Student Loan Debt: The $1.6 Trillion Problem Dividing Democrats
In March 2020, as the COVID-19 pandemic began to have devastating effects on the U.S. economy and public health, and Joe Biden edged closer to the Democratic presidential nomination, he made a commitment:
We should cancel a minimum of $10,000/person in federal student loans, as proposed by Senator Warren and his colleagues. Young people and other students in debt have borne the brunt of the latest crisis. This shouldn’t happen again.
Since taking office in January 2021, Biden has used various executive measures to effectively cancel approximately $17 billion in federal student loans, according to its education department.
While important – especially for the nearly one million people who benefited – these actions were limited and targeted, for example, at people with disabilities or graduates defrauded or manipulated by their lenders and educational institutions. .
For everyone else, there have been repeated pauses in federal loan repayments — a COVID-era stimulus and relief measure begun under President Donald Trump and reimplemented several times by Biden.
The elephant in the room, however, is the long-term fate of $1.6 trillion in federal student loans, owed by more than 40 million people, by early 2022. To that, there are basically four responses: Republicans are united in opposing the cancellation of all student loan debt; while the Democrats are split into roughly three camps.
Biden, who campaigned as a centrist determined to work with Republicans and independents, will have to balance those concerns by uniting the progressive and moderate wings of his own party.
This is the position Biden himself currently appears to hold, and the specific number he has repeated over and over. vaunted is $10,000 per person. Approximately two-thirds of borrowers owe more than $10,000, so a cancellation at this level would still leave considerable debt untouched.
However, some commentators have argued that those with lower debt burdens are, perhaps ironically, the most likely to default, as they often form a cohort of borrowers who have never graduated and are therefore less likely to benefit from the increase in income that usually accompanies higher education.
In late April 2022, Biden provided an update on the commitments he made during the campaign trail, saying:
I’m looking at dealing with some debt reduction…I’m looking carefully at whether or not there will be — there will be further debt reduction, and I’ll have an answer on this in the next two weeks. weeks.
However, Biden drew a line in the sand in the same set of remarks, stating, “I’m not considering a $50,000 debt reduction,” which brings us to the second proposed answer to question 1, 6 trillion dollars.
That figure – $50,000 in debt forgiveness per borrower – has been put forward by several prominent progressive Democrats, in particular Senator Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer of New York.
In February 2021, Warren and Schumer – along with rising progressive stars like Reps. Ayanna Pressley, Ilhan Omar and Mondaire Jones – promoted a Congress resolution which explicitly called on Biden to “take executive action to comprehensively forgive up to $50,000 in federal student loan debt for federal student loan borrowers.”
Besides divisions over the amount and scope of debt cancellation, Democrats are also at odds over How? ‘Or’ What any cancellations must be made.
House Speaker Nancy Pelosi, for example, has publicly insisted that the president does not have the legal authority to cancel student loan debt, and that “it must be an act of Congress”.
Schumer, on the other hand, has insisted Biden could do it “with the flick of a pen” – a position shared by the National Association for the Advancement of Colored People.
The NAACP has emphasized the racial equity dimensions of student loan debt – black borrowers carry a disproportionate debt burden – and have highlighted a minimum cancellation level of $50,000 per person, describing such a step by Biden as “the best way to dramatically narrow the racial wealth gap.”
With prominent Democratic leaders like Schumer pushing Biden toward a $50,000 cancellation, Biden insisting he won’t go there, and Democrats and left-wing activists demanding $50,000 as a minimum non-negotiable, this is where the Democratic fights could go wrong.
Republicans, meanwhile, have sought to exert their own pressure, with parallel bills intended to prevent Biden from renew the freeze on loan repayments againand stop his administration of unilaterally cancel debts.
The policy of canceling all federal student loan debt, with no income restrictions, has come an extremely long way in just a few years, but it seems unlikely to go any further under the presidency of Biden.
As part of the 2020 Democratic presidential primary, Warren first propose eliminating $50,000 for each borrower with income below $100,000, gradually reduced forgiveness for those earning between $100,000 and $250,000, and no debt forgiveness for anyone earning above that threshold.
Sanders, pushing to capture support from the party’s progressive wing, launched the College for All Act in June 2019 – legislation that would have required the Department of Education to write off all student loan debt, without the income limits Warren stipulated. (Sanders and Warren also advocated the elimination of tuition fees).
Three years later, with Biden installed in the White House, Sanders does not relax his efforts. In February, when Biden’s Education Department announced that it had forgiven $415 million in loan debt for 16,000 deceived college borrowers, Sander repliedcurtly:
Good. Now write off the remaining $1,883,214,046,704 for another 44,984,000 Americans still drowning in student debt.
As vocal as the support for this “total” approach to debt cancellation is, Biden’s definitive opposition to measures that do not involve income limits and the voting mathematics at play in the US Senate mean that Sanders will almost certainly remain disappointed for at least two more years.
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Federal Student Aid. https://studentaid.gov/data-center/student/portfolio. Accessed May 23, 2022.
“Forgive student loans, but only a little.” Manhattan InstituteNovember 23, 2020, https://www.manhattan-institute.org/forgive-student-loans-but-only-a-little.
Joe Biden Town Hall hosted by Lester Holt | NBC News NOW. www.youtube.com, https://www.youtube.com/watch?v=5xTNKVqsLKo. Accessed May 23, 2022.
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NAACP President Derrick Johnson on Extending Student Loan Repayments | NAACP. April 6, 2022, https://naacp.org/articles/naacp-president-derrick-johnson-student-loan-repayment-extension.
Romer, Andre M. Perry, Marshall Steinbaum, and Carl. “Student Loans, the Racial Wealth Divide, and Why We Need Complete Student Debt Cancellation.” BrookingJune 23, 2021, https://www.brookings.edu/research/student-loans-the-racial-wealth-divide-and-why-we-need-full-student-debt-cancellation/.
“Romney, Colleagues Introduce Bill to Stop President Biden from Forgiving Student Loan Debt.” Mitt RomneyMay 18, 2022, https://www.romney.senate.gov/romney-colleagues-introduce-bill-to-stop-president-biden-from-cancelling-student-loan-debt/.
President Pelosi holds a weekly press conference. www.youtube.com, https://www.youtube.com/watch?v=BiZQ0sZwFi4. Accessed May 23, 2022.
“Thune: It’s time to end Biden’s unnecessary student loan deferral.” US Senator John Thune, https://www.thune.senate.gov/public/index.cfm/2022/4/thune-it-s-time-to-end-biden-s-unnecessary-student-loan-deferment. Accessed May 23, 2022.
Warren, Schumer, Pressley, Colleagues: President Biden Can and Should Use Executive Action to Immediately Forgive Up to $50,000 in Federal Student Loan Debt | US Senator Elizabeth Warren of Massachusetts. https://www.warren.senate.gov/newsroom/press-releases/warren-schumer-pressley-colleagues-president-biden-can-and-should-use-executive-action-to-cancel-up-to- 50,000-in-federal-student-loan-debt-immediately. Accessed May 23, 2022.
Warren, team. “I call for something truly transformational: universal free public college and cancellation….” MediumMay 10, 2019, https://medium.com/@teamwarren/im-calling-for-something-truly-transformational-universal-free-public-college-and-cancellation-of-a246cd0f910f.