Cancel $50,000 in student loan debt? Democrats urge Biden to do that in new resolution

Democratic lawmakers introduced a resolution Thursday calling on President Joe Biden to cancel $50,000 in student loan debt for every person holding such debt through executive action.

Senate Majority Leader Chuck Schumer of New York held a press conference Thursday morning announcing the initiative alongside Democratic Sen. Elizabeth Warren of Massachusetts and Reps. Mondaire Jones of New York, Ayanna Pressley of Massachusetts, Ilhan Omar of Minnesota, and Alma Adams of North Carolina.

The legislators linked the issues of racial inequality and student loan debt.

“This is also a civil rights issue. A disproportionate burden of student debt falls on people of color often times because they were taken advantage of by a lot of these awful, despicable disgusting...for-profit colleges,” Schumer said at the conference.

Warren added: “Canceling student loan debt is the single most effective executive action that President Biden can take to close the racial wealth gap.”

“The student debt crisis has always been a racial and economic justice issue,” Pressley said. “But too long, the narrative has excluded Black and Latinx communities and the ways in which this debt has exacerbated deeply entrenched racial and economic inequities in our nation.”

A 2019 report by the Institute on Assets and Social Policy found that the median white borrowers had reduced their debt by 94% 20 years after entering repayment compared to the median black borrower who still owed 95% of their student loans after the same time span.

Americans owed more than $1.7 trillion in student loan debt in quarter three of 2020 — an uptick of about 4% compared to quarter three of 2019, according to The Federal Reserve.

Canceling $50,000 in student debt would reduce the country’s debt balance from $1.7 trillion to $700 billion, CNBC reported. It would mean 80% of federal student loan borrowers, accounting for 36 million people, would be completely free of federal debt, higher education expert Mark Kantrowitz told the publication.

Questions linger over power to cancel debt

Biden has previously expressed skepticism that the president has the power to cancel student loan debt through executive action.

“That’s different than my saying, and I’m going to get in trouble for saying this . . . for example, it’s arguable that the president may have the executive power to forgive up to $50,000 in student debt,” Biden told The Washington Post. “Well, I think that’s pretty questionable. I’m unsure of that. I’d be unlikely to do that.”

Biden’s officials said the president still supports canceling $10,000 in student loan debt per borrower, CNBC reported.

Schumer and Warren have asserted that Biden has the power to cancel debt through the “existing authority under the Higher Education Act.”

Some experts have raised similar doubts about such executive actions, saying bypassing Congress could be met with legal challenges.

“Using an executive order to forgive federal student loans will likely be met with a lawsuit and preliminary injunction, and eventually fail,” Kantrowitz told CNBC. “Also, trying that route immediately upon taking office would block any attempt at working with Congress in a bipartisan manner.”

Financial planner Ryan Brown of CR Myers & Associates told Forbes that legal scholars believe that federal loan debt falls under Congress’ commerce, taxing or taxing powers and “that an Executive Order issued by the President would be an overreach of constitutional authority as a result.”

Education Department officials under former President Donald Trump’s administration released a memo in January arguing that the agency doesn’t have the power to forgive student loan debt either.

The memo states that “the Secretary does not have statutory authority to provide blanket or mass cancellation, compromise, discharge, or forgiveness of student loan principal balances, and/or to materially modify the repayment amounts or terms thereof, whether due to the COVID-19 pandemic or for any other reason.”

Former Education Secretary Betsy DeVos called the proposals to cancel federal student loan debt “crazy.”

“Their proposals are crazy,” DeVos told Fox News in 2019. “Who do they think is actually going to pay for these? It’s going to be two of the three Americans that aren’t going to college paying for the one out of three that do.”

This story was originally published February 4, 2021 at 9:13 AM with the headline "Cancel $50,000 in student loan debt? Democrats urge Biden to do that in new resolution."