Student Loan Update: President Biden Says No to $50,000 Forgiveness
- Author: Bryan Miller
- Posted: 2024-08-20
For those watching the struggle between lawmakers and the White House over how to deal with massive student loan debt in the United States, it came as little surprise that President Joe Biden announced officially on Thursday, April 28, the parts of the debate that he didn't consider feasible.
Read on to learn more about the reasons behind this decision and the potential impact of it on both the debate and individual loans:
Why Was $50,000 under Consideration?
Forgiveness refers to the reduction of current student loan balances by a particular amount. The President promoted the idea of a $10,000 reduction during his time on the campaign trail before he won the presidency. More progressive members of the Democratic Party, including Senate Majority Leader Chuck Schumer and Senator Elizabeth Warren, have been placing pressure on Biden for some time to reduce $50,000 of student loan debt for each federal and private borrower no matter the status of their loan. On Thursday, Biden plainly stated he wasn't considering that amount at all.
Yet, President Biden didn't remove debt reduction from consideration entirely. In fact, prior to mentioning the $50,000, he prefaced the negative statement with "I am considering dealing with some debt reduction." He emphasized that he didn't know for certain if he would forgive more debt beyond loans held by public service workers and borrowers who experienced fraud from for-profit schools. That said, he promised to give the public his answer within a couple of weeks. He has previously given everyone in default an opportunity to procure payment arrangements and continued the pause for federal, non-FFEL loans through the end of August 2022.
Why Did Biden Announce This Now?
Last month, over 100 Congressional Democrats sent President Biden a letter asking him to forgive a "meaningful" amount of student loan debt. On Monday, April 25, a question about the promised $10,000 reduction came up during a meeting with the Congressional Hispanic Caucus. On Tuesday, California Democratic Representive Nanette Barragán told CNN that Biden was considering using executive authority to forgive at least $10,000. Rumors then began to spread
Many lawmakers also started to pressure him about $50,000. On Wednesday, Senator Schumer posted a video asking Biden to approve the amount. He claimed that all it would take on the President's part would be the "flick of a pen" on an executive order. Students and other borrowers asking for total debt forgiveness have also been protesting outside of the White House this week. Additionally, some experts believe that he made the announcement to allay fears because of recent news this week that the country is likely heading into a recession.
As for his commitment to provide a definite answer in a few weeks after many believed he would wait until the end of summer: Financial and political experts think that this may be the only way he can help many Americans who have been asking for additional stimulus money while also improving the opinion of younger Americans about his efforts and achievements to-date as President. He may be planning to time his announcement with a major upcoming holiday, such as Memorial Day or the Fourth of July.
Why Does Biden Hesitate?
President Biden has claimed uncertainty for some time about his legal authority to cancel student loan debt via executive order. He believed that any action should come from Congress. Yet, Harvard lawyers from the Harvard University's Legal Services Center (Project on Predatory Student Lending) issued a memo in September 2020 that showed that the Higher Education Act gives the Department of Education the power to cancel federal student loans. There have been fears about the impact of forgiveness on the economy. Taxpayers who don't have student loan debt also feel like they would be paying other people's bills. If Biden forgave $10,000 per borrower, the government would have to pay out $321 billion.
He's also had to deal with concerns from businesses. If you haven't been paying on your loan, you may have noticed some unpleasantness from your student loan servicer in recent months, such as more contacts about repaying it or setting up payment plans. If so, there's a reason for this behavior. Businesses that make money off student loans, such as private lenders, lose a lot of money in the long run if the government pays off borrower debt. As with credit cards, lenders want you to have debt so they can make money from the interest that accrues over time when you don't pay in full. If the government pays a large portion of that debt, they lose anticipated future revenues.
Things to Keep in Mind
If President Biden decides to act on his $10,000 per borrower pledge, he might alter it to prevent the wealthy from taking advantage of his action. He will likely enact a "means test" to confirm that a borrower actually needs the reduction in their debt. In the meantime, he and other officials continue to recommend that all borrowers speak to their loan servicers or the Department of Education at StudentAid.gov about repayment options.
