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Quietly, student debt has become a major part of coronavirus relief efforts.
This story is part of the Prospect’s series on how the next president can make progress without new legislation. Read all of our Day One Agenda articles here.
In September, Senate Minority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) jointly announced a formal call for then–presidential candidate Joe Biden to use his executive authority, if he won, to cancel student debt—an existing power of the Department of Education. Their resolution called for eliminating the first $50,000 of a student borrower’s debt, though the president can eliminate virtually all student debt through the ED.
The Schumer-Warren proposal went relatively unnoticed until after the election, when the outcome of at best a 50-50 Senate, or at worst continued control in the hands of Mitch McConnell, made the need for a Day One Agenda of executive action even more critical. Suddenly, the idea began to take off. #CancelStudentDebt trended on Twitter this week. Two hundred and thirty-seven nonprofit and community organizations petitioned Biden to take action on Day One. Reps. Alexandria Ocasio-Cortez (D-NY) and Barbara Lee (D-CA), Rep.-elect Cori Bush (D-MO), and several others tweeted about the issue. Warren and Schumer joined in the chorus, too. As of 2019, Ocasio-Cortez still owed thousands in student debt.
At the moment, Biden only seems open to another debt forgiveness program through public service. But despite his apparent reticence, the fact that it’s generated so much attention, to the extent that Senate Democratic leadership now supports it, is symbolically important for how the larger political world has moved on the issue.
In a statement to the Prospect, Schumer said, “Student loan debt is exacerbating the historic economic crisis our country is facing. It is holding back entire generations of young adults from buying homes, saving for retirement, and starting families. This crisis has been building long before COVID came around. But now, in this recession and period of massive unemployment, the burden of student debt is becoming even more insurmountable.”
The idea of using executive authority to eliminate student debt has been around since the Obama administration. Though some proposed it as a relief measure during the Great Recession, the administration balked. However, one Obama reform has significantly increased the potential impact of student debt cancellation. Through a provision of the Affordable Care Act, the ED became the primary lender for students when private lines of credit dried up. The presidential authority in question only applies to public loans, not private debt. But after the Obama reform, roughly 95 percent of student debt is publicly held.
Despite Obama’s thumbs-down, advocates persisted. The Prospect wrote about this policy as part of its Day One Agenda package in September 2019. A forthcoming article in the Buffalo Law Review also explains the legal parameters. Although it may seem impossible that the president can unilaterally eliminate $1.6 trillion in debt, because the debt is owed to the ED, the agency can decide not to collect it. According to Luke Herrine, the law review article’s author, current case law makes it unlikely anyone would have standing in court to object to an agency’s not collecting student debt. Biden could also ensure through his presidential authority that that cancellation is not treated as taxable income, another catch.
Quietly, student debt has become a major part of coronavirus relief efforts. The CARES Act paused student debt repayment for six months, and in August, President Trump signed an executive order extending that pause until December 31. Economists have been chattering about debt cancellation as an economic stimulus, but that may be the wrong frame; since payments are already frozen, canceling debt in a way that prevents them from returning in January would be a major anti-austerity measure.
While the question of whether a president would be allowed to cancel student debt was highly controversial initially, in recent weeks the debate has mostly assumed that a president can do it, and has turned to the question of whether it would be the best available fiscal policy. That alone is a huge sea change.
A few stragglers have again begun to spin the idea that the president does not have the authority to cancel student loans. Zack Friedman, writing for Forbes, noted that “some legal scholars” think only Congress has that power. Writing for The Washington Post, senior fellow at the Brookings Institution Adam Looney argued that Biden shouldn’t follow the Schumer-Warren proposal because not everyone who has student debt is financially struggling. He wrote that much of the outstanding $1.6 trillion in debt is owed by those with master’s or professional degrees. He added, “$50,000 across-the-board relief championed by Schumer and Warren is wildly out of synch with the traditional approach of progressive policymaking.”
Although it may seem impossible that the president can unilaterally eliminate $1.6 trillion in debt, the Education Department can decide not to collect it.
The idea that student debt is mostly an issue for white, upper-middle-class people is not a full or accurate picture of who has student debt. The student debt burden contributes considerably to the racial wealth gap, and prohibits millions of families from purchasing a house, having children, or otherwise investing in their future. Research shows that, prevented from accruing generational wealth by racist policies, Black families are more likely to take on student debt and take on riskier forms of debt than white families—yet another indicator that this policy is, in fact, in step with progressive policymaking.
“This is critically important because communities of color, which have been hit hardest by the health and economic consequences of COVID, disproportionately bear the burden of student debt,” said Schumer in a statement. “We can’t let the burden of student debt contribute to economic instability.”
Though the Schumer-Warren $50,000 policy doesn’t match what advocates have called for—a full cancellation of all student debt—it’s a sign that the needle has moved. Beginning largely as a fringe idea of advocates and leftist policy wonks, it was later adopted as part of Warren’s presidential platform as well as that of Bernie Sanders, and has now reached the offices of Democratic Senate leadership.
