Pascrell, Menendez Highlight Student Loan Debt Crisis on Montclair State Campus
Student debt tax relief in American Rescue Plan paves way for federal action
U.S. Rep. Bill Pascrell, Jr. (D-NJ-09) and U.S. Sen. Bob Menendez (D-NJ) today were joined by students, administrators, and higher education advocates at Montclair State University to highlight the student loan debt crisis. A provision in the American Rescue Plan authored by Pascrell and Menendez paves the way for President Biden would make college loan forgiveness tax-free and eliminate thousands of dollars in surprise tax bills.
Watch Rep. Pascrell’s full remarks at today’s press conference here.
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.
“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.”
“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.”
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. 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.”