Sen. Elizabeth Warren, D-Mass continued her push for the cancellation of student loan debt Tuesday, making her case to the Federal Reserve chairman that the new administration should take immediate action.
"All on his own, President-elect (Joe) 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," the two-term senator told Jerome Powell during a Senate hearing.
"This is the single most effective economic stimulus that is available through executive action."
Student loan debt has ballooned to $1.6 trillion, which makes it the second biggest form of household debt after mortgages, and it continues to grow.
Warren and Senate Minority Leader Chuck Schumer, D-N.Y., introduced a resolution in September that calls on the president to immediately cancel up to $50,000 in federal student loan debt.
Biden said earlier this month that he thinks there should be an “immediate $10,000 forgiveness of student loans," but a Biden official told Fox News that the president-elect thinks it should come from congressional action, not a unilateral executive order.
At the Senate Banking Committee hearing on the CARES Act Tuesday, Warren argued that canceling student loan debt would boost the economy in myriad ways - increasing the incomes of borrowers, closing the racial wealth gap, jumpstarting small business formation and reducing unemployment.
Powell agreed that student loan debt can weigh down a borrower's financial situation.
"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," Powell said Tuesday.
But a working paper out this week by economists from the University of Chicago and the University of Pennsylvania found that untargeted student debt forgiveness is a "highly regressive policy." It would distribute $192 billion to the top 20% of earners, and only $29 billion to the bottom 20% of earners, according to the paper.
"We find that the benefits of universal debt forgiveness policies largely accrue to high-income borrowers, while forgiveness through expanding income-contingent loan plans instead favors middle-income borrowers," the authors wrote.