Politics

Biden plan to cancel student debt faces hurdles with Democrats, GOP and courts

President Biden raised the hopes of millions of people paying off college debts after congressional Democrats reported this week that he privately told them he is exploring ways to cancel up to $1.6 trillion in federal student loans through executive action.

Mr. Biden hasn’t publicly confirmed that pledge, but acting unilaterally to cancel student loans would stir division within the Democratic Party, invoke Republican opposition and likely face legal challenges.

House Speaker Nancy Pelosi, California Democrat, threw cold water on student debt cancellation in July by telling reporters that only Congress has the authority to eliminate student loans and that legislation to address the issue was not under discussion among House lawmakers.

“The president can’t do it,” she told reporters.

A spokesman for Mrs. Pelosi did not respond to a request for an update on Mrs. Pelosi’s view of executive branch student debt cancellation.

She is at odds with many in her caucus. Dozens of House Democrats co-sponsored legislation introduced last year by Rep. Ayanna Pressley, Massachusetts Democrat, calling on Mr. Biden to use executive action “to broadly cancel federal student loan debt.”

Mrs. Pelosi also differs from Democrats across the Capitol, including her Senate counterpart, Majority Leader Charles E. Schumer.

Mr. Schumer, of New York, has called on Mr. Biden to take executive action to wipe out student loan debt.

“The president can sign this with the flick of a pen,” Mr. Schumer has said.

Mr. Schumer last month raised the pressure on Mr. Biden to take action by signing a letter from 90 fellow congressional Democrats urging the president to cancel student debt unilaterally.

“As your administration works towards rebuilding a more equitable and just economy, it should use its administrative powers to address this crisis and permanently relieve the millions of borrowers struggling with this debt,” Democrats wrote.

The letter did not specify the amount of debt Mr. Biden should eliminate, but lawmakers urged the president to cancel “a meaningful amount.”

Mr. Schumer told reporters in the Capitol this week that Mr. Biden is “moving in our direction” on canceling student loans.

Polls show that Mr. Biden’s standing with younger voters has tumbled. Party leaders are worried that his loss of support will lead to lower turnout among the Democratic base in the November midterm elections. Younger voters have signaled that they are disappointed in unkept promises by Mr. Biden and congressional Democrats, among them a pledge to eliminate student debt.

Mr. Biden this month extended for a fourth time the student loan repayment pause that began after the onset of the COVID-19 pandemic. It halts loan payments for all student loans but does not cancel them. The latest extension expires two months before the midterm elections.

Sen. Elizabeth Warren, a Massachusetts Democrat who drafted the letter to Mr. Biden, put forward her own plan for canceling student debt when she ran against Mr. Biden for the Democratic presidential nomination. Ms. Warren called for canceling $50,000 per outstanding student loan. Mr. Biden campaigned on a proposal to cancel $10,000 or more in federal or personal student loans, although he did not specify it would be through executive action.

Democrats say canceling student debt would boost the economy by freeing up extra money for the purchase of homes or opening small businesses and would allow more people to pay into retirement accounts.

Proponents make the case that canceling student debt is also a matter of racial and economic justice. They say Black students require more student loans to attend college and have a harder time paying off the debt, while Hispanic borrowers struggle to repay loans at a higher rate than White borrowers, partly because they earn less after college than all other ethnic or racial groups.

Critics say mass cancellation of student loans would do nothing to help future college students and would be viewed as an unfair benefit for those who attended college, even wealthier students, over people who went to trade school, started a business or went to work rather than pursue a college education.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said student debt cancellation “may be an extremely appealing political talking point, but it is not good policy.”

“It is costly, inflationary, poorly targeted and fails to address the root problems in our higher education financing system,” she said in a statement Wednesday. “Full debt cancellation would be a massive hand-out to rich doctors and lawyers, would worsen our inflation crisis, and would cost almost as much as the entire 2017 tax cuts. Either the president is serious about reducing deficits and getting inflation under control, or he is not. The White House can’t have it both ways.” 

The Brookings Institution, a center-left think tank in Washington, said roughly half of the benefits of canceling student loans would go to the top 40% of earners.

“Taking a one-size-fits-all, blanketed approach not only forgives student loan debt for borrowers who are successfully paying their loans already or are financially able to repay, it further fuels the source of the student debt crisis — unrestrained federal lending and skyrocketing tuition prices,” Richard Hunt, president and CEO of the Consumer Bankers Association, told The Washington Times.

It also could provoke a backlash among students and parents who paid off loans or sacrificed financially, saving less for retirement to avoid taking out loans in the first place.

In a moment caught on video that later went viral, Ms. Warren got a taste of that backlash while campaigning in Iowa in January 2020. She was approached by a parent who asked whether, under her student debt relief plan, he would be reimbursed for the college tuition he paid off by working two jobs.  

Ms. Warren answered, “Of course not,” prompting the frustrated father to ask, “So you’re going to pay for people who didn’t save any money, and those of us who did the right thing get screwed?”

She did not answer the question. Democrats have yet to indicate how they will respond to the inevitable anger from those who paid off loans, did not take out loans or never attended college.

If Mr. Biden cancels student debt, it’s not clear how or whether it would be covered by new revenue such as a tax increase or budget cuts, which are unlikely.

Ms. Warren’s presidential campaign proposal would have eliminated 95% of student loans at a cost of roughly $640 billion. She proposed paying for it with a 2% tax on people who earn more than $50 million.

Senate Republicans, who could reclaim the chamber’s majority in November, introduced legislation that would ban Mr. Biden from canceling any student debt and would block him from further deferring or suspending student loan payments for anybody earning more than 400% of the poverty level.

Legal experts are divided over whether a presidential cancellation of student debt could survive a likely court challenge. Some argue that the president has the power to cancel debt held by the federal government, but a legal opinion requested during the Trump administration on loan cancellation warned that the Education Department “does not have the statutory authority” to go beyond pausing the loans temporarily and could not provide “blanket or mass cancellation” of the debt.

During a White House press briefing Wednesday, press secretary Jen Psaki said Mr. Biden has not made a decision on how he will address student debt.

“The president has been considering and looking at options for how to provide more … relief to students across the country,” Ms. Psaki said.

When Mr. Biden took office, the temporary student loan pause implemented under Mr. Trump had been extended once and he has never lifted it.

“Not a single borrower of federal student loans has paid a penny on these loans since he took office, and this has been the longest time of that for any president, probably, in history.” Ms. Psaki said.

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