Biden student loan debt forgiveness: where the debate stands

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President Biden asked the Education Department to investigate whether it could unilaterally cancel federally-held student debt, raising hopes of around 45 million Americans who collectively owe $ 1.7 trillion .

But it’s still not clear if any relief will come.

Last year, the Trump administration and Congress temporarily suspended collection from some student loan borrowers in response to the COVID-19 pandemic. Biden has asked the Department of Education to extend this relief.

This sparked new calls from some progressives for the federal government to write off student loan debt. Backed by Senate Majority Leader Charles E. Schumer (DN.Y.), they want Congress or the President to write off up to $ 50,000 in student loan debt per borrower.

Biden indicated during the presidential campaign that he was open to the idea, but at a much smaller amount.

Where are things now?

At a CNN town hall in February, Biden questioned whether he had the legal authority to write off the level of debt requested by Congress. He stressed that he preferred Congress to pass a law.

“I am prepared to write off a debt of $ 10,000, but not 50” thousand, Biden said. “Because I don’t think I have the power to do it by signing the pen.”

Yet on April 1, he asked Education Secretary Miguel Cardona to research and draft a legal note examining whether it was within the president’s powers to write off $ 50,000 in student loan debt. There is no deadline for Cardona to present his findings.

If the ministry says Biden can act on his own, he could sign an executive order ordering the Education Department to write off the debt.

If the department says Biden can’t act alone, Congress could pass a bill forgiving student loan debt, and the White House has said Biden will happily sign it. But Democrats have narrow margins in the House and Senate, and the issue tends to be politically unpopular with Republican lawmakers. So unless 10 Republican senators are ready to step in to help Democrats defeat a potential obstruction, this Congress is unlikely to be able to successfully forgive student loan debt.

Under what authority would Biden cancel this debt?

This is what the president expects Cardona’s response to.

Advocates point to a provision in the Higher Education Act of 1965 which they say gives the President, through the Secretary of Education, broad power to “modify, compromise, waive or release student loans. “.

Some 44 million Americans collectively hold about $ 1.6 trillion in student loan debt, and the numbers are rising. So, can President Joe Biden, or anyone else, really solve the student debt crisis?

Others point to the Higher Education Aid Opportunities for Students Act, or HEROES, 2003, which allows the secretary to waive or modify certain loan programs to ensure that injured parties during an emergency national government declared by the president “are not placed in a more unfavorable financial situation. ”

The Trump administration relied on this law to justify zeroing student loan interest and deferring payments in the weeks before Congress passed the CARES Act, which explicitly called on the Department of Lending ‘Education to stop collecting payments on certain student loans held by the federal government until September, not to charge interest during that time, and to stop trying to collect payments from people already behind on their loans. The administration again stressed that the HEROES Act would continue to not collect payments once the authority of Congress has ended.

In the past, the HEROES Act has been used narrowly and applied to active duty members or those affected by a natural disaster such as fire or flood, rather than the general public.

Two days before Trump stepped down in January, attorneys for the Department of Education released a legal note to then-secretary Betsy DeVos claiming that the massive student loan cancellation would exceed this. that Congress anticipated when it enacted the Higher Education Act and the HEROES Act.

What would canceling student debt mean for the economy?

About 45 million Americans have student loan debt, worth a combined $ 1.7 trillion. Most of it is in federal student loans. Just under $ 200 billion is spent on private student loans.

Borrowers typically hold between $ 20,000 and $ 24,999, according to the U.S. Federal Reserve’s 2020 Household Report. And they typically pay between $ 200 and $ 299 per month, according to the report.

Student loan debt is the second largest source of individual debt in the United States, behind mortgage debt. About a sixth of the US population over the age of 18 holds federal student loan debt. For those under 35, about a third of the population has federal student loan debt.

Advocates argue it prevents young people from buying homes and starting families until later in life.

What would this mean to me?

If Biden forgives $ 10,000, 15.3 million Americans – 33.6% of all borrowers – would have their debt wiped out entirely, according to federal student aid data from the Department of Education for the last quarter of fiscal year 2020. In total, $ 75 billion in debt would be canceled.

More than 38 million Americans who owe $ 60,000 or more would have all or almost all of their debt written off if Biden forgives $ 50,000. In total, up to $ 686.5 billion would be forgiven.

Just over 4 million Californians owed federal or private student loan debt in 2020, with an average debt load of $ 36,800, according to the New York Fed’s Consumer Credit Panel.

The data also shows that the people most likely to default are those who took money out for college, typically less than $ 10,000, and couldn’t get a degree but still owe pay back the money without a better paying job. This could be why Biden jumped to the $ 10,000 figure.

According to the Federal Reserve, 37% of adults with outstanding student loans who have not completed an associate’s degree are behind on their payments and are most likely to default.

It sounds counterintuitive, but the default rate actually goes down as borrowing increases, as those who borrow the most from the federal government tend to work on graduate degrees and land better paying jobs.

If Biden cancels the student loan debt, you won’t have to worry about next year’s tax bill. Congress exempted from tax the student loan exemption in the most recent COVID-19 economic stimulus bill.

Would that only apply to federal student loans or private student loans?

The government has no authority over private student loans. This debt, estimated at $ 119 billion, could not be canceled by Congress or by executive order.

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