The cost of college in America is too high. For decades, this has been the consensus among indebted graduates and policymakers. The United States spends more per student on higher education than other developed countries except for Luxembourg.
And according to the OECD judgment, the exorbitant enrollment rates in the United States virtually have no relationship to the value that students could get in exchange.
As a result of this political failure, students and graduates of American universities collectively hold more than $ 1.7 trillion in student debt. Student loan cancellation has become a defining cause of America.
Before his inauguration, Joe Biden called on Congress to write off each borrower’s $10,000 in student debt, but the president didn’t include any loan amnesties in his COVID relief plan.
And the $6,000 billion budget published in May does not even have forgiveness of student loans. This political constraint prevented Biden from carrying out all the policies he promoted during the election campaign.
Indeed, it is not known whether the president will have the votes to implement his main government priorities, which include investments in the climate, infrastructure, care for the elderly, childcare, universal daycare, family allowance, paid time off, and community college tuition-free.
Student debt relief ranks pretty low on the President’s wish list. He spoke little of the issue during his election campaign.
He went to great lengths to voice his opposition to the cancellation of more than $10,000 per borrower in an attempt to reaffirm his “moderate” credentials (that his plans to relatively ambitious expenses have called into question).
If Biden had included student debt relief in his budget request, he (probably) wouldn’t have made it very substantial. Democrats in the Senate have already shown that they are perfectly comfortable rejecting the president’s demands.
And as of this writing, there are 50 votes in the Senate to forgive $10,000 per borrower. Presidential budgets are primarily public relations documents, as Congress has the highest authority overspending.
The White House has concluded that limiting the size of its budget request to $6 trillion is more important than pleasing debt cancellation advocates from a political standpoint.
Challenge for Writing Off a Debt?
The idea that the president could spend more than $ 1 trillion to cancel America’s student debt – alone, with the stroke of a pen – may seem far-fetched. But there is a cohesive legal theory behind the idea.
And thanks to a reform passed under Barack Obama in 2010; the federal government now owns about 92 percent of all student debt, which means that more than $1.5 trillion in US student debt is owed to the Department of Education, which has the explicit authority to waive “any claims” it has and can therefore unilaterally write off all that debt.
This theory makes sense to me. But the functioning of federal judges must make sense, and thanks to the Trump presidency, the federal judiciary is quite conservative. So for massive student debt cancellation to happen through executive action, three things would have to happen:
(1) the Education Department’s review would have to conclude that Biden has the power to cancel student debt,
(2) Biden should decide to use such authority, and
(3) the judiciary should respect his right to such authority.
These three developments seem unlikely. As mentioned, Biden shows little enthusiasm for the student debt issue and has generally gone to great lengths to avoid litigation.
Leveraging obscure federal law to deliver $430 billion in aid to the minority of indebted Americans – in defiance of Congress and based on consistent but contested legal theory – doesn’t seem to be the game. In late July, House Speaker Nancy Pelosi said she didn’t believe Biden had the power to write off student debt through the executive branch.
Is Biden working against the debt crisis?
While the president has shown little enthusiasm for general student debt relief, his administration is trying to ease the burden on borrowers through regulatory measures and legislative proposals.
On his first day in office, Biden extended the moratorium on student loan repayments until the end of September (the administration does not plan to extend this period any further, however, so borrowers will again be hooked for payments. until October).
Until the end of 2025, that is, if your student loans are returned to you before 2026, you will never have to pay tax on this income. This removes a potential obstacle to mass forgiveness, although the provision did not come at Biden’s behest and its ultimate meaning remains unclear.
The administration’s most significant actions on student debt are likely to come from the regulatory rewrite of existing debt relief programs. The White House has already adopted measures to eliminate bureaucracy and facilitate developing borrowers for forgiveness.