Biden wants to go big on the economy but go small on student-debt reform

joe biden
President Joe Biden participates in a CNN town hall at the Pabst Theater in Milwaukee, Wisconsin, February 16, 2021.

  • President Joe Biden said at his first town hall that he will not cancel $50,000 in student-loan debt.
  • Congress should introduce legislation to cancel the debt, Biden has consistently said.
  • Several leading Democrats believe Biden can act, using powers under the Higher Education Act. 
  • Visit the Business section of Insider for more stories.

President Joe Biden has a $1.9 trillion plan and a $1.7 trillion problem. He wants to go big on the former, but, unlike several prominent Democrats, more conservative on the latter.

The $1.9 trillion, of course, is the stimulus plan that Biden was touting in last night’s CNN town hall in Wisconsin. But when asked about proposals to cut into the $1.7 trillion in outstanding student-loan debt (as of the third quarter of 2020), the president expressed caution.

Democratic lawmakers including Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren, and Rep. Alexandria Ocasio-Cortez have called on Biden to use his executive power to cancel up to $50,000 in student debt per person. 

“I will not make that happen,” Biden said at CNN’s town hall.

Instead, he said he will go smaller – in fact, that he has to.

“My point is: I understand the impact of debt, and it can be debilitating,” Biden said at the town hall. “I am prepared to write off the $10,000 debt but not $50 [thousand], because I don’t think I have the authority to do it.”

The case against using executive power

One of Biden’s first executive actions was extending the pause on student loan payments through September, providing relief to those with student debt that are struggling financially during the pandemic.

However, when the subject of canceling $50,000 in student loans has come up, he has not gone beyond the $10,000 of relief that he proposed during his presidential campaign. As president, he’s said he does not believe he has the executive authority to do so.

Warren and Schumer were part of a group that reintroduced a resolution to urge Biden to cancel up to $50,000 in a press conference in the beginning of February. At the time, Schumer said, “there’s very little that the president could do with the flick of a pen that would boost our economy more than canceling $50,000 in student debt.”

Press Secretary Jen Psaki responded soon after in a tweet that Biden would look into the prospect of executive action to cancel student debt, but the White House’s position since has been consistent – this is Congress’ job.  

 

During the CNN town hall, Biden said that he would support Congress canceling debt through legislation, which would make the policy harder to undo than an executive action, and that loan forgiveness should depend on whether someone attended a private or public university.

At one point, Biden questioned the fairness of forgiving “billions of dollars of debt, for people who have gone to Harvard and Yale and Penn.”

The president did note that he supports extending student loan forgiveness for those going into public service jobs, like teaching, along with making community college free.

The case for using executive power

Warren and Schumer argue that Biden has the full authority to use his executive power under the Higher Education Act of 1965 to cancel $50,000 in student loan debt.

The Act provides the secretary of Education the authority to “modify, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption,” meaning that since the Dept. of Education holds the debt, Biden can direct the secretary to cancel it.

“The US Department of Education holds that debt and can cancel it, too,” Warren and Schumer wrote in a late January op-ed. “This is exactly what Joe Biden and Kamala Harris should direct their Education secretary to do.”

In addition, a letter to Warren from from the legal director Eileen Connor of Harvard Law School’s Legal Services Center, as well as attorney Deanne Loonin, and Toby Merrill, director of the Project on Predatory Student Lending, says the secretary of Education has full authority under the Higher Education Act to cancel student debt. 

In fact, Biden used the Act to extend the pause on student loan payments, and Democrats in the Senate and House, such as Ocasio-Cortez, are pushing for him to do the same with student debt cancelation.

“Cancelling $50,000 in federal student loan debt will help close the racial wealth gap, benefit the 40% of borrowers who do not have a college degree, and help stimulate the economy,” Schumer and Warren said in a statement responding to Biden’s town hall remarks. “It’s time to act. We will keep fighting.”

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Biden dismisses a Democratic plan to wipe out $50,000 in federal student loan debt

Joe Biden town hall
Joe Biden holds a face mask as he participates in a CNN town hall at the Pabst Theater in Milwaukee, Wisconsin, February 16, 2021.

  • Biden bluntly rejected a Democratic plan to forgive up to $50,000 in student loan debt on Tuesday.
  • “I will not make that happen,” he said at a CNN town hall event, adding he didn’t believe had the unilateral authority to do it.
  • The plan was put forward by Sens. Elizabeth Warren and Chuck Schumer.
  • Visit the Business section of Insider for more stories.

President Joe Biden effectively rejected on Tuesday evening a Democratic plan put forward by Sens. Elizabeth Warren and Chuck Schumer to wipe out up to $50,000 in student loan debt per borrower. Instead, he said he backed a measure to provide up to $10,000 in forgiveness.

“I will not make that happen,” he said of the $50,000 relief measure. Instead, he told a CNN town hall audience he believed loan forgiveness “depends on whether or not you go to a private university or a public university.”

Biden said he was reluctant to forgive debt for people who attended elite institutions, listing Harvard University, Yale University, and the University of Pennsylvania as examples. He also said each of his three children graduated with a six-figure debt load and paid it off over time.

“I don’t think anybody should have to pay for that, but I do think you should be able to work it off,” he said. “I understand the impact of the debt, and it can be debilitated.”

Instead, the president touted a proposal to provide free community college to families earning less than $125,000 each year. “Everyone should be able to go to community college for free,” he said. “That costs $9 billion, and we should pay for it.”

He later said: “I’m prepared to write off $10,000 in debt, but not 50. I don’t think I have the authority to do it by the sign of a pen.”

The $10,000 loan forgiveness measure does not form part of Biden’s $1.9 trillion rescue package, which is now making its way through Congress. Biden has ordered the Education Department to pause all federal student loan payments through Sept. 30 and waive interest.

Many Democrats are urging Biden to take aggressive action to cut student debt. Schumer and Warren introduced their plan earlier this month, arguing it’s a critical step to rein in inequality and strengthen the economy.

“There is very little that the president could do with a flick of a pen that would boost our economy more than canceling $50,000 in student debt,” Schumer told reporters. “This is one of those things the president can do on his own.”

White House press secretary Jen Psaki said at a news conference on Feb. 4 that the Biden administration would favor legislation from Congress to provide loan forgiveness instead of taking executive action. 

The Biden administration said they are reviewing whether that route is possible.

Read the original article on Business Insider