The Biden administration is reviewing student debt repayment options

United States President Joe Biden speaks in Pittsburgh, Pennsylvania on March 31, 2021.

Jim Watson | AFP | Getty Images

President Joe Biden has asked Education Secretary Miguel Cardona to prepare a report on the president’s legal authority to cancel up to $ 50,000 in student debt per borrower, White House chief of staff Ron Klain said in an interview with Politico on Thursday .

“Hopefully we’ll see that in the next few weeks,” Klain said of the memo. “And then he’ll look at that legal authority, he’ll look at the political issues about it, and he’ll make a decision.”

During the campaign, Biden said he supported student loan forgiveness of $ 10,000, but he is under increasing pressure from Democratic Party members, advocates and borrowers to go further by canceling $ 50,000 per person and do this through action by the executive.

Although Biden has expressed reluctance to bypass Congress to reduce student debt in the past, White House press secretary Jen Psaki suggested in February that the government had not ruled out the possibility. On his first day in office, Biden extended a payment hiatus for federal student loan borrowers that has been in effect from March through September next.

Senate Majority Leader Senator Chuck Schumer said he had concluded that Biden could cancel $ 50,000 of the debt himself.

“You don’t need a congress,” said Schumer. “All you need is the movement of a pen.”

During the 2020 Democratic Presidential Primary, Massachusetts Senator Elizabeth Warren vowed to grant student loans in the early days of her term, including announcing an analysis written by three legal experts as part of the predatory student lending project at Harvard Law School has been. who declared student debt relief through executive action “lawful and permissible”.

Others say Biden would be brought to justice if he tried to pay off the debt himself.

More from Personal Finance:
The state’s tax return is due here
There may still be an option to claim missing $ 1,200 or $ 600 stimulus checks
These states do not allow a tax break of $ 10,200

If it was determined that the president could cancel student debts without passing any laws, borrowers could reduce or eliminate their balances overnight. On the other hand, given the razor-thin majority of Democrats, the likelihood that Congress will agree to grant the loans is uncertain at best.

“I think the government is working hard to find a legally feasible way to pay off up to $ 10,000,” said A. Wayne Johnson, formerly responsible for federal student loan debt with the US Department of Education.

At the same time as his resignation in 2019, Johnson called for student loan forgiveness of $ 50,000 per borrower. The system in the US bordered on predators and much of the debt would never be paid back.

$ 10,000 or $ 50,000

The U.S. has more than 44 million student loan borrowers and the country’s outstanding balance is projected to exceed $ 2 trillion by 2022.

If all federal loan borrowers were to cancel their debt at $ 10,000, the country’s outstanding educational debt would fall from $ 1.7 trillion to around $ 1.3 trillion, according to Mark Kantrowitz, an expert in higher education.

And a third of federal student loan borrowers, or 14.4 million people, would see their balances reset to zero.

Removing $ 50,000 for all borrowers, on the other hand, would reduce the country’s outstanding student loan debt from $ 1.7 trillion to $ 700 billion.

Meanwhile, the $ 50,000 plan would cancel 80% of federal student loan borrowers, or 36 million people, from all debt, Kantrowitz said.

Even before the pandemic, around a quarter of student loan borrowers were in default or default.

Comments are closed.