Will Progressives Persuade Biden To Cancel Significant Student Loan Debt?

Yesterday, Elizabeth Warren gaveled in her first hearing since being named chair of the Senate Banking, Houssing and Urban Affairs Committee's subcommittee on economic policy. The topic: student loan debt. She skewered the CEO of the Pennsylvania Higher Education Assistance Agency (PHEAA) James Steeley over the company's failures to provide mandated relief for borrowers eligible for the Public Service Loan Forgiveness (PSLF) Program-- which is supposed to forgive student debt for public servants after ten years. So far, about 225,000 people have hit the ten-year mark and applied for forgiveness, but 98% of them have been rejected. At the hearing, Warren also continued her calls for President Biden to use his existing authority to cancel up to $50,000 in student debt, a position supported by 58% of registered voters.

Last night, Tal Axelrod of The Hill reported about the on-going struggle of progressives to get Biden off the dime of student debt forgiveness, something anathema to the conservative mind-set. "More than 36 million people," wrote Axelrod, "would be freed from debt if the Biden administration cancels $50,000 in student debt per borrower, according to data put out Tuesday from the Education Department. Sen. Elizabeth Warren (D-MA), a vocal proponent of the cancellation proposal being pushed by progressives, released the data after requesting answers from the Education Department earlier this month. The 36 million borrowers who would have their debt completely forgiven account for 45 million federal student loan borrowers overall. The data also shows that 9.8 million federal student loan borrowers who were in default or more than three months behind on their debt at the end of 2019 would have their debt forgiven. That’s almost all of the 10.3 million federal student loan borrowers who were in that position."

So far Biden has only been willing to go as high as $10,000 in debut forgiveness per student. Getting part of the way there last February, Biden said "I do think in this moment of economic pain and strain that we should be eliminating interest on the debts that are accumulated, No. 1. And No. 2, I'm prepared to write off the $10,000 debt.

White House chief of staff Ron Lain said earlier this month that Biden had requested information from Education Secretary Miguel Cardona regarding his legal authority to cancel student loan debt.

“He hasn’t made a decision on that either way. In fact, he hasn’t yet gotten the memos that he needs to start to focus on that decision,” Klain said.

After Warren's hearing yesterday, CNBC reported that "Biden continues to be under mounting pressure to take action on student loan forgiveness." Warren: "America is facing a student loan time bomb that, when it explodes, could throw millions of families over a financial cliff. The average borrower will have to start paying nearly $400 a month to the government instead of spending that money out in the economy."

Warren also discussed the racial inequities of student debt, pointing out that the median Black borrower still owes 95% of the original amount they borrowed 20 years after taking out the loans. The median White borrower, meanwhile, owes just 6% of the original amount they borrowed two decades later.

“This is the single most powerful executive action President Biden could take to advance racial equity and give everyone in America a chance to build a future,” Warren said.

Also on Tuesday, more than 415 organizations, including the American Civil Liberties Union, the American Psychological Association and the Consumer Federation of America, wrote a letter to Biden and Vice President Kamala Harris calling on the White House to use executive authority “to cancel federal student debt immediately.”

“Before the Covid-19 public health crisis began, student debt was already a drag on the national economy, weighing heaviest on Black and Latinx communities, as well as women,” the organizations wrote.

“Administrative debt cancellation will deliver real progress on your racial equity, economic recovery, and Covid-19 relief campaign priorities.”

...Critics of student loan forgiveness argue that it wouldn’t significantly stimulate the economy since college graduates tend to be higher earners who would likely redirect their monthly payments to savings rather than additional spending. Others say it would be unfair to those who’ve already paid off their student debt or never took out loans, and would send the message that it’s OK for people to ditch their debts.