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How Student Loan Forgiveness Could Change Lives In Massachusetts

As student loan debt reaches record highs, pressure is mounting on President Joe Biden to forgive as much as $50,000 per borrower.

In Massachusetts, the average student loan balance per person was $38,867, in 2020, up 7.1 percent from 2019, according to Experian.
In Massachusetts, the average student loan balance per person was $38,867, in 2020, up 7.1 percent from 2019, according to Experian. (Shutterstock)

MASSACHUSETTS — What would you do with an extra $10,000 in Massachusetts? What about $50,000?

As President Joe Biden faces mounting pressure to take action on student loan forgiveness, it’s a question that’s likely on the minds of millions of Americans with student loan debt.

While on the campaign trail, Biden said he supported canceling $10,000 in student loan debt per borrower as a way to stimulate the economy amid the coronavirus pandemic. Some members of Congress, however, are saying that isn’t enough. They are asking him to forgive $50,000 per borrower.

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More than 10 million Americans are unemployed right now, so wiping away $50,000, or even $10,000, worth of debt would likely have a tremendous effect on what people in Massachusetts could afford each month. But just how far would that money go?

Assuming most borrowers would no longer have to pay the average $393 monthly payment, they could:

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Student Loan Debt At A Glance

The calls for student debt cancellation certainly aren’t unwarranted.

Student loan debt makes up the second-biggest share of household debt, according to the Brookings Institution. Student loan debt hit an all-time high in February 2021, even as most repayments were paused as part of the CARES Act passed in March 2020.

In the meantime, outstanding student loan debt in the United States has grown at double the rate it had in previous years. Student loan debt now sits at a staggering $1.57 trillion, according to credit reporting agency Experian, an increase of $166 billion since 2019.

In 2020, the average student loan debt per person was $38,792.

In Massachusetts, the average student loan balance per person was $38,867, in 2020, up 7.1 percent from 2019, according to Experian.

Borrowers in all 50 states and the District of Columbia also recorded growth in their student loan debt last year, according to Experian data. Borrowers in D.C. had the highest amount of student loan debt in 2020, with an average balance of $60,651. Meanwhile, South Dakota borrowers had the lowest at $30,449.

The median monthly payment for a bachelor’s degree is about $444, while a master’s degree runs about $695 per month and a doctoral $1,210 per month.

It takes most borrowers about 20 years — or 240 monthly payments — to repay their student loan debt, according to data compiled by educationdata.org.

When you factor in interest — about 6 percent over 20 years — the average student loan accrues $26,000 in interest alone.

Pressure Mounts

For now, vanishing student debt is only a possibility. However, calls for its reality are growing louder.

"Today we're calling on President Biden to use his authority to forgive up to $50,000 in student loan debt," Sen. Bob Menendez said during a news conference Monday, according to a CNET report.

Sen. Elizabeth Warren of Massachusetts also is among lawmakers lobbying for student loan forgiveness.

During a recent hearing on student loan debt, Warren said the median Black borrower still owes 95 percent of the original amount they borrowed 20 years after taking out the loans. However, the median white borrower owes just 6 percent of the original amount after the same period.

“This is the single most powerful executive action President Biden could take to advance racial equity and give everyone in America a chance to build a future,” Warren said, according to the CNBC report.

By Tuesday, more than 415 organizations had signed a letter urging Biden and Vice President Kamala Harris to cancel student loans.

Signers included the American Civil Liberties Union, the National Association for the Advancement of Colored People (NAACP) and the Consumer Federation of America.

The letter was first sent in November and then again in January.

Would forgiving student loans have a positive effect on the U.S. economy? Depends on who you ask.

A 2018 paper from the Levy Economic Institute of Bard College looked at the effects of student loan debt forgiveness. At the time, authors wrote that a one-time cancellation of $1.4 trillion in outstanding student debt would translate to an increase of $86 billion to $108 billion a year, on average, to the country’s GDP.

However, the bipartisan Committee for a Responsible Federal Budget argues that canceling student loan debt would be a poor strimulus to the economy. Researchers say that while student loan forgiveness would increase cash flow by $90 billion per year, it would come at a cost of $1.5 trillion.

“Simply extending the current executive action to defer loan repayments and cancel interest would achieve much of the economic benefit of loan cancellation at only a very small fraction of the cost,” the report states.


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