Office of U.S. Senator Elizabeth Warren (D-Mass.)
The Facts: Majority of Student Loan Debt is Held By Families With Zero Wealth, 99.7% of Borrowers Didn’t Attend Ivy League Schools and 40% Didn’t Finish College, Student Debt Cancellation Won’t Fuel Inflation
At a hearing of the Senate Committee on Banking, Housing, and Urban Affairs, U.S. Senator Elizabeth Warren (D-Mass.) and two experts debunked myths that out-of-touch pundits and Republicans have spread about student debt cancellation. Senator Warren reiterated her call on President Biden to provide meaningful student debt cancellation to help narrow the racial wealth gap among borrowers, deliver relief to families struggling with higher costs, and unlock opportunities for millions of Americans.
Senator Warren and Dr. Jalil Mustaffa Bishop, an Assistant Professor at Villanova University and the co-founder of the Equity Research Cooperative, debunked the myth that student loan borrowers are wealthy elites who attended highly selective institutions. In response to questions from Senator Warren, Dr. Bishop confirmed that only 0.3% of borrowers attended an Ivy League school. By contrast, the majority of student debt is held by families with zero or negative household wealth, with Black students taking out debt at much higher rates than white students – almost 90% compared to 68%. Finally, about 40% of borrowers did not finish college and have to pay off loans with a high school graduate’s income.
In a second round of questions, Senator Warren and Mike Pierce, the Executive Director and co-founder of the Student Borrower Protection Center, debunked Republican myths that student debt cancellation would fuel inflation. With the federal student loan payment pause, the federal government has been effectively cancelling student loan payments for more than two years. Citing estimates from a conservative think tank that is critical of cancellation, Mr. Pierce noted that two years of student debt cancellation has only added about two-tenths of a percentage point to inflation, with 97% of inflation being driven by other causes. Rather than inflating the economy, meaningful student debt cancellation would help families struggling with higher costs, unlock opportunities, and make the economy stronger.
Transcript: Examining Student Loan Servicers and Their Impact on Workers
U.S. Senate Committee on Banking, Housing, and Urban Affairs
Thursday, May 5, 2022
Round one of questions below and video HERE:
Senator Elizabeth Warren: Thank you, Mr. Chairman.
Right now, President Biden is considering cancelling debt for the 43 million Americans who have student loans. Now, this policy is incredibly popular with the American public. No matter who you ask – and that includes people with student loans and people without student loans – big majorities support cancellation. And I think the reason for that is that there is scarcely a working person in America who does not have a friend, a family member, a coworker, who is weighed down by student loan debt.
But if you’re listening to the talking heads with fancy degrees who oppose this policy, you might be under the impression that the borrowers who the President wants to help are all wealthy. They’re all wealthy Harvard grads who don’t need any help with their loans. So what I’d like to do is just look deeper into the data.
Dr. Bishop, you’re an expert on student borrowers and their experience in the student loan system. What does the data say about who borrows money to attend college – are they generally very wealthy?
Dr. Jalil Mustaffa Bishop, Co-Founder And Assistant Professor, Equity Research Cooperative & Villanova University: I think the data is quite clear that those who borrow student loans are not wealthy. That they are not people who have high levels of assets. That more than half of borrowers with student loans, or more than half of student debt is held by families with zero or negative household wealth. And especially when we are looking at communities of color, where again we see almost 90% of Black students borrowing student loans, compared to 68% of white students.
So the idea that student loans are carried by wealthy families, I think is something that doesn’t show up in the data, and also is something that again, goes against what we understand as rich people or wealth in this country.
Senator Warren: Okay, so these are people who are borrowing, are people of, at best, very modest means.
Let’s take a look then about the kinds of schools they attend. Do most borrowers take out loans so they can attend elite schools or business schools, Dr. Bishop?
Dr. Bishop: No, and as someone who went, as someone who was a low-income student who went to one of these elite schools, we know that the vast majority of borrowers are not coming from the Ivy League. That when we look at those selective schools, we see around 0.3% of all borrowers come from the Ivy Leagues.
Senator Warren: Wait a minute, Dr. Bishop. Can you say that one the other way? What proportion of student loan borrowers are not coming from the Ivy Leagues?
Dr. Bishop: So 99% come from institutions that are not the Ivy League.
Senator Warren: 99, 99.7, according to your data, right?
Dr. Bishop: Yes.
Senator Warren: Okay, so they’re not coming from the Ivy League, so let’s do one more. Critics argue that cancelling student loans would mean helping out people who are earning good money with their college degrees and will be able to pay off their loans without the government stepping in.
Dr. Bishop, are those valid criticisms? Are student loan borrowers all earning college graduate wages and in a good position to pay off their loans?Dr. Bishop: No, so we know that 40% of student loan borrowers have student debt but do not have a college degree. We know that increasingly, many student loan borrowers are parents who do not have the so-called lifetime earning trajectory in ahead of them
That when we look at Black students, we know that they owe more than they originally borrowed a decade out, and that twenty years out, they have only paid down, on average 95%, or they still owe 95% of their original student loan balance.So Dr. Bishop, could I ask you, just unpack that, just a little bit. So, students go into college, right? And they borrow while they’re in school, and you said what proportion of them never graduate from college?
Senator Warren: So Dr. Bishop, could I ask you, just unpack that, just a little bit. So, students go into college, right? And they borrow while they’re in school, and you said what proportion of them never graduate from college?
Dr. Bishop: 40% of students–
Senator Warren: 40%, so four out of every ten students who’s carrying student loan debt, do they make college grad wages?
Dr. Bishop: Absolutely not.
Senator Warren: No. So here they are – they’re earning like high school grads, but all are getting, but they’re managing college loan debt. And then you also said, you never, people don’t think of it this way. You borrow money, but for what proportion of Black students did you say, twelve years out, from when they started borrowing money, are actually deeper in debt?
Dr. Bishop: So we know, 66% of Black student loan borrowers, over a decade out, are deeper in debt, will owe more than they originally borrowed. And–
Senator Warren: And why do they owe more than they originally borrowed?
Dr. Bishop: Because we understand that Black students not only borrow more, but they access higher ed institutions that are more likely to be for-profits and predatory. To be institutions that are already underresourced themselves, and that they’re navigating a higher ed system that is very different than their white counterparts, as far as opportunity and accessibility.
Senator Warren: Yeah, and I assume also we’re talking about what kind of wages they earn when they–
Dr. Bishop: Absolutely. So entering the labor market, which often doesn’t get as much attention in these conversations, we still have persistent employment gaps, racial income gaps, that even as Black people earn more degrees, we still see our wages not reflecting that.
Senator Warren: I appreciate this. You know, it’s clear that the opponents of student loan cancellation are living in a bubble of privilege that is completely disconnected from the reality of the people who borrow money to get an education. As you said, 99.7% of borrowers did not get an Ivy League degree. Heck, 40% of them didn't get any degree at all. The majority of these loans are held by people with zero wealth. And Black borrowers are not just treading water trying to keep up with their payments – they’re actually falling behind.
Meaningful student loan debt cancellation is the single, most powerful thing the President of the United States could do on his own to help narrow the racial wealth gap among borrowers, to help families that are struggling with rising costs, and to expand opportunities for millions of people.
You know, we need to stop listening to out-of-touch pundits and politicians whose biggest worry is that we might help working people too much.
Thank you, Dr. Bishop. Thank you, Mr. Chairman.
Round two of questions below and video HERE:
Senator Elizabeth Warren: So, President Biden is considering cancelling student loan debt for tens of millions of Americans and Republicans are attacking the idea because they don’t want the President to get credit for helping working families that need help. So one of the arguments they’ve been making is that cancelling student loan debt will somehow make inflation worse. So that’s the question I want to pursue today, in, in this round.
Republicans’ arguments I think here are completely out of step with reality. When the pandemic hit two years ago, President Trump halted all student loan payments, and they’ve been paused ever since then. In other words, the federal government has already been effectively cancelling every month of student loan payments for more than two years.
Now, Mr. Pierce, you’re an expert on student debt and its impact on borrowers and the economy so let me ask you. What does the data show about how two years of student loan cancellation has impacted inflation?
Mike Pierce, Executive Director, Student Borrower Protection Center: Thank you for the question, Senator Warren. And I actually want to cite the same conservative think tank, the Center for Responsible Federal Budget, that Senator Toomey cited in his opening remarks, noting that it is putting billions of dollars back in borrowers' pockets, but that is just a few billion dollars in a many trillion-dollar economy.
It is not – the same analysis shows that it has not contributed substantially to inflation. And in fact, it's just driving 0.2% of inflation, that is one-quarter of one-tenth of all inflation in America. The White House actually puts that estimate even lower – and 97% of all inflation is due to other causes, like the war in Ukraine, problems with supply chain, and most importantly, greed by mega-corporations that are profiteering off of the pandemic.
Senator Warren: Okay. So even the most conservative think tanks say about – is it two-tenths of one percent of inflation may have been affected?
Mr. Pierce: That’s right.
Senator Warren: Let's, let's unpack that a little bit. Because according to the New York Fed, the payment pause has saved borrowers $84 billion a year – $84 billion for two years sounds like a lot of money to most people, including me. And you're saying that even so, it only contributed two-tenths of one percentage point to the rate of inflation. So, why is it that $84 billion a year isn't adding more inflation?
Mr. Pierce: That's because, and again, I'm citing the conservative think tank here.
Senator Warren: Got it.
Mr. Pierce: That's because we have a multi-trillion dollar economy that's driven by consumer spending.
Senator Warren: Mhm.
Mr. Pierce: And this billions of dollars in relief, it's life-changing for the families that benefit from it, but it's just a drop in the bucket for the economy.
Senator Warren: Okay, so let me see if I’ve got this straight. Republicans’ so-called solution to rising prices is to tell hardworking families that they need to start writing checks for hundreds or thousands of dollars a month to the federal government.
You know, that’s not just a slap in the face to borrowers who are barely getting by right now – it also would have virtually no impact on inflation. But let’s talk about what cancellation of student loan debt would do for the economy.
Mr. Pierce, what impact would meaningful student debt cancellation have on families’ pocketbooks and the broader economy?
Mr. Pierce: So, as you mentioned, we have canceled student loan payments for two years.
Senator Warren: Yeah.
Mr. Pierce: And research that we published with the California Policy Lab and our Student Loan Law Initiative at University of California, Irvine, found that the average family saves 200 bucks a month. 43% of those borrowers have used that to pay down high-cost credit card debt, and the borrower, borrowers with the worst credit, with the weakest credit going into the pandemic, have experienced the biggest gains. So, this is progressive policy and is a breath of fresh air for people that have struggled for too long.
Senator Warren: Right. And for people who are now getting rid of the long-term principal, what does this mean for their lives? What can they now do?
Mr. Pierce: This will expand opportunities for homeownership. It'll make a generation of renters turn into a generation of homeowners. It'll help people save for retirement and it will help fight the plague of intergenerational student debt. It will free up people's money to help the next generation pay for college.
Senator Warren: So a lot of opportunity, a lot of long-term stability for families. You know, this would be real money in the pockets of American families who are struggling to pay their bills right now.
And let’s be clear about what’s happening here. Republicans are desperate to stop the President from doing something that would help working families. So desperate that they are peddling lies about how student loan debt cancellation would impact our economy.
Here are the facts. Cancelling student debt would unlock opportunities for Americans across the country. It is a crucial step in reforming the broken student loan system. And it would not inflate the economy – it would make it stronger for years to come.
The President needs to provide meaningful student debt cancellation for hardworking families and he needs to do it now.
Thank you for being with us.