President Joe Biden has announced a mass student loans forgiveness program, ending months of speculation about one of the nation’s most hotly debated topics.
The White House has long teased “canceling” $10,000 per borrower of student loans, which would mean shifting the debt on to taxpayers, but it finally announced the details of the program on Wednesday.
BIDEN’S DILEMMA: CANCEL STUDENT LOANS OR TAKE CREDIT FOR CUTTING DEFICIT
In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023.
I’ll have more details this afternoon. pic.twitter.com/kuZNqoMe4I
— President Biden (@POTUS) August 24, 2022
Biden will speak about the program at 2:15 p.m. at the White House.
Some 40 million people in the United States hold a collective $1.7 trillion in student loans. To be eligible for Biden’s cancellation program, borrowers will need to earn under $125,000 individually or $250,000 as a household, and those who received a Pell Grant can get up to $20,000 canceled, which the Biden administration is promoting as a way to close the racial wealth gap because black borrowers are twice as likely to receive Pell Grants.
The $125,000 income threshold means the top 5% of income earners will not be eligible for loan forgiveness, White House staffers said on a call with reporters following the announcement. The average student loan debt is $37,693, according to the Education Data Initiative.
Conservatives have railed against the idea for months, predicting a blue-collar backlash to the Democratic stance on student loans and saying Biden will live to regret his moves because 87% of people do not have student loans.
“What does it say for all those folks? Boy, you were really stupid here,” former Education Secretary Betsy DeVos told the Washington Examiner in June.
Democrats hope the move energizes young voters in a nonpresidential election year, yet there is disagreement on that side over how far to go. Groups such as the NAACP and legislators, including Sen. Elizabeth Warren (D-MA), have called on Biden to shift $50,000 or more per borrower onto the public debt, with some even saying $10,000 per borrower is a form of structural racism because black borrowers have higher average balances.
MAJOR BREAKING NEWS:
We’ve worked for this and worked for this and worked for this.
And now, President Biden just took action to #CancelStudentDebt.
Thank you, President Biden!
— Chuck Schumer (@SenSchumer) August 24, 2022
An analysis from the Penn Wharton Budget Model estimates it will cost taxpayers between $300 billion and $980 billion over 10 years to forgive student loans, with most of the debt relief going to borrowers in the top 60% of income earners.
Jenny Beth Martin, the Tea Party Patriots Action’s honorary chairman, slammed the move as divisive.
“Once again, Joe Biden picks winners and losers in a divisive manner,” she said. “This time, he divides the country between those who will enjoy the benefits of a college education while transferring their student loan debt to the losers who will pay for it.”
One issue that conservatives and progressives largely agree on is that reforms need to be made in order to prevent future borrowers from racking up similar levels of debt. The White House mentioned changes to government-backed loan repayment programs and ways to hold schools accountable during the call with reporters, but did not elaborate on ways to lower college costs generally.
Republicans have raised ethical concerns about Biden administration staffers holding millions in student loans, a problem that former Bush White House ethics lawyer Richard Painter said could be not just unethical but criminal.
House Committee on Oversight and Reform Ranking Member James Comer (R-KY) raised the issue again in a statement released after the announcement.
“This bailout also raises ethical concerns about Biden Administration officials with student loans who have worked on this policy and stand to benefit financially,” he said. “Alarmingly, we’ve learned that the Office of Government Ethics has never been consulted on any pending or finalized waivers related to student loan forgiveness and has no finalized waivers on file for Biden Administration officials. Oversight Committee Republicans will continue to conduct oversight of this issue to expose any self-serving Biden Administration officials.”
Another question is whether Biden has the legal standing to take action on loans without Congress. House Speaker Nancy Pelosi (D-CA) said in 2021 that the president cannot move without Congress, and most on the Right agree.
“There is no meaningful argument that Biden has the legal authority to do broad student debt cancellation,” Neal McCluskey, the director of the Cato Institute’s Center for Educational Freedom, said. “He has said for months that his legal people will give him a report, and no one has seen anything from that report. If they thought he had legal authority, you would think he would have released the report.”
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But even McCluskey doesn’t know who could establish standing to file a suit as an aggrieved party, which would undermine any legal efforts to stop the cancellation.
“Generally speaking, taxpayers don’t have standing to sue, saying their money is being used badly,” he said.
