FOR IMMEDIATE RELEASE

May 14, 2020

CONTACT: Alexis Goldstein, alexis@ourfinancialsecurity.org

Narrowing student debt cancellation in Heroes leaves out millions and surrenders a key tool for economic stimulus

Statement from Alexis Goldstein, Senior Policy Analyst, Americans for Financial Reform, on the Manager’s Amendment changes to the student loan relief provisions in the Heroes Act:

As Congress considers the next steps to rebuild the U.S. economy, student debt cancellation must remain a priority. Speaker Pelosi said that the third pillar of the Heroes Act is “putting much-needed money into the pockets of the American people.” Narrowing the student debt cancellation provisions in the HEROES Act surrenders a crucial tool to address this economic crisis that would do exactly that.

The CARES act measures were insufficient, and have been plagued with implementation problems, including 54,000 borrowers having their wages illegally garnished. Cancelling $10,000 in student loans would leave an estimated 16 million people entirely free of student debt. It would also help keep borrowers from facing student loan payments again well before the economy begins to recover. 

The Manager’s Amendment changes the student loan cancellation in Heroes to limit it only to borrowers who are defined as “economically distressed.” Narrowing cancellation to only apply to certain borrowers not only dramatically lessens the economic stimulus, it sets the legislation up for the kinds of implementation problems that CARES has faced. 

“Economically distressed” is defined as those who were in default, delinquent, forbearance, deferral, or who would qualify for a $0 payment in an income driven repayment plan as of March 12th. As drafted, this amendment leaves out millions: 

• Anyone who only became eligible for $0/month income-driven repayment due to losing their job after March 12th would not qualify for relief. 
• Anyone making small, but non-zero income driven repayment amounts would not qualify. 

The ongoing devastation of coronavirus demands a policy response that both stimulates the economy and gets direct relief to individuals. Cancelling student debt for all borrowers does both. The Speaker has said we must “think big” and that “not acting is the most expensive course.” Research shows that cancelling student debt has clear, big benefits: it boosts GDP, creates jobs, would be an effective stimulus, and increases income for individuals. 

Congress must not give up one of the most direct ways to stimulate the economy, cancelling student debt for all borrowers.