Warren makes case to Fed chair for canceling student loan debt

Sen. Elizabeth Warren (D-Mass.) on Tuesday pressed for President-elect Joe Biden to take executive action to cancel student loan debt during an exchange with Federal Reserve Chairman Jay Powell at a Senate hearing.

“All on his own, President-elect Biden will have the ability to administratively cancel billions of dollars in student loan debt using the authority that Congress has already given to the secretary of Education,” Warren said during a Senate Banking Committee hearing. “This is the single most effective economic stimulus that is available through executive action.”

Warren has long supported student debt cancellation, and her comments come amid a debate over whether Biden should act unilaterally to do so. 

Since March, student loan borrowers have been able to defer payment on loans without accruing interest and penalties, but that relief is set to expire at the end of the year.

Biden has backed measures, including the cancellation of $10,000 of student loan debt through legislative means, as part of his broader higher-education plan. But Biden would struggle to enact this plan legislatively if Democrats don’t get control of the Senate after the Jan. 5 Georgia runoffs.

Some Democrats argue that Biden should act unilaterally to cancel student debt, saying that doing so would help aid the recovery from the coronavirus-related downturn. But many economists argue that there are better ways to boost the economy.

During Tuesday’s hearing, Warren focused on arguing that it would be beneficial to the economy to cancel student debt.

Warren brought up past comments in which Powell has expressed concerns about student debt. 

Powell said he and others “have been calling out the rising student debt for some years now,” but said he was going to defer to other policymakers about what relief is appropriate during the pandemic.

Warren followed up by asking Powell about the impact of student debt on the economy.

“If people who instead of spending that money in the economy are spending that money by sending money back to the federal government on their student-loan payments, that is a problem for the economy, is it not?” she asked.

Powell replied that if people are weighed down by debt, particularly if they’re unemployed, it can “weigh on economic activity.”

Powell also said that research shows that over long periods of time, student debt can hurt people’s credit history and ability to own a home. 

“In effect, those people are unable to participate perhaps in the economy to the full extent that they might be able to, which would weigh on the economy,” he said.

Warren noted that many other actions aimed at providing coronavirus relief, such as aid to state and local governments and more stimulus checks, would require congressional approval, but that “student loan debt is different.” 

She said research has found that canceling student debt would boost gross domestic product, create jobs, boost small business creation, support the housing market and help to close the racial wealth gap.

“It is time to act,” she said.