President Biden mentioned the possibility of erasing certain student loan debt for millions of Americans, rekindling a campaign promise as he faces mounting pressure from progressives as well as falling approval ratings.
Biden last week hinted at the possibility of eliminating $10,000 of debt per borrower, likely through executive action. So far, the president has repeatedly extended a moratorium on federal student loan repayments, a pause that was first put in place under former President Donald Trump as part of a relief measure. wider against COVID-19.
BIDEN CANCELLING STUDENT DEBT WILL WORSEN INFLATION, EXPERTS WARN
“I’m looking at facing some debt reduction,” Biden said last week in response to a question at the White House. “I’m not looking at $50,000 in debt relief. But I’m carefully considering whether or not there will be additional debt relief.”
Here’s everything we know about the plan so far:
How much per borrower will be forgiven?
Biden backed the “immediate” write off of $10,000 in student debt for most borrowers during his presidential campaign, but raised questions about his legal authority to do so via an executive order.
Progressives, including Senate Majority Leader Chuck Schumer, DN.Y., have urged Biden to forgive $50,000 of unpaid federal debt per borrower by executive order. Democratic lawmakers have argued that Biden could use existing executive authority under the Higher Education Act to order the Department of Education to “modify, compromise, waive or release” student loans.
The president did not say how much he planned to cancel, but did signal that a $50,000 debt forgiveness was not being considered.
How much will the plan cost?
Wiping out $10,000 per borrower would force the government to cancel about $321 billion in federally guaranteed loans, according to a analysis released by the Federal Reserve Bank of New York last week. This would benefit about 11.8 million borrowers, or about 31.1%, and cancel 30.5% of loans past due or in default before the pandemic forbearance.
Under the policy, the average borrower would receive $8,478 in student loan forgiveness.
If the Biden administration imposed certain constraints on the pardon, such as a household income limit of $75,000, the cost of the program would rise from $321 billion to $182 billion, according to the New York Fed. As of December 2021, the total outstanding loan balance held by the federal government was $1.38 trillion.
Who will be eligible for student loan forgiveness?
The Biden administration is considering income caps for eligibility for student loan relief that would exclude high-income earners. Officials have raised the possibility of limiting the relief to people who earned less than $125,000 or $150,000 as individual filers in the previous year. This would equate to a threshold of about $250,000 to $300,000 for couples who file their taxes jointly.
“The president has talked, back on the campaign, about taking action or considering action to help people earning less than $125,000 a year, so that’s the framework he’s thinking in at this point,” White House press secretary Jen Psaki told reporters. this week aboard Air Force One.
White House officials have warned that no final decision has been made.
Will the executive order face a legal challenge?
Such sweeping executive action would almost certainly face a legal challenge, and it’s unclear whether it could survive in the current 6-3 conservative Supreme Court.
Critics have argued that the use of such power goes beyond the president’s authority granted by Congress. Canceling student loan debt would also add to the country’s already bloated national deficit, which totaled a record $2.8 trillion in fiscal 2021.
Lead attorney for former President Barack Obama’s Education Department, Charlie Rose, has suggested that canceling certain debts for certain borrowers without tying the relief to their individual needs would put the Biden team at risk of seeing his plan quashed by a court, according to the Wall Street Journal.
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In a memo obtained by the Journal, Rose, who served in the Education Department under Obama from 2009 to 2011, wrote in a “strictly confidential” memo in May 2021 that the White House could be on shaky legal ground if Biden is going ahead with the plan.
“While the issue is disputed, the most compelling analyzes tend to support the conclusion that the executive branch probably does not have the unilateral power to engage in massive student debt cancellation,” Rose wrote in a note. for his law firm, Hogan Marren Babbo & Rose, Ltd.