Will President-elect Joe Biden give a wealthier-than-average portion of the population a huge bailout when he enters office? It’s something that a number of Democratic politicians are hoping he does.
Senate Minority Leader Chuck Schumer and Sen. Elizabeth Warren support a plan that would eliminate up to $50,000 of debt for federal student loan borrowers. “We believe that Joe Biden can do that with the pen as opposed to legislation,” Schumer recently said, referring to an executive order. Other members of the Democratic Party have been saying that Biden should cancel student debt, including Reps. Alexandria Ocasio-Cortez of New York and Ayanna Pressley of Massachusetts.
Cancel student debt. That’s the tweet.
— Ayanna Pressley (@AyannaPressley) November 16, 2020
The country currently holds more than $1.7 trillion in student loan debt, according to FinAid. While Biden’s campaign website says that he wants to “end the absurd rules that make it nearly impossible to discharge student loan debt in bankruptcy,” he is part of the reason why that rule exists in the first place.
Biden was among those who voted for the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. It’s a bill that made private student loans one of 10 types of debt exempt from forgiveness when filing for bankruptcy.
In the years following Biden’s vote, private student loan debt swelled. It went from $56 billion in 2005 to $140 billion in 2011, according to the Center for American Progress. That was a gift to the for-profit university system as well as private lenders because the law reduced the threat of lenders not getting as much of their money back.
If there were that threat, it may have encouraged smarter lending practices and required schools to lower their costs. Colleges and universities might not rapidly inflate their costs if lenders are wary of making those big upfront payments for degrees that offer poor returns on the investment.
Votes like that also gave some a negative perception that Delaware’s lucrative banking industry propped up Biden. He received $237,850 in campaign contributions from the commercial banking, credit card, and financial industries from 2001 to 2006, according to Open Secrets.
Earlier this year, Biden said he wanted to forgive $10,000 of everyone’s student loan debt. Since more education, on average, leads to higher earnings, this would be a regressive policy that disproportionately helps the wealthy. That’s the case for any massive student loan bailout.
However, if Biden wants to reverse part of that 2005 law he voted for that exempts private student loan debt from bankruptcy law, that would be a good first step toward fixing the education debt issue. It would cost the country a few billion each year, according to Demos, and it would help those in the most need of debt relief. To those struggling financially, student loan debt is just another expense, the kind that makes people less likely to have children.
Making the change would also likely have bipartisan support. It’s an idea for which former Florida Gov. Jeb Bush has expressed support. Warren is a major supporter of reforming bankruptcy law. Additionally, there is a proposal that has already been introduced in the House of Representatives, the Discharge Student Loans in Bankruptcy Act of 2019, that garnered a Republican co-sponsor.
There are plenty of bad policies that could come from a Biden administration. If Biden were to fix the mistake he made 15 years ago, it would be one less.
Tom Joyce (@TomJoyceSports) is a freelance writer who has been published by USA Today, the Boston Globe, Newsday, ESPN, the Detroit Free Press, the Pittsburgh Post-Gazette, the Federalist, and a number of other media outlets.
