Billion dollars in student loans canceled by Biden pave the way for massive debt forgiveness?


About 72,000 borrowers took a hiatus last week: The US Department of Education announced it would write off student loan debt for students who attended colleges that used deceptive or predatory practices. This wipes out roughly $ 1 billion in debt held by borrowers who attended now-defunct for-profit colleges like [hotlink]ITT[/hotlink] Technical Institute and Corinthian Colleges.

During the last years of Barack Obama’s presidency, the Education Department attempted to write off this debt, but Donald Trump’s administration limited the scope of the remission. The move announced last week is a step backwards from the Obama-era policy of granting full debt relief to defrauded borrowers.

But it is not massive debt cancellation that progressives are looking for. Indeed, this discount represents only a tiny fraction of the outstanding college debt: barely 0.05% of the over $ 1.7 trillion in total student debt. Or $ 1 out of $ 1,700.

Biden’s decision to write off some student debt at the start of his presidency begs the question: Does this move pave the way for a wider forgiveness by executive order? On Tuesday, Senator Bob Menendez suggested that great action is needed when he tweeted: “This is just the start. Let’s take it a step further and write off up to $ 50,000 for all federal student loan borrowers!”

In the past, massive cancellation of student loans through executive powers would have left borrowers with a huge tax bill, as the IRS viewed canceled student loans as income. That’s no longer the case: The $ 1.9 trillion package signed by President Biden earlier this month includes a provision to make the canceled student loan tax-free. But that removed barrier to forgiveness did not coincide with Biden’s public support for such a move. Instead, Biden is registered for help Congress consider forgiving up to $ 10,000 in student loan debt for each borrower.

“The Biden administration is under intense pressure from the progressive wing of the Democratic coalition to write off more student debt. years is a guarantee that more debt will be canceled, ”said Robert Kelchen, associate professor of higher education at Seton Hall University. Fortune.

Why the skepticism? Kelchen points out the lack of enthusiasm of Biden, who has not publicly supported pardon without congressional support. The president does not support total forgiveness either: in February, Biden outright rejected the idea of ​​a pardon of $ 50,000 per student, saying “I can’t do it.”

“At this point, President Biden appears to be reluctant to proceed with a blanket debt cancellation by executive order, as he prefers to work with Congress on big proposals and it is not entirely clear whether such a move would survive l ‘inevitable legal challenge,’ Kelchen said.

Camp Biden’s decision to go ahead and completely wipe out the debt of students who attended struggling colleges like ITT Technical Institute – something that was blocked by Betsy Devos’ Department of Education – does not encounter much political hindsight. That will change if Biden tries to forgive massive amounts of federal student loans by executive order.

“While I expect Biden to take further steps to write off more student debt, I don’t see his action this week as being in a similar vein. Conservatives like me are jumping up and down, shouting and screaming that blanket cancellation is the wrong plan. But you won’t see most of us speaking out against the increased generosity of forgiven student loans, ”said Beth Akers, resident member of the American Enterprise Institute. Fortune. “This week’s action might have been more generous than what I would have liked to see, but it makes sense given the circumstances. This contrasts with the more general debt cancellation effort that seems motivated politically rather than rationally. “

The Senate Majority Leader and many of his fellow Democrats support forgiveness up to $ 50,000 per student. But that level of debt cancellation is sure to be met by Republican resistance in the tightly Democrat-controlled US Senate. If fierce political resistance condemns the legislative route to debt cancellation, perhaps that is what ultimately pushes the White House to use the powers at its disposal.

“If progressives keep up the pressure on President Biden and he becomes frustrated that Congress does not pass debt cancellation legislation,” Kelchen says Biden could then act without Congress.

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