House and Senate Democrats are ramping up their plans for student loan cancellation.
Here’s what you need to know — and what it means for you.
Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) will hold a press conference today to introduce a resolution in Congress that calls on President Joe Biden to cancel up to $50,000 of student loans for student loan borrowers. As first reported by Fox News, the resolution calls on the president to use executive action for student loan cancellation in the wake of the Covid-19 pandemic. The resolution is similar to a resolution that Schumer and Warren introduced in September. Since then, Schumer has clarified that their proposal doesn’t apply to every student loan borrower. Rather, only student loan borrowers with federal student loans who earn less than $125,000 would be eligible. The student loan forgiveness would be tax-free to student loan borrowers. In the U.S. House of Representatives, Reps. Ayanna Pressley (D-MA), Rep. Ilhan Omar (D-MN), Mondaire Jones (D-NY) and Alma Adams (D-NC) will endorse the resolution as well. Both Pressley and Omar have been vocal supporters of student loan cancellation, and Omar recently supported a new wealth tax to pay for student loan forgiveness.
Can a president cancel student loan debt?
Warren and Schumer say that student loan cancellation will stimulate the economy, reduce disparity, increase family formation, encourage new businesses, improve retirement savings, spur homebuying, and help relieve a generation of borrowers from crushing consumer debt. Earlier this week, Warren tweeted: “Canceling student loan debt would immediately put money in the pockets of millions of Americans. It would help dig our economy out of this crisis. And we don’t have to wait for Congress: the Biden-Harris administration can get it done with their executive authority.”
According to Warren and Schumer, the Higher Education Act of 1965 (which is current law) provides legal authority for the U.S. Secretary of Education to cancel student loans. In their view, the president already has legal authority to cancel student loans. They reference Section 432(a) of the Higher Education Act, which grants the U.S. Secretary of Education the authority “to modify, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.” Based on this, they argue that it’s unquestionable that the president (through the Secretary of Education) can cancel student loans for all student loan borrowers.
Bad News For Student Loan Cancellation?
Biden wants to cancel student loans immediately. There is no disagreement about the timing of student loan cancellation. The disagreement is about how much student loan forgiveness, who qualifies and the procedure by which there is student loan debt cancellation. Biden wants Congress to cancel $10,000 of student loans through legislation or in the new stimulus package. There have been multiple proposals in Congress to cancel student loans, in addition to existing student loan cancellation programs such as income-driven repayment and Public Service Loan Forgiveness.
Curiously, Schumer and Warren are not pursuing a bipartisan approach to student loan cancellation, or even seeking unity with the president, who is a fellow Democrat. That’s not to say Republicans will support student loan cancellation; they likely won’t. However, Biden supports cancelling student loans, so why not propose a universal student loan…