Biden and top Democrats split on how to cancel student debt

Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren once again called on President Joe Biden to use executive authority to cancel student debt on Thursday — but the President wants Congress to act first.

“The President has and continues to support canceling $10,000 of federal student loan debt per person as a response to the Covid crisis,” White House press secretary Jen Psaki said at a briefing. She added that that the President is “calling on Congress to draft the proposal,” and “looks forward to signing it.”

In one of his first acts in office, Biden extended the pause on student loan payments and interest, a Covid relief benefit put in place by Congress last year that had already been renewed by the Trump administration. Federal student loan borrowers won’t have to make payments until October 1 at the earliest.

But some Democratic lawmakers are hoping for more. Schumer and Warren, along with Massachusetts Rep. Ayanna Pressley, led dozens of other Democrats in reintroducing a bicameral resolution Thursday that calls on Biden to cancel $50,000 per borrower — something they argue that he has the executive power to do.

A similar resolution was introduced last year calling on the Trump administration to forgive student loan debt — but former Education Secretary Betsy DeVos slammed that proposal as “government gift giving.” House Democrats included a provision to cancel $10,000 per borrower in a sweeping Covid relief bill passed in May that was never taken up in the then Republican-led Senate.

Schumer said at a press conference earlier on Thursday that he and Warren had a 45-minute conversation with Biden and his advisers a few weeks ago to discuss canceling student debt. The Senate majority leader said he was optimistic that the administration would act if there’s enough pressure from the American people.

“They have been extremely open to listening to us,” he said.

Proposals go back to the Democratic primaries

Warren, as well as Vermont Sen. Bernie Sanders, have been pushing for some kind of student debt cancellation plan since 2019, when they were running in the Democratic presidential primary. Biden put out a policy proposal to forgive $10,000 per borrower only after the pandemic began and he was the presumptive nominee.

A broad cancellation of federal student loan debt would be unprecedented. But a memo from lawyers at Harvard’s Legal Services Center and its Project on Predatory Student Lending says the Department of Education has the power to do so.

The Department already has some more targeted debt cancellation policies in place. It wipes away debt for defrauded students as well as disabled veterans. Biden could provide relief for hundreds of thousands of more borrowers just by expanding those programs, according to the National Student Legal Defense Network.

There are thousands of borrowers who say they were defrauded by now-defunct for-profit colleges like Corinthian and ITT Tech, but have waited years for the Education Department to review their claims as DeVos tried to roll-back an Obama-era rule that streamlined the process.

Warren says the economic crisis caused by the pandemic makes it even more important to cancel student loan debt as soon as possible, and argues that it would help narrow the racial wealth gap and jump start the economy by providing relief for more about 45 million Americans.

“Data show that canceling the student loan debt would result in greater home ownership rates, more housing stability, improved credit scores, higher incomes, higher GDP, more small business formation and more jobs,” she said Thursday.

Economists say cancellation might not generate a big GDP boost

Some economists say that canceling student debt is not the best way to jump-start the economy right now. A Goldman Sachs analysis found that forgiving $10,000 of debt per borrower would likely cost $300 billion and add less than 0.1% to GDP, while forgiving up to $50,000 would cost around $800 billion and provide only a slightly bigger boost to GDP.

A separate report from the Committee for a Responsible Federal Budget said that canceling all federal student debt would offer little economic stimulus compared to other aid programs like the small business loan program and enhanced unemployment benefits. It would have a small effect on how much cash people have to spend right now.