Posted On Jun 02, 2022,

The tenacity of a handful of progressive Democrats has kept alive the possibility of canceling significant amounts of student loan debt. So what’s at stake for lawmakers – and borrowers?

Progressives have long been calling on President Joe Biden to support the total cancellation of student loan debt as a sign of his commitment to racial equity and a nod to the bloc of the Democratic Party that provided the crucial get-out-the-vote energy that delivered him to the White House.

But Biden has never shied away from making clear that he doesn’t support it.

"I will not make that happen," he said a month after his inauguration when asked whether he’d act on calls, including from newly minted Senate Majority Leader Chuck Schumer of New York, to use his executive authority to cancel up to $50,000 in student loan debt per borrower.

Instead, Biden pledged – as he did many times on the campaign trail – to consider canceling $10,000 in student loan debt but said he harbored concerns about canceling debt for borrowers who graduated from elite schools like Harvard University, essentially adhering to the idea that wide-scale student loan debt cancellation often benefits wealthier borrowers. And as he’s reiterated many times since, Biden said he'd rather use that money to provide early education for kids who come from disadvantaged circumstances or pour more resources into historically black colleges and universities and other minority-serving institutions.

"I understand the impact of the debt and how it can be debilitating," he said. "There's a whole question about what universities are doing. They don't need more sky boxes."

Yet a year into his presidency, the tenacity and stick-to-itiveness of senators like Bernie Sanders, the Vermont independent responsible for shepherding the policy into a mainstream party platform, and Elizabeth Warren, the Massachusetts Democrat who led a decade-long and in many ways ongoing crusade against predatory student loan lenders and servicers, and of influential House Democrats like Ayanna Pressley of Massachusetts, Jamaal Bowman and Alexandria Ocasio Cortez of New York and Ilhan Omar of Minnesota, seem to be paying off – even if they don’t yet have the answer they want.

So how did student loan debt cancellation become such a pressing issue for Democrats? And what’s at stake for borrowers?

Why Are People Talking About Student Loan Debt Cancellation?

As it stands, about 45 million borrowers hold roughly $1.7 trillion in federal student loan debt – second only to mortgage debt and higher than debt for both credit cards and auto loans.

The median borrower with outstanding student loan debt for their own education owed $17,000 in 2016, according to the Pew Research Center – though the amount owed varies significantly. A quarter of borrowers with outstanding debt report owing $7,000 or less, while another quarter owed $43,000 or more.

Among the class of 2019, 62% graduated with student debt, the average of which stood at $29,000, according to the Institute for College Access and Success. And while those aged 25 to 34 are most likely to hold student loan debt, borrowers aged 35 to 49 owe the most – more than $600 billion of it, according to federal data.

Women borrow more for college compared with men, and Black students borrow more often and greater amounts compared with all other races and ethnicities.

According to data from the Education Department, 36 million of the existing 45 million student loan borrowers would have their debt wiped clean if Biden took executive action to cancel up to $50,000 in student loan debt, including 10 million who are currently in default.

More than 11 million borrowers have been in repayment for five to 10 years and 10.6 million have been in repayment for 10 to 20 years, the data shows. More than 4 million have been paying off debt for more than 20 years. For the 22 million borrowers who have been repaying their student loan debt for more than five years, the vast majority would see their debt erased entirely if Biden canceled the amount of student loan debt his Democratic colleagues are pressuring him to do.

Canceling up to $50,000 of federal student loan debt would erase debts for roughly 30 million borrowers, including more than 90% of low-income Black borrowers, and is estimated to cost $650 billion. Forgiving $10,000 per borrower would cost approximately $320 billion and erase the debt for nearly 12 million borrowers.

Advocates of the move have been calling special attention to the major racial equity implications of canceling student loan debt, arguing that the Biden administration won’t be able to effectively address discrimination in housing, infrastructure and lending to minority-owned businesses without first canceling student loan debt, which disproportionately impacts Black borrowers.

For example, four years after graduation, the average Black college graduate owes $52,726, compared to $28,006 for the average white college graduate, according to Brookings. And in 2019, 75% of Black borrowers held student loan balances higher than their original loan, compared to 51% of white borrowers.

Carrying more student loan debt pushes down creditworthiness, and in turn, these disparities often prevent Black borrowers from buying homes, starting families or launching a business – never mind building wealth or saving for retirement. In fact, since having a college degree does not eliminate income gaps, white college graduates have over seven times more wealth than Black college graduates.

“Make no mistake, despite the dominant narrative, the student debt crisis has always been both a racial and economic justice issues,” Pressley said in April while testifying before the Senate Banking, Housing and Urban Affairs Committee. “For our students who don’t have the benefit of intergenerational wealth – specifically Black and brown students – signing on the dotted line for those student loans have been the only way to pursue a degree.”

Pressley and other supporters argue that Biden has the authority “with the stroke of a pen” to cancel student loan debt under section 432(a) of the Higher Education Act, which affords the education secretary authority to "compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption” – the very same authority he’s used four times since becoming president to extend a freeze on student loan payments instituted at the outset of the pandemic.

Can Joe Biden Cancel Student Debt?

Biden has long said he’s unclear whether he really has the authority to act on the issue himself, and tasked Education Secretary Miguel Cardona to work with White House officials to verify whether that’s the case. Though the administration has refused to release the findings of that analysis, the president's remarks last week that he’ll have an announcement to make soon on student loan debt cancellation perhaps hint at the fact the memo concludes that he does have the authority.

To be sure, any action on the student loan debt cancellation would have to come from the White House since a legislative path from Congress is a nonstarter. Beyond the fact that Democrats hold the slimmest of margins in the Senate and lack the unified front they’d need to overcome a filibuster, Speaker of the House Nancy Pelosi of California doesn’t support the policy.

"I don't even like to call it forgiveness because that implies a transgression," she said last year. "It's not to be forgiven, just freeing people from those obligations."

Earlier this month, after a speech in the Roosevelt Room at the White House, Biden told reporters that he’s in the process of “taking a hard look” at the issue.

“I’m not considering $50,000 in debt reduction,” he said. “But I am in the process of taking a hard look at whether or not there will be additional debt forgiveness.”

“I’ll have an answer on that in the next couple of weeks.”

White House press secretary Jen Psaki clarified that the administration’s goal is to “continue to provide relief to people who need it most, to help people get some extra breathing room,” and that the president is specifically considering whether to tie debt relief to borrowers' income levels – an idea a handful of moderate Democrats have proposed in the past.

For supporters of wholesale student loan debt cancellation, driving the issue front-and-center at this moment is noteworthy: The economy is in negative growth, the country finds itself increasingly entangled in the invasion of Ukraine by Russia and the president is asking Congress for another round of COVID-19 aid – even as the political goodwill afforded to new administrations has long since dried up, including among congressional Democrats, and voters are staring down a looming midterm election.

Biden’s remarks come in the wake of a private meeting with Democratic lawmakers who pressed him on the issue, including Schumer, who said afterward that he thinks “the president is moving in our direction.”

“My talks with him and his staff have been very fruitful over the last little while, and I am hopeful that he will do the right thing,” he said. “We’re getting closer, we’re getting closer.”

Those not watching the turn-of-the-screw push for student loan debt cancellation closely might assume that the White House has been ignoring the issue altogether given the increasing urgency of progressives’ ask. In reality, the Biden administration has been more active in this space than in any other facet of its education agenda.

The Education Department has already canceled more than $18.5 billion in federal student loan debt for roughly 750,000 borrowers, including $8.5 billion for borrowers who have become permanently disabled, $7 billion for borrowers enrolled in the public service loan forgiveness program and more than $3 billion for borrowers who were defrauded by their school or were enrolled in ITT Technical Institutes before it abruptly closed. Most recently, last week, the department announced 28,000 borrowers who enrolled in Marinello Schools of Beauty will receive loan discharges totaling approximately $238 million.

The department also announced a slate of changes to its federal student loan repayment programs to correct harmful practices by its loan servicers, which investigations found steered borrowers into forbearance without outlining their other options and hindered their progress toward loan forgiveness by inaccurately tracking their monthly payments. The changes are set to result in immediate debt cancellation for 40,000 borrowers enrolled in the Public Service Loan Forgiveness program and help 3.6 million borrowers recoup at least three years worth of credit toward forgiveness under the income-driven repayment plan.

In addition, Biden has extended the freeze on student loan payments four times. The repayment pause was first put in place under the original coronavirus aid package in March 2020 and extended twice under the Trump administration by former Education Secretary Betsy DeVos.

The move allows Democrats to tout a significant statistic in the run-up to the midterms to scores of young voters who want to see Biden cancel all federal student loan debt – that since the start of the Biden-Harris administration, no American has had to pay a dime on their federally held student loan.

But progressives aren’t satisfied.

Who Supports Canceling Student Debt?

The mixed support for blanket student loan debt cancellation within the Democratic Party mirrors polling on the issue that shows the vast majority of voters believe the government should step in to help with the debt crisis, but lack consensus as to what that help should look like – even among young voters who have been most passionate in forcing the issue.

A national poll of young Americans released last week by the Institute of Politics at the Harvard Kennedy School shows that only 38% support total debt cancellation. Meanwhile, 27% favor the government assisting with repayment options without any debt cancellation, 21% favor debt cancellation for those with the most need and 13% believe the government should not change current policy. And while support for full cancellation has increased 5 percentage points since 2020, preference for the government helping with repayment decreased 8 points.

Meanwhile, Republicans are in lockstep opposition to any such action, arguing among other things that the federal government cannot afford to take such action at a time of economic uncertainty.

Sen. Richard Burr, North Carolina Republican and ranking member of the Senate Health, Education, Labor and Pensions Committee called canceling student loan debt “a dangerous and foolhardy proposal,” which

“U.S. GDP fell at 1.4 percent during the first quarter of this year – a damning trend that has been exacerbated by this administration’s inflation-fueled spending spree,” said Rep. Virginia Foxx, North Carolina Republican, who is the ranking member of the House Education and Labor Committee. “Imagine what irreparable damage would be caused by blanket student loan forgiveness.”

Instead, Burr, Foxx and others have repeated calls to overhaul the Higher Education Act, which is more than a decade overdue for reuathorization, and in doing so, simplify the loan repayment options.

In the coming weeks, the White House is set to make an announcement on whether it will heed progressives’ calls to action – a move that could strategically energize an influential bloc of the Democratic Party ahead of the midterm elections.

“We are working really, really hard where there is clear authority to help borrowers,” James Kvaal, undersecretary of education, told reporters last month when asked whether the department plans to cancel student loan debt. “Every day we are engaged in conversations about how to make the programs work better and how to get borrowers the relief they’re entitled to.”

Original Article : https://www.usnews.com/news/education-news/articles/explainer-why-are-democrats-talking-about-canceling-student-loan-debt

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