2 percentage points in 2016. Biden carried Nevada by the same margin in 2020.

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