Back when President Joe Biden was still running for office, he frequently endorsed the idea of student loan debt forgiveness, but he always danced around the topic, suggesting relatively modest limits. He frequently said that he supported up to $10,000 in student loan debt forgiveness. Once he made it into office, that issue quickly slid to the back burner. (This is perhaps understandable considering all of the other debacles he’s gotten himself into.) Of course, he might not have felt all that much pressure to act quickly because all student loan payments were on hold before he even took office, thanks to a moratorium imposed by Donald Trump. Biden has extended that moratorium a couple of times now, but it’s due to run out in May.
This wasn’t just a question of if Biden was going to actually cancel massive amounts of student loan debt. There was a question if he was even legally able to do so. In April he requested a memo from the Department of Education indicating their guidance as to whether or not he could legally do it. That memo, if it was ever created, has still not surfaced for the public to read. The White House has been cagey when asked about it, as has the Department of Education. But according to progressives in Congress and activists who have been lobbying for such a move, time is running out. Many are openly saying that if Joe Biden doesn’t cancel those debts, he’s basically toast. (The Hill)
Advocates and lawmakers are stepping up the pressure on President Biden to act on student loan forgiveness, focusing on it as a major issue some warn Democrats could pay for at the ballot box in the upcoming midterm elections.
Biden has been called on to work with Congress on the issue and provide more transparency about his authority to wipe out all federal student debt for millions of Americans. The extension once again of the student loan repayment pause amid record spikes in COVID-19 cases made advocates optimistic that more action will come out of the White House.
“I think the administration needs to engage more with Congress on this because I think there’s real concern,” Sen. Bob Casey (D-Pa.) told The Hill.
So there are three parts to this question and Biden is facing yet another civil war within his own party depending on which way he goes. First of all, will he move to cancel some debt or all of it? Second, does he even have the authority to do it? And finally, even if he takes no action on cancellation, will he let the moratorium on loan repayments expire in May or extend it again until after the midterms?
As to the last question, Thomas Gokey, an activist with the Debt Collective was quoted as saying, “A Democrat couldn’t be elected dog catcher if they turn student loan payments back on.” Rep. Jamaal Bowman (D-N.Y.), offering no legal or constitutional proof, said that if Biden has the authority to pause loan repayments, he has the ability to cancel them. And since he ran on canceling $10,000 in debt, that’s the minimum he should be expected to do.
But can he? First of all, Biden asked the Department of Education to answer the question. Shouldn’t he have asked the Treasury or the Commerce Department? Because the jungle of student loans is very, very complicated, and answering that question may be about as clear as mud.
You can read a great breakdown of how the student loan system has operated over the years at Investopedia. Up until the early nineties, all student loans were handled through private banking entities, though almost all were guaranteed by the government. Starting with the Clinton administration and during both terms of George W. Bush, the federal government started issuing loans, accumulating roughly $140 billion in student debt. But after Obamacare passed, the numbers shot through the roof. The number of loans originating through private lenders plunged by 90%. As of last year, student loans accounted for 36.8% of all U.S. government assets.
Stop and think about that for a moment. If Joe Biden waves a magic wand and makes all of that debt “disappear,” one-third of the federal government’s assets will evaporate with it. Further, all of the other loans still held by private lenders will still have to be paid back by someone, and that someone is the taxpayer. The impact to the economy, not to mention the federal debt, is almost incalculable.
There’s one other factor not to be missed here. Progressives are warning Biden that he needs to take drastic action on this or his support among the base will collapse even further. (Assuming that’s possible at this point.) But if he does wipe out all of that student loan debt, do you know who else isn’t going to be feeling like supporting him? Everyone in the country who tightened their belt and paid off the debt they incurred. They’re going to be asking… what about me? Good luck juggling that hot potato, Uncle Joe.