Right now, Americans are drowning in debt. Nearly 8 million Americans fell below the poverty line since last summer. In just the first three months of the pandemic, more than 100 million skipped their monthly payments for mortgages, student loans, credit cards and other forms of debt. U.S. households owe $1.55 trillion in student loan debt, $861 billion in credit card debt and $81 billion in unpaid medical bills. All told, Americans hold a staggering $4.13 trillion in non-housing debt alone, which doesn’t include the monthly mortgage payments that millions of homeowners are struggling to afford.
There are concrete steps the Biden-Harris administration can take to address this crisis right away. President-elect Joe Biden has proposed forgiveness of up to $10,000 for every American with federal student loans. Earlier this month, Senate Minority Leader Charles E. Schumer (D-N.Y.) and Sen. Elizabeth Warren (D-Mass.) called on Biden to go even further and issue an executive order that forgives up to $50,000.
Biden’s plan would eliminate debt for more than a third of borrowers. Schumer and Warren’s version would help millions more, wiping out debt for around 80 percent of all borrowers. Either would be a lifeline for struggling Americans, injecting billions of dollars of much-needed cash into a failing economy. Warren called student loan cancellation the “single most effective executive action available to provide massive consumer-driven stimulus.”
Some have dismissed the need for actions such as these. Michael R. Strain of the American Enterprise Institute writes, “I would be shocked if forgiving the student loans of high-income, highly-educated professionals resulted in any measurable increase in entrepreneurship, dynamism or economic growth.”
But such arguments don’t hold up. For starters, an executive order could target relief toward those in greatest need. Critics such as Strain also conflate educational attainment with economic security. Just consider the experience of millennials: more educated than previous generations yet rocked by surging tuition costs and stagnant wages. Their struggles curtail growth across the economy. Sixty-one percent of millennials have delayed purchasing homes due to the burden of student loans. More than half of millennials who want to start their own businesses cite student debt as a major hurdle toward entrepreneurship.
And debt doesn’t just hamper students; it hampers families. Each year, Americans between the ages of 18 and 34 receive at least $125 billion from their parents to help cover their educational costs.
Similar financial difficulties exist for Americans dealing with other forms of debt. Unpaid medical bills damage the credit scores of 43 million Americans — restricting their ability to rent homes, start businesses and secure car loans. Thirty-eight percent of prospective home buyers with outstanding medical bills said they were denied mortgages because of such debt. Medical issues bankrupt more than half a million households each year.
Fortunately, there are big ideas that can help. Sen. Bernie Sanders (I-Vt.) has a sweeping plan to eliminate $81 billion in medical debt, while Rep. Katie Porter (D-Calif.) introduced legislation to provide greater credit reporting protections for Americans with outstanding medical bills. Legal scholars and consumer advocates Norman I. Silber and Jeff Sovern have also proposed that Congress provide up to $10,000 in credit card interest relief for households that accumulated debt during the pandemic.
There’s movement on the grass-roots level as well. More than 9,000 Americans have joined a debtors union known as Debt Collective. By collectively bargaining with creditors, the group has already canceled more than $1.8 billion in debt from sources such as student loans, medical bills, credit cards and payday loans. Now, the Debt Collective and its allies are challenging the incoming administration to take historic measures. “We have the money to cancel debt, and doing so is in everyone’s interest,” writes Debt Collective co-founder Astra Taylor. “The problem is that the powerful rarely listen to reason.”
Moving forward, our leaders must consider every viable solution to help lift the crushing weight of America’s debt crisis — and free Americans to spur the economic recovery. Year after year, people across the country resolve to pay off debt. This new year, may Biden and members of Congress resolve to stand with them.