Menendez, Pascrell Call on President Biden to Act on Student Loan Debt Crisis, Unleash Economic Power, Potential of Borrowers

Press Release

U.S. Senator Bob Menendez (D-N.J.) and Congressman Bill Pascrell, Jr. (N.J.-09) today were joined by students, administrators and higher education advocates at Montclair State University to call on President Biden to use his authority to act on student loan debt, unleash the economic power of millions and drive the nation's economic recovery from the pandemic. A provision in the American Rescue Plan authored by Sen. Menendez and sponsored by Rep. Pascrell in the House paves the way for the President to take bold action by making college loan forgiveness tax-free and eliminating thousands of dollars in surprise tax bills.

In New Jersey, an estimated 1.3 million borrowers hold $48.8 billion in student loan debt, with an average balance of more than $33,000. Nationwide, more than 43 million Americans hold a combined $1.6 trillion in federal student loan debt, with many struggling to make payments even before the current economic crisis caused them to fall further behind.

"Student loan forgiveness has the power to unleash a wave of consumer-driven growth in this country--and President Biden does not need Congress to do it. And with the American Rescue Plan now the law of the land, we no longer have to worry about slamming borrowers with surprise taxes on their forgiven debt," said Sen. Menendez. "For millions of Americans and especially people of color, crippling student loan debt has turned the dream of a college education into a financial nightmare that haunts them for decades. For far too long, incomes have failed to keep pace with the rising cost not only of education but also health care, housing, child care, and other basic living expenses. When you are barely keeping your head above water it is a hell of lot harder to make a dent in your student loan principle."

"This has not been an easy year for anybody, but the burden on our students is very heavy. They have been robbed of a year of their lives,"
said Rep. Pascrell
. "Students face enormous anxiety about the post-pandemic world and carry mountains of loan debt. It shouldn't be this way. Thanks to the Pascrell-Menendez-Gomez-Warren provision included in the American Rescue Plan, student debt loan forgiveness can be tax-free and give enormous flexibility to millions of Americans. Absolutely no one who wants to pursue an education and better themselves should be saddled with debts for the rest of their lives."
The lawmakers also called for President Biden to use his executive power to cancel up to $50,000 in federal student loan debt and pointed to the impact it would have on the national economy by helping unleash the economic power of those who are currently burdened by crippling student debt.

"Here in New Jersey, the average student loan bill is $310 a month. But for many borrowers, it's even more. I'm talking $400 or $500 a month on top of all their other bills," Sen. Menendez continued. "Just imagine what people could do if some or all of that debt was forgiven. Maybe it's buying a new car. Maybe it's finally buying your first home. Maybe it's leaving your current job and starting your own small business. Maybe it's saying to your spouse, let's have a baby, we can afford to start a family now. Here's the bottom line, student loan forgiveness has the power to unleash a wave of consumer-driven growth in this country."
The Student Loan Tax Relief Act, which was introduced by Sen. Menendez in the Senate and championed by Rep. Pascrell in the House of Representatives, was included in the American Rescue Plan and signed into law last month. Previously, most forms of student loan debt forgiven by the federal government or other entities were considered taxable income under the Internal Revenue Code. As a result, individuals who received most forms of student debt relief could have faced a large, surprise tax bill or even be bumped into a higher tax bracket -- undermining the goal of student debt relief. Because of this provision, an average student borrower who earns $50,000 in income would save approximately $2,200 in taxes for every $10,000 of forgiven student loans.

"Making higher education affordable for all who aspire to it and have the ability to benefit from it is vitally important for our nation," said Dr. Susan A. Cole, President, Montclair State University. "I am grateful to Senator Menendez and Representative Pascrell for their consistent support for educational opportunity over many years and for their current efforts in support of President Biden's proposal to address the problem of student debt."

"About 1.2 million New Jersey residents -- one in six adults --collectively owe close to $50 billion in federal and private student loans. This was not sustainable before COVID, let alone in the aftermath of the current economic crisis," said Phyllis Salowe-Kaye, NJ Citizen Action Executive Director. "Citizen Action thanks Senator Menendez and Congressman Pascrell for ensuring that all student debt relief will be tax free. We stand with them and all members of Congress to urge President Biden to cancel up to $50,000 in federal student loans. The costs and financing of post-secondary education in this country are unjust and disproportionately challenging for Black and Brown students and their families. Without systemic change to education financing, access to affordable higher education and career training will continue plummeting and leave millions with insurmountable debt. If we want a competitive work force, a solid inclusive middle class and a strong economy, we need student debt cancellation and reform now."

"Having loans puts students on a financial hold because once we graduate, we are accumulating interest on top of our debt and to fan the flames, it's difficult to find jobs since the debt is so much higher than our salaries. Since we're so focused on paying back our loans, it doesn't allow us to generate our wealth from buying a home, to building good credit and creating our businesses," said Montclair State University senior Jasmine Metellus. "The power of loan forgiveness would help narrow the racial wealth gap and put students in a better place when it comes to education and their finance."

"Folks in my generation graduated college during the Iraq War, we lived through the Recession, and when things finally started to get together and the economy started to take off, here we are dealing with COIVD, back in another disaster," said Rutgers University graduate Roberto Cabanas, who holds $60,000 in student loan debt.
All we're doing is trying to get ahead and there's been so many barriers for my generation to start families and to live the American dream."
Last year, Sens. Menendez and Cory Booker outlined a plan for President Trump to use existing authority under the Higher Education Act to cancel up to $50,000 in federal student loan debt. In February, the Senators renewed their call and outlined a plan for President Biden to cancel federal student loan debt.

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