For now, it is an open question whether President-elect Joe Biden has an interest in testing his presidential power to try to forgive student debt.
Joe Raedle | Getty Images
It is an urgent issue not only for higher education experts and legal qualifications. Tens of thousands of Americans drive a lot on the answer: Can the president forgive student debt without Congress?
If the president were able to cancel student debt without passing legislation, borrowers could in theory see their balances reduced or eliminated overnight. On the other hand, the chances of Congress agreeing to forgive the loans are uncertain at best. In general, Republicans are not in favor of debt forgiveness.
For now, it is also an open question whether President-elect Joe Biden has an interest in testing his presidential power in this way.
More from Personal Finance:
Depositors are struggling to get money back from the Beam banking app
Personal Finance 101: The Complete Guide to Managing Your Money
During the Democratic presidential election in 2020, Massachusetts Senator Elizabeth Warren promised to forgive student loans in the first days of her administration, including with her announcement an analysis written by three legal experts based on the Harvard Law School predatory student loan project that described such a move as “legal and permissible.”
The bite, however, has not gone that far.
A spokesman for the president-elect would not say whether Biden has taken a stand on whether he can forgive students’ debts without Congress, pointing to remarks Biden made at a recent news conference after being asked if he would take executive position action to cancel the loans.
“They’re really having problems,” Biden said of student borrowers. “They have to make choices between paying off their student loans and paying the rent, those kinds of decisions. It has to be done right away.”
Biden has said he would forgive $ 10,000 in student debt for all borrowers, and the rest of the debt to those who attended public colleges or historically black colleges and universities and earned less than $ 125,000 a year. All in all, it would cut the country’s $ 1.7 trillion outstanding student loan tab by about a third, according to calculations by higher education expert Mark Kantrowitz.
The bite is under increasing pressure to move on.
Senator Chuck Schumer, DN.Y., and Warren in September urged the next president to forgive $ 50,000 student loans to each borrower as soon as he entered the White House. In an interview earlier this month with The.Ink, Schumer said Biden could cancel the debt “with the pen contrary to law.”
More than 230 nonprofit and nonprofit organizations, including Americans for Financial Reform, the NAACP and the National Consumer Law Center, signed a letter on Nov. 18 urging Biden to cancel student loans on his first day as president.
“To minimize the damage to the next generation and help narrow the gap between racial and gender prosperity, bold and immediate action is needed to protect borrowers on student loans,” the groups wrote.
The student loan crisis has been particularly painful for black borrowers, with nearly 85% of black college graduates having educational debt compared to 69% of white college graduates. And because of racial wealth and income inequality in the United States, black borrowers suffer higher default interest rates and also sit in debt much longer than their white peers. Meanwhile, two-thirds of the country’s outstanding debt for student loans is borne by women.
Even before the pandemic, when the country was in the midst of its longest economic expansion in history and unemployment was at a low half-century, more than 1 in 4 student borrowers were either in difficulty or in default. A survey found that 58% of registered voters support student loan forgiveness, and over 820,000 people have signed a Change.org petition entitled “Donald Trump / Joe Biden: Delete Student Loans!”
The legal arguments surrounding whether a president can nixe the debt are getting complicated, fast.
CNBC asked Toby Merrill, founder and director of the Project on Predatory Student Lending at Harvard Law School, how she would explain to a 15-year-old why she believes it is within the president’s power to do so.
“The Constitution gave Congress the authority to control government property, as well as debt to it,” she wrote.
And Congress, Merrill said, assigned the secretary of education, working for the president, “the specific and unlimited authority to create and cancel or change debts due under federal student loan programs.”
The same question was asked to Luke Herrine, a Ph.D. graduate of Yale Law School who first put forward the argument in 2017 that the U.S. Department of Education could cancel student debt.
“Basically, it’s like the power of a prosecutor to decide whether to prosecute someone – the prosecutor may think that a person has committed a crime, but decides not to sue them for some reason,” he said. Herrine.
In other words, the president could work with the U.S. Department of Education to stop the collection of people’s student loans, say the argument’s supporters of the argument.
Others are not sure it will succeed in bypassing Congress to cancel the debt.
“Using an executive order to forgive federal student loans is likely to be met with a lawsuit and interim injunction and eventually fail,” Kantrowitz said.
“Also, trying that route immediately after accession would block any attempt to work with Congress in a two-way way,” he added.
Ryan D. Doerfler, a law professor at the University of Chicago, can also see such a move being met by a myriad of challenges. For example, he said opponents might say the U.S. Department of Education can only provide borrowers with emergency assistance under specific circumstances.
Still, these potential obstacles should not prevent the president from trying it, Doerfler said.
“Congress seems completely uninterested in taking such steps,” he said, and then, “better to pursue debt relief through executive action than to ask for Mitch McConnell’s change.”
In addition to the legal disputes, other critics of a student’s debt anniversary say it would not stimulate the economy significantly because college graduates tend to be higher wage earners who would likely redirect their monthly bill to savings instead of spending more.
Borrowers need help now more than ever, she said.
“People affected by coronavirus, people whose income is cut off or are hourly workers, are struggling under the burden of student loan debt,” Merrill said.
The U.S. Department of Education offered people the option to put their student loan payments on hold until January. Nearly all borrowers took it: Less than 11% of those with federal student loans pay their bills during the pandemic, according to data analyzed by Kantrowitz. In a recent Pew survey, 58% of borrowers reported that it would be difficult for them to resume payment in the coming month.
Despite its benefits, some say that erroneous forgiveness will trigger a setback among those who did not attend college, did not take out loans, or have already paid their student debt. These borrowers “may feel that their thrift was being punished,” wrote Noah Smith, columnist for Bloomberg, this month.
By this argument, Herrine busted.
“It’s like saying giving a COVID vaccine is unfair to those who caught COVID before the vaccine,” he said.