Biden could wipe out 84% of the federal student-debt pile by canceling $50,000 per person

student loans graduate
  • DOE data shows canceling $50,000 in student debt per person would erase debt for 84% of federal borrowers.
  • It shows that canceling $10,000 per person would erase debt for 35% of them, Yahoo Finance reports.
  • The DOE and DOJ are reviewing Biden’s authority to cancel $50,000 in student debt.
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Democratic lawmakers are continuing to push for President Joe Biden to cancel $50,000 in student debt per person, and new data from the Department of Education may have helped them make their case to the president.

A DOE analysis obtained by Yahoo Finance on Monday found that $50,000 in student-loan forgiveness per person would erase the entire debt for 36 million – or 84% – of the roughly 43 million borrowers in the US with federal loans, while $10,000 in forgiveness would erase the entire debt for 15 million – or 35% – of those borrowers.

The data also showed that 9.4 million of the 36 million borrowers who would benefit from a $50,000 loan cancelation are at risk of default, meaning they could fail to repay the loans. Also, 4.4 million borrowers, each holding an average of $48,000 in student debt, have had loans for more than two decades since graduation. Another 10.7 million borrowers have held their loans for over a decade.

Sen. Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer have led efforts in calling on Biden to cancel $50,000 in student debt per person using executive powers, but the president has argued he does not have the authority to cancel $50,000, and he said he would welcome legislation to cancel $10,000 per person.

In response to Biden’s comments, Warren said in a press call last month: “We have a lot on our plate, including moving to infrastructure and all kinds of other things. I have legislation to do it, but to me, that’s just not a reason to hold off. The president can do this, and I very much hope that he will.”

Biden has since asked the Justice Department and the Education Department to review his authority to use executive action to cancel student debt, and White House press secretary Jen Psaki said in early April that the $50,000 cancelation figure hasn’t been ruled out.

The DOE data comes ahead of Warren’s Senate Banking hearing on Tuesday afternoon to discuss the burden of student debt.

“I graduated from a state school that cost $50 a semester,” Warren said on Twitter on Monday. “That opportunity is simply not out there today. Two out of every three people who go to a state school today have to borrow money to graduate. That is not how we build a future. #CancelStudentDebt.”

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19 states have higher student-loan debt than annual budgets, report finds

student loan debt
  • Student Loan Justice found 19 states have more student debt owed than the annual state budget.
  • Georgia, Florida, and Missouri top the list, with debt of at least 140% of the budget in each state.
  • Student Loan Justice Founder Alan Collinge said Biden must use his executive powers to cancel student debt.
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The student-debt problem numbers are massive: 45 million people owe $1.7 trillion. But another big number is 19, as that many states have more outstanding student debt than their annual budgets.

Student Loan Justice – an organization advocating for student-debt cancellation – released a report in March on these 19 states, with Georgia, Florida, and Missouri topping the list at 169%, 148%, and 141% of debt owed relative to their budgets, respectively, and South Carolina and New Hampshire close behind at 135% and 131%.

To put that in perspective, Georgia’s state budget is slightly more than $48 billion, but Georgians’ total student debt comes close to $82 billion.

Alan Collinge, founder of Student Loan Justice, told Insider that the reason those 19 states made the list could be a result of high borrowing alongside state budgets that are smaller than others.

He added that although President Joe Biden’s Department of Education has already taken steps to cancel student debt for borrowers defrauded by for-profit schools and borrowers with disabilities, that isn’t nearly enough to address the scope of the problem.

“I see this as massively unimpressive, and it really skirted around the real issue, which is the widespread catastrophic effects the student lending program is having on the citizens,” Collinge said.

The key question right now is whether Biden will cancel student debt through executive order or wait for Congress to draft legislation, and similar to progressive lawmakers’ arguments, Collinge said Biden does have the authority under the Higher Education Act to cancel up to $50,000 in student debt, which would not only help borrowers, but the economy, as well.

“There is no easier or cheaper way than to simply cancel it by executive order,” Collinge said. “You don’t need to raise one dime in tax, and you don’t add anything to the national debt, so I think to most common-sense thinkers, this is the low-hanging fruit on the economic stimulus tree.”

Democratic lawmakers like Sen. Elizabeth Warren of Massachusetts and Senate Majority Leader Chuck Schumer have long been calling for Biden to use his executive powers to cancel up to $50,000 in student debt per person.

In a press call last month, Warren said executive action would be much quicker than going the legislative route.

“We have a lot on our plate, including moving to infrastructure and all kinds of other things,” she said. “I have legislation to do it, but to me, that’s just not a reason to hold off. The president can do this, and I very much hope that he will.”

Schumer added in the same call that if Biden believes he can cancel $10,000 in student debt per person, which he campaigned on, there’s no reason he can’t cancel up to $50,000.

While Biden has not yet committed to canceling any form of student debt, White House Press Secretary Jen Psaki said in February that the Justice Department will review Biden’s legal authority to cancel up to $50,000 in student debt, and White House Chief of Staff Ron Klain told Politico last week that Biden asked the Education Department to prepare a memo on his legal authority to cancel debt.

At a Monday press briefing, Psaki was asked to clarify these recent statements and said Biden would “happily sign” a bill to cancel $10,000 per person in student debt, and he has not ruled out the option of cancelling up to $50,000 in debt.

“I think that would naturally be the first step before it’s a larger amount beyond there,” she said. Psaki did not clarify whether Biden is in favor of using an executive order to cancel $50,000 per person.

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