The Crisis We Choose to Ignore
Why cancelling student debt is both a moral & economic imperative.
Over the past two decades, the federal government has taken huge financial strides to stabilize the economy during moments of profound crisis in the U.S. From the 2008 Great Recession to the COVID-19 pandemic, these notable moments of federal intervention reveal a stark contradiction in how the government decides which crises warrant sweeping action — and which do not.
In the 2008 Great Recession, bailouts for the auto industry, major banks, and insurance agencies totaled $500 billion (adjusted to 2025 dollars) and were framed as a necessary defense against systemic collapse. During the COVID-19 pandemic, the government mobilized roughly $5 trillion in spending and tax cuts with unprecedented speed, providing massive aid through the Paycheck Protection Program (PPP), direct aid to consumers, relief funds to educational institutions, and direct payroll support for airlines. In each case, policymakers treated corporate stability and prosperity as a matter of national urgency. They also demonstrated that the federal government has the power and ability to provide targeted aid to those in most need during crises.
Yet, the federal government’s response to the student debt crisis could not be more different. For years, student loans — now totaling $1.45 trillion dollars — have been largely framed as an individual burden, not a systemic failure. Unlike banks or airlines, individuals who chose to earn their degree are told “no” or to “wait.” This happens even as current and former students drown under compounding interest and mounting financial stress from debt needed to merely participate in a system that treats higher education like a game where, even after clearing all levels, the prize of gainful employment and upward mobility is not guaranteed. As the calls for universal debt cancellation have grown louder, the federal government continues to cite statutory limits of authority (i.e., when cancellation can occur), despite having acted decisively and at unprecedented levels for the corporate sector.
This double standard is not simply a matter of policy design. It reflects a deeper question about national priorities: Whose crises deserve immediate action or rescue, and whose situations fester as a result of having been ignored? In this blog post, we challenge the federal government to take decisive action on student loans in the same way it has for corporations on multiple occasions. We elucidate that universal debt cancellation is a matter of national urgency — and a systemic threat — by leading from a place of justice and listening to those closest to the deleterious impacts of student loans.
Debt Cancellation as Justice: Listening to Black Student Borrowers
A justice framing and approach to discussing student debt necessitates that we center those individuals who are most directly impacted by loans. Historically, Black student borrowers have carried more student debt, repaid their loans at lower rates, and defaulted at higher rates than their non-Black peers. So, in 2021, when Black student borrowers made clear that the narrative of student loans as “good debt” failed to reflect their lived realities, the world listened (Congressional Testimony, CNN, the 74, and The Chronicle of Higher Education). For many, student debt undermined Black people’s quality of life, serving as a primary source of financial stress, and limiting their access to basic necessities. Even among those with graduate degrees, their student debt delayed or waylaid retirement savings, homeownership, family planning, job mobility, and debt repayment across every income bracket.
Black student borrowers understand what policymakers often ignore: a higher education system that relies on debt while disregarding racial and economic inequality does more than just reflect injustice — it reproduces inequities by design. In this financial system, there’s no such thing as “good debt.” Instead, the student loan system is functioning exactly as intended — handcuffing people’s potential and possibilities and sentencing them to a lifetime of debt.
At EqRC, we know that those most directly impacted by systemic inequities are best positioned to imagine a different future. So, when Black student borrowers overwhelmingly call for full debt cancellation as the remedy to this crisis, federal policymakers should listen. Moreover, they should ask themselves: What if we cancel all existing federal student loans? What would the impact be on student borrowers, specifically, and society more broadly? To answer these questions, we must both look to the federal government’s past actions and to simulated cancellation studies.
Debt Cancellation Works: The Economic and Social Case
To be clear, the federal government has taken some action to alleviate the burden of student loans (i.e., discharging loans for defrauded students, implementing new income-driven plans) but not nearly enough. Further, recent federal policy changes have undone many of the measures put in place to support students (i.e., loan repayment programs like the SAVE plan) and changed longstanding aid requirements (i.e., credit requirements/thresholds) that will only further student borrowers’ dependence on student loans in the future. Without immediate and decisive federal intervention, the already festering crisis will undoubtedly worsen and quickly.
If and when the federal government finally decides to cancel all student loans, here is what they, society, and student borrowers can expect to experience immediately and over time, as evidenced by simulated cancellation studies and small-scale cancellations (i.e., discharges):
Higher Gross Domestic Product (GDP): Boosting real GDP by an average of $115 billion to $145 billion per year; and, over 10 years, $1.15 trillion and $1.45 trillion (adjusted to inflation, 2025)
Lower unemployment: Creating 1.2 million to 1.5 million new jobs per year for the first few years after cancellation and facilitating a 0.22 to 0.36 percentage point reduction in unemployment over a 10-year period.
Greater Wealth: Growing the middle class by uplifting student borrowers in the bottom 40% of the income distribution. Closing the racial wealth gap where the median wealth of Black families was one-eighth of White families, and the median wealth of Latinx families was one-fifth of White families and where Black and Latinx degree holders’ net worth is far less than their White peers with less education.
Higher income: Increasing household disposable income where federal student loans comprise 41.6% and 57% of male and female student borrowers’ median salaries, respectively.
Other Key Benefits & Activities: Supporting additional family planning, mental, and physical health, and wealth-boosting activities, since student borrowers would be more likely to:
Purchase a home
Start a family (i.e., marriage, children) or start a business
Be less likely to default on other forms of debt or need debt
In 2008, the federal government mobilized roughly $500 billion (adjusted to 2025 dollars) to save the economy. In response to the COVID-19 pandemic, the federal government mobilized roughly $5 trillion in spending and tax cuts, with roughly $1.1 trillion going to individuals via direct aid. Not only is there precedent for the scale of cancellation needed; there’s a proven record that the federal government has the regulatory muscle to unburden student borrowers, address this crisis, and boost the U.S. economy in the process if they so choose. As of June 2025, the Department of Education’s outstanding loan portfolio totaled slightly over $1.45 trillion, a number well within those other bailouts.
The High Price of Doing Nothing
The costs of federal inaction (i.e., universal cancellation) are not abstract; they show up in diminished economic mobility and widening wealth and income inequality. Without meaningful intervention, the student debt crisis will continue to drain resources from families, depress economic growth, and perpetuate systemic inequities for generations to come. Failing to act means accepting a status quo in which we rescue banks and airlines at the first sign of trouble but leave 40 million student borrowers — disproportionately Black and Latinx — buckling under the weight of a debt system designed to perpetuate a lifetime debt sentence.
We Have the Power — and the Precedent — to Act
The federal government’s history of massive interventions in corporate and economic crises, contrasted with its limited action on student debt, reveals a profound and unjust double standard. Universal debt cancellation is not just a matter of justice for disproportionately impacted student borrowers; it’s a proven economic stimulus with the power to boost GDP, create jobs, and close the racial wealth gap. The federal government has the precedence and the power to act. The only question is whether policymakers have the will and courage to do so.
At EqRC, we’ll be modeling wealth outcomes under a “debt vs no debt” scenarios to show the long-term equity impacts across demographic profiles, investigating the stories and lived experiences of student borrowers impacted by this crisis through a parallel study of Latinx student borrowers, and advancing a comprehensive view of college affordability where our starting point is “Free College” through coalition-building efforts.
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Authored by: Dr. Jonathan C. W. Davis, Director of Research at the Equity Research Cooperative
