Biden has sought to aggressively expand higher education options for lower- and middle-income people, proposing as part of his “Build Back Better” economic plan to make community college free and expand Pell Grants, which help pay for college for the lowest-income Americans.
But he didn’t include loan forgiveness in the plan, preferring that Congress devise a program on its own.
With lawmakers gridlocked on almost all issues, Democrats who favor loan forgiveness have increasingly pressed Biden to relieve some debt through executive action.
White House officials have said Biden is considering forgiving at least $10,000 in federal loans per borrower, and have signaled that people making more than $125,000 a year likely wouldn’t be eligible. Legal experts say an income limit would make an executive order harder to challenge in court.
‘Jubilee for Elites’
Republicans have assailed loan forgiveness as a potential fresh driver of inflation and unfair to people who’ve paid off their student debts. Senate Republican Leader Mitch McConnell has labeled student loan cancellation “a jubilee for elites” and Republicans in the House and Senate have introduced symbolic legislation that would block Biden from forgiving loans through executive action.
But loan forgiveness enjoys broad support among Democrats. Even Joe Manchin, the West Virginia senator who has stalled Biden’s economic agenda in the evenly divided Senate, has said he supports at least some relief.
About 43 million Americans have outstanding federal student loans, and the average balance is more than $37,000. The majority of the debt is owed by households in higher income brackets, according to the Education Data Initiative.
Black college graduates owe an average of $25,000 more in student loan debt than White graduates.
About 64% of registered voters support at least some student debt forgiveness, according to a Politico/Morning Consult poll last month. But only 5% said they considered education issues -- like student loans -- the top issue for the mid-terms.
Many legal experts, even those once skeptical of Biden’s authority, have concluded that he can order at least some loan forgiveness. But the scope of his power -- and where he derives it -- remains under debate.
A provision of the Higher Education Act gives the secretary of Education authority to “compromise, waive or release the department’s claims against student borrowers.”
A 2003 law also arguably gives Biden the power to order the Education secretary to forgive federal student loan debt during emergencies, such as the Covid-19 pandemic, said Luke Herrine, an incoming assistant professor of law at the University of Alabama, and Jonathan Glater, a law professor at the University of California, Berkeley.
But Mark Kantrowitz, a financial aid expert, said using either of those two laws to create a broad new forgiveness program -- even in a targeted way -- would be easily challenged in court. Biden instead could modify existing repayment plans by decreasing the current forgiveness period, now usually 20 or 25 years, and changing income caps, Kantrowitz said, likely avoiding a legal challenge.
It’s unclear who would have standing to sue over a forgiveness program, though plaintiffs might include members of Congress or loan servicing companies that hold federal contracts and risk a financial loss.
Progressives say there’s precedent for a forgiveness program, as both the Trump and Biden administrations paused repayments on student loans and interest accrual during the pandemic. Biden has yet to allow payments to resume, and has already canceled $18.5 billion in student loans, including more than $5.8 billion for borrowers with severe disabilities.
“It’s clear they have the power; they’ve been using it,” Warren said last week.
This article was provided by Bloomberg News.