What's the Deal With Student Debt Forgiveness?

Student debt is a big problem. As of 2020, Americans owe $1.7 trillion dollars of it. That’s a four percent increase from 2019 and more than a 100 percent increase from 2010. Economic struggles during the COVID-19 pandemic only exacerbated the problem. Suspending payments and interest on federal loans through September 2021 helps significantly. But without further relief, the bubble could pop.

Fortunately, the Biden administration seems to understand this. Biden campaigned in part on forgiving student loan debt, and it seems to be relatively high on his list of priorities. That’s partially because several prominent politicians are pressing him on it. Senators Chuck Schumer and Elizabeth Warren have led the charge, continuously calling on Biden to cancel $50,000 of federal student loan debt per borrower. Biden, meanwhile, has committed to cancelling just $10,000 per borrower.

Why is Schumer & Warren’s proposal better than Biden’s?

The most obvious answer is: $50,000 > $10,000. Five times the amount cancelled equals five times the amount of relief. That number’s probably even higher once you factor in Biden’s plan to target student debt relief based on income. Several experts also say that eliminating student debt would make a significant dent in America’s racial wealth gap. Warren and Schumer have highlighted that analysis in statements and op-eds. The more debt is cancelled, the greater effect it’ll have.

So Why Not Cancel All Student Debt?

Great question! Probably because politicians and ruling elites can’t risk the American public learning that a government printing its own currency can rack up/forgive as much debt as it wants. That’s why there was so much hesitancy around COVID-19 relief and stimulus checks. But big problems call for big solutions. Pulling back the veil becomes palatable when broader economic stability is at stake.

Okay… uh… so does Biden need Congress to cancel student loan debt?

No and yes. Many experts have determined Biden can cancel student loan debt with executive action via the Higher Education Act. There’s virtually no limit on how much he can cancel—except for those which he imposes upon himself. If he decides to cancel debt via executive action, odds are there will be some income requirement baked in.

But Biden also wants to pass student debt relief through Congress even though he doesn’t have to. It’s part of his administration’s commitment to making all legislation as bipartisan as possible, even when Republicans show little interest in capitulating. So in that sense he needs Congress even though he doesn’t need them. Old habits die hard, if at all.

What about private loan borrowers?

There’s been scant mention of private loans in the language surrounding wide-scale student debt relief. There are a few reasons why. The first (and most obvious) is that the federal government controls federal loans, so in theory they’re easier to cancel. The Higher Education Act doesn’t include private loans, so if Biden were to use executive action, those borrowers would likely be left hanging. The other reason private loans aren’t mentioned is they only make up eight percent of total education debt according to NerdWallet. That’s not a small number ($136 billion!), but given how much more authority the government has over federal loans, it’s a small enough percentage to ignore.

That stinks. Is there any kind of specific relief for student loans taken out to attend for-profit colleges?

Blanket student debt relief would likely cover all federal student loans regardless of the institution they were applied to. It’s not clear whether student debt relief will include some kind of protections against for-profit institutions, but crackdowns are already happening. Pennsylvania just announced a settlement agreement to forgive $2.6 million in private loans after a for-profit college chain collapsed. The Department of Education also recently decided to cancel $1 billion of loan debt for students scammed by for-profit colleges. And even the American Rescue Plan included a provision that makes it harder for for-profit colleges to prey on veterans. So even if there’s no specific measure, it’s something authorities are keeping a close eye on. Thanks John Oliver.

When can we expect any of this?

Another good question. Biden’s infrastructure bill has taken center stage for the moment. It’s important to keep in mind that there might not be any relief in end. But with all the pressure being applied now, that would be a shock. Schumer, Warren, and other debt cancellation advocates have no intention of quieting. Expect to see something by September 30, when the extended moratorium on federal student loan payments ends.