Biden’s Student Loan Debt Cancellation Problem

Lawmakers in his party continue to bring the issue to the fore, urging the president to forgive $50,000 for each of the 43 million federal borrowers. — something he’s shot several times, including on Thursday.

But these measures have done little to ease the political pressure.

“Borrowers don’t just need their debts suspended; they need them erased,” Schumer said from the Senate floor.

“In a jiffy, President Biden could breathe new life into millions upon millions of student borrowers,” the New York Democrat added.

The pressure is mounting in a year of midterm elections and, as recent polls show, Biden’s approval rating continues to decline among young Americans.
More than 100 Democratic members of Congress have signed a letter sent to Biden last month that urged him to “cancel a significant amount of student debt.” A handful of progressive lawmakers, including Senator Bernie Sanders of Vermont and Rep. Pramila Jayapal of Washington State, appeared with student debt forgiveness organizers outside the White House on Wednesday to show their support.
So far, Biden has resisted pressure to forgive $50,000 in student loan debt for each borrower. On Thursday, he doubled his position while leaving the door open for some sort of student debt cancellation.

“I’m looking at facing debt reduction. I’m not looking at $50,000 debt reduction,” Biden said at the White House after unveiling new funding for Ukraine.

“But I’m looking closely at whether or not there will be further debt forgiveness, and I’ll have an answer on that within the next two weeks.”

Later Thursday, White House press secretary Jen Psaki confirmed that “no process has yet been concluded internally.”

There are several reasons why Biden may resist the pull of his party’s left wing.

Legal authority is unclear

Biden made it clear during his presidential campaign, after the start of the Covid-19 pandemic, that he supported partial cancellation of federal student debt.

His campaign proposal called for the immediate cancellation of a minimum of $10,000 in student debt per person in response to the pandemic, as well as the cancellation of all federal debt related to undergraduate college tuition. two- and four-year public college and university cycle for borrowers earning up to $125,000 per year.

But he also urged Congress to take action to cancel the debt, rather than saying he could use executive power to do so.

It is not entirely clear that the president’s executive power allows him to largely erase student debt. Last year, Biden asked attorneys for the Departments of Education and Justice to assess whether he, in fact, had the authority to write off federal student loan debt broadly. The administration did not disclose those findings.

But a September 2020 note lawyers from Harvard University’s Legal Services Center and its Predatory Student Loans Project argue that Congress gave the Department of Education the power to largely forgive federal student debt through a known statute as the Higher Education Act. It gives the Secretary of Education the authority “to create and cancel or modify debt owed under federal student loan programs,” the memo says.

Inflation is a key issue for voters

This may seem counterintuitive to borrowers who would benefit from debt cancellation, but some experts say canceling student loans would add to inflation. That’s a problem for Biden and other Democrats, who are blamed for rising gas and grocery prices.

Millions of people could be spending the money — about $4 billion a month, according to one estimate — on things other than their monthly student loan payments. And people may be more likely to make big purchases, like cars or houses, if they no longer have student debt hanging over them.

A report of the Committee for a Responsible Federal Budget estimated that canceling all of the $1.6 trillion federal student loan debt would raise the inflation rate by 0.1 to 0.5 percentage points over 12 months. Canceling $50,000 per borrower would result in a smaller increase, but the group did not estimate this effect.

“It’s not gigantic,” said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget.

“In a normal inflation environment, that wouldn’t be a big deal. But we’re in a very precarious situation right now and risk inflation spiraling out of control,” he added.

Debt cancellation could benefit many wealthy

Biden has repeatedly said he is committed to ensuring wealthy Americans pay their fair share and has offered to raise taxes on the wealthiest Americans. Canceling student debt could run counter to this policy objective.

Canceling student debt for everyone would disproportionately benefit wealthier households, such as those with doctors and lawyers, because these borrowers tend to have more student debt after attending higher education. In 2019, households with a graduate degree had to 56% of outstanding education debt.

A more targeted approach, such as canceling the debt of borrowers who earn less than a certain income threshold or canceling loans borrowed only for undergraduate degrees, could help ensure that a greater proportion of benefits go to Americans who need them most.

Here's who's eligible for student loan debt relief after Biden's latest actions
“If you did even basic targeting, then more of the money would go to low-income borrowers,” said Adam Looney, nonresident senior fellow at the Brookings Institution. who has studied student debt relief policies.
Yet canceling student debt would not solve the fundamental problem of college affordability. Biden has also campaigned to make community colleges free, a move that would require congressional legislation, but that proposal was dropped from his Build Back Better agenda.

“If you don’t fix the system, these issues will reoccur and we’ll be back in the same crisis we’re in now,” Looney said.

Biden has indicated he would be willing to exclude high-income borrowers from student debt forgiveness, arguing last year that the government should not forgive debt for people who went to “Harvard and Yale and Penn”.

PSAKI said on Thursday that the president continues to consider some type of loan forgiveness resource test.

“He’s explained in the past that he doesn’t think millionaires or billionaires should benefit – or even the highest earners – so it’s definitely something he would consider,” he said. she stated.

To date, Biden’s actions have provided more than $17 billion in targeted student debt relief to 725,000 borrowers. About $3.2 billion of this was waived for borrowers who had been defrauded by their for-profit colleges.

CNN’s Kevin Liptak contributed to this report.

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