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: President-elect Joe Biden has signaled he’s open to canceling student-loan debt — the question is when and how much

An idea that first bubbled up during Occupy Wall Street is now being talked about as a Day 1 priority for President-elect Joe Biden. Read More...

Advocates and U.S. senators are arguing that President-elect Joe Biden could cancel student debt on Day 1 of his presidency.

Photo by Jim Watson/Agence France-Presse/Getty Images

Activists, advocates and scholars have been arguing for years that cancelling student-loan debt would provide an economic stimulus, correct decades of policy failure — and that the president has the authority to do it. 

Now it’s looking more likely than ever that he will. 

Earlier this fall, Democratic Senators Chuck Schumer and Elizabeth Warren introduced a resolution urging the next president to immediately cancel up to $50,000 in student debt. Schumer reiterated his support for that proposal in an interview with author Anand Giridharadas, arguing that student debt cancellation could be part of a suite of FDR-style proposals in the first 100 days of a Biden administration. 

“We believe that Joe Biden can do that with the pen as opposed to legislation,” Schumer said of student debt cancellation in the interview. 

Right now, it’s still unclear whether Biden will take the senators up on their suggestion, but there’s evidence to indicate he’s open to it. During the campaign, Biden pledged to cancel $10,000 of student debt as part of a coronavirus relief effort. He’s also advocated for cancelling undergraduate student debt for borrowers who attended a public college or Historically Black College and University and earn up to $125,000. 

Confluence of factors brought debt cancellation to the mainstream

It was once a relatively fringe idea that first bubbled up during Occupy Wall Street, but a confluence of factors has pushed student debt cancellation into the mainstream. Both Warren and Senator Bernie Sanders, an Independent of Vermont, campaigned on platforms of mass student debt cancellation during the Democratic primary for president. 

For one, the meteoric rise in student debt during and following the Great Recession has made repaying college loans almost a universal American experience. In addition, it’s become clear over the past several years that the impact of student debt is felt disproportionately by Black borrowers and is fueling the racial wealth gap. 

Economists have also shown that cancelling student debt could stimulate the economy. The COVID-19 pandemic and the accompanying economic downturn has made that kind of policy more attractive than ever.

“It might have felt like a nice to have nine months ago, now I think there are real questions of if we can afford not to do it,” said Suzanne Khan, the director of the Great Democracy Initiative and Education, Jobs, and Worker Power Program at the Roosevelt Institute, a progressive think tank. 

Experts argue the the executive branch has the authority to cancel student debt without Congress

One aspect of student debt cancellation that could make it a particularly attractive form of stimulus to the Biden administration is that the president-elect wouldn’t need the authority of Congress to do it, according to legal experts.

In a letter accompanying Warren and Schumer’s resolution in September, attorneys from Harvard Law School’s project on Predatory Student Lending wrote that “Congress has granted the Secretary a more specific and unrestricted authority to create and to cancel or modify debt owed under federal student loan programs in the Higher Education Act (HEA) itself.”  In other words, the president could direct the secretary of education to cancel the debt.

The Trump administration used that authority in March to waive interest on federal student loans during the pandemic before Congress codified the relief into the CARES Act, Politico reported in August.

The Debt Collective, a debtor advocacy organization that launched during Occupy Wall Street, has been talking about this authority since 2015. Watching the issue gain traction within days of the announcement of Biden’s win is evidence of the success of its efforts, said Astra Taylor, a co-founder of the organization. 

During the Obama administration, the Debt Collective also drew attention to what was until then a rarely used law that allows borrowers to have their debt cancelled if they were misled by their schools. In the years since, thousands of borrowers have had their loans wiped away under this authority, which showed that the government could cancel student debt in some circumstances and helped lay the groundwork for broader debt cancellation. 

“There’s an acute awareness that the Democrats didn’t take the Senate, but [Republican Senator and Majority Leader] Mitch McConnell is not the president and there are lots of ways for Joe Biden to exercise authority to make people’s lives better,” Taylor said. “This is something that Joe Biden can do on day one and the Debt Collective wants him to cancel all student debt on day one of his administration.” 

Debate over whether or how much debt cancellation makes sense

Critics of student debt cancellation worry that it could provide a financial boon to borrowers who have relatively high earnings and whose debts are manageable, and that wiping away everyone’s debt wouldn’t solve the challenges plaguing our college finance system.

Jason Delisle, a resident fellow at the American Enterprise Institute, a right-leaning think tank, wrote in the Wall Street Journal this year that temporary payment pauses — like the one that’s been offered to borrowers as coronavirus relief — could better help with weathering economic shocks. In addition, he wrote, already existing programs that allow borrowers to manage their debt as a percentage of their income could help them manage the debt long-term.

“This program should be improved to help borrowers who are struggling the most, rather than forgive everyone’s debt regardless of whether they really need the help,” he wrote of the college finance system.

There’s debate even among supporters of student debt cancellation about what level would be appropriate. During the presidential campaign, Sanders advocated for cancelling all student debt, while Warren pushed for up to $50,000 in student debt for borrowers who earn $250,000 or less. (She also argued that the president could accomplish this on the first day in office.)

The divide hinges on whether it makes sense to target the debt relief to certain populations of borrowers. Higher levels of student debt are usually (but not always) correlated with higher levels of education, which are usually (but not always) correlated with higher levels of earnings. Mass student debt cancellation would benefit those with the largest student debt loads the most — at least in absolute dollars. Still, recent research suggests that the art of deciding on a specific cut-off can get messy. 

Louise Seamster, an assistant professor of sociology and criminology at the University of Iowa, was one of a group of researchers who initially argued that $50,000 in student debt cancellation was a good threshold for policymakers interested in using the policy to improve racial equity. 

But the group recently re-ran their analysis with updated data from the Federal Reserve’s Survey of Consumer Finances and found that a threshold of somewhere between $50,000 and $75,000 would make more sense — in large part because of the exponential growth in student debt among Black borrowers over the past few years. 

For example, based on 2016 Fed data, $50,000 in student debt cancellation would get rid of college loans for 81% of Black households. But the 2019 data indicate that $50,000 would only eliminate student debt for 73% of Black households. According to the 2016 figures, cancelling $50,000 in student debt would increase the wealth of Black households by 40%, but by 2019 that shrunk to 34%. 

“The urgency of the growth of student debt makes it more and more imperative to do something about this quickly,” Seamster said. “The data is in about what happens when we wait.” 

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