Starting on October 1, monthly payments on US student loans held by 43 million youth and workers are due to resume for the first time since March 2020. The resumption of payments on $1.7 trillion in federal student loan debt, as well as the restart of interest accrual this month, will have devastating social consequences for millions of people.
As part of his 2020 presidential campaign, Democrat Joe Biden promised to forgive the federal student debt of borrowers making under $125,000 a year. Like so many of the Democrats’ campaign promises, this one too has proven completely worthless. For all of Biden’s demagogy, American capitalism is incapable of addressing this or any other significant social issue.
Student debt relief advocates gather outside the Supreme Court on Capitol Hill in Washington, Tuesday, Feb. 28, 2023, as the court hears arguments over President Joe Biden’s student debt relief plan. [AP Photo/Patrick Semansky]
Student loan payments were suspended in March 2020 in response to the mass economic dislocation caused by the COVID-19 pandemic, in which millions of people lost work and pay amid the socially necessary shutdown and quarantine measures taken to stop the spread of the disease. Now, along with the dismantling of any measures to track the virus or stop the continuing and deadly spread of COVID-19, the political establishment is imposing repayments to satisfy the demands of Wall Street to end the 42-month pause.
Since the initial suspension of debt payments, the social crisis has continued to deepen. Over the past three years, the cost of living has increased 20 percent while median wages have fallen.
The scale of the student debt crisis is enormous. According to data maintained by the Federal Reserve, as of March 2023, total US student loan debt was $1.774 trillion, which is greater than the $1.03 trillion credit card debt or the $1.56 trillion auto loan debt. The volume of student loan debt has increased more than three-and-a-half times since 2006, when it was $480 billion. Today, approximately one in five US adults owes money on student loans.
The restart of payments will have a crushing financial impact on students and their families. It comes amid rising interest rates on all types of loans, and at a point when delinquencies on credit card debt and auto loans are the highest they have been in a decade, according to Moody’s Analytics.
As Mark Zandi, chief economist at Moody’s Analytics, told the Washington Post, “The increase in delinquencies and defaults is symptomatic of the tough decisions that these households are having to make right now—whether to pay their credit card bills, their rent or buy groceries.”
Since 2006, average student loan debt has increased by a factor of four, rising from $9,366 to $37,338. According to the US Department of Education, nearly two-thirds—more than $1 trillion—of all the student loan debt is owed by some 27 million individuals between the ages of 25 and 49.
Numerous studies have shown that these borrowers have been forced to take second jobs and postpone life decisions, such as starting a family, buying a house or taking vacations, due to their student loan payments.
Additionally, parents have taken on debt to help their children afford a college education. There are 3.7 million Direct Parent Plus loan borrowers, who owe an average of $30,000. Some have debts as high as $200,000.
Many of these parents will be taking this debt into retirement, and since laws have been passed (at the bidding of the banks) to prevent these loans from being discharged through personal bankruptcy, payments will be garnished from their monthly Social Security checks if they are unable to pay and go into default.
With the June 30, 2023 decision of the US Supreme Court to reject the Biden administration’s plan for extremely limited student loan forgiveness, the ruling class made it clear that nothing will be permitted that reins in the student loan operations of Wall Street.
