Senate Minority Leader Chuck Schumer is pushing the incoming Biden administration to cancel up to $50,000 in federal student loans when the president-elect takes office in January.
His announcement comes as the nonpartisan Congressional Budget Office released data indicating that America’s student loan debt had increased by 700% during the period from 1995 through 2017.
Schumer said that Biden can forgive the debt by executive action due to the Higher Education Act. The Trump administration previously cited the Higher Education Act in authorizing a freeze in student loan payments, which has been extended through the end of January.
If Schumer has his way, the freeze would be made permanent for millions of student loan customers.
"College should be a ladder up but student debt makes it an anchor down. For far too many students and graduate students, some years out of school, student loans and federal student loans are becoming a forever burden," Schumer said. "They stand in the way of people getting the job they want, they stand in the way of buying a home, of starting a family, of buying a car and they hurt our economy dramatically.”
Biden has not indicated support for the plan, and has instead offered a more modest recommendation of canceling up to $10,000 in federal student loans.
Loan burden increasing
Data released this week by the Congressional Budget Office shows that America’s collective student loan burden has increased seven times from 1995 through 2017 for a multitude of reasons.
The CBO lays out a number of reasons why this has happened. One culprit is that borrowing from private, for-profit colleges has skyrocketed. Adding insult to injury, those who attend for-profit colleges and universities are more likely not to graduate, resulting in fewer job opportunities.
The CBO also says that enrollment increased at universities across America through the late 90s and 00s, meaning there were simply more students to go into debt. The number of students taking out new loans did subside some after a 2011 peak, but remained higher in 2017 than they did in the 90s and much of the 00s.
There has also been an arms race at universities to increase services to students, which increases costs. This comes while state support for public universities has decreased in recent years.
Are student loans themselves responsible for increases to tuition?
The CBO says that until recently, there was no evidence that an expansion to the federal student loan program was responsible for tuition increases at universities. But the CBO claimed that more recent data has suggested that federal student loans could result in increased tuition.
The CBO cited a study conducted by Dr. Robert Kelchen of Seton Hall called “An Empirical Examination of the Bennett Hypothesis in Law School Price” among other studies.
“Using data from 2001 to 2015 across public and private law schools and both interrupted time series and difference-in-differences analytical techniques, I found rather modest relationships across both public and private nonprofit law schools,” Kelchen wrote.
College grads still fare better overall
Despite all of the debt many college graduates face in the years, and even decades, after attending school, those with bachelor’s degrees or higher fare much better in the job market.
According to the US Census’ 2019 data, the median income for a householder with a bachelor’s degree was $51,036, with those with advanced degrees making even more. For those with an associate’s degree, a degree generally given to community college graduates, the median income was $34,242. Those who attended some college, but did not have a degree, earned $33,380 a year, while those who were high school graduates earned $26,803.
During the height of the pandemic, those with at least a four-year college degree were more likely to hang on to their job. The unemployment rate increased from 2.5% to 8.4% for those with a bachelor’s degree from March to April of 2020. Those with an associate’s degree or some college experience, but not a four-year degree, saw an unemployment rate increase from 3.7% to 15%.
For those who graduated high school but did not attend college, the unemployment rate during the same period jumped from 6.8% to 21.2%.
The most recent job figures, which were for the month of October, showed an unemployment rate of 4.2% for those with at least a four-year degree, 6.5% for those with an associate’s degree or some college, and 8.1% for those with a high school diploma and no college experience.