Should Joe Biden forgive student loans? That’s the question begging for a clear answer. Last week, Biden revived calls for the government to pay up to $10,000 in student loans per borrower. Loan forgiveness is among his plans to boost the US economy once he sits as President of the United States.
RELATED: Senator Rand Paul: Pay Off Your Student Loans With Your 401k
HEROES Act Provision
Congress passed the Democrat-led HEROES Act in May 2020, as a follow-up to CARES Act. Among the provisions in the $3 trillion is forgiveness of student loans. Under the HEROES ACT, borrowers can have $10,000 in student loans forgiven. The government will also cover monthly payments for private student loans until 2021.
Biden based his support for student loan relief on the original HEROES Act. He said he wants “Immediate $10,000 forgiveness of student loans.” He said the relief was for “helping people up there in real trouble. They’re having to make choices between paying their student loan and paying the rent. Those kinds of decisions.”
Executive Order instead of Legislation
Minority Leader Senator Chuck Schumer and Senator Elizabeth Warren want more. Upping the ante, they suggested forgiving federal education loans up to $50,000 per person. Warren tweeted: “Biden-Harris can cancel billions of dollars in student loan debt, giving tens of millions of Americans an immediate financial boost and helping to close the racial wealth gap. This is the single most effective executive action available for a massive economic stimulus.”
Schumer and Warren say that Biden doesn’t even need an act of Congress to get student debt erased. Schumer said that “We believe that Joe Biden can do that with the pen as opposed to the legislation.” In fact, the Higher Education Act empowers the president to cancel student loans without congressional approval. However, the act’s intent is to protect students from fraudulent or bankrupt schools. Using this act to wipe the student debt during the pandemic may not be applicable.
Congress to Do It, not Biden
Whether the Higher Education Act does have the power to do so or not is beside the point. Joe Biden made it clear he does not want to issue an executive order. Instead, he prefers Congress to legislate on the matter. The way that Congress is currently composed, the House will support a student loan bill. However, a Republican Senate may block the bill, or at least pare down the number of those eligible for relief.
Biden did not give any direct statements on the Democrats’ suggestion. He preferred that Congress act on the matter as legislative action. Instead, he proposes creating a program that wipes off $10,000 of student debt per year for up to five years. This will apply to students working in government, schools, and non-profit organizations. Also, previous national or community service qualifies for the relief.
$1.7 Trillion Student Loan
Last Wednesday, 239 nonprofit and community organizations called on Biden to help students. They urged Biden to act “unilaterally” in canceling $1.7 trillion in student loan debt. Doing so can stimulate the pandemic-stricken economy and reduce the racial wealth gap.
In an open letter to Biden and VP-elect Kamala Harris, the group said: “Before the COVID-19 public health crisis began, student debt was already a drag on the national economy, weighing heaviest on Black and Latinx communities, as well as women. That weight is likely to be exponentially magnified given the disproportionate toll that COVID-19 is taking on both the health and economic security of people of color and women.”
But, Will Forgiving Student Loans Help?
Currently, an estimated 46 million Americans have student loans. This makes student debt the second biggest form of household debt after mortgages. Canceling student loans can result in a disproportionate impact on those with the most debt. This means that those with the highest debts are often graduate school students. These students tend to provide better, high paying jobs. Matthew Chingos, VP for education and data policy at the Urban Institute, advises caution. “If you were to just say get rid of all the loans, you’d be giving money to people who got ripped off by their for-profit colleges, but you’d also be giving money to doctors and lawyers,” he said.
Should Biden forgive student debt? If he does by executive action, legal challenges to his authority might arise. David Bergeron of the Center for American Progress thinks the courts might think differently. “If it’s done by executive action there’s a question that swirls around legal authority and what would happen if a court determined that there wasn’t a legal authority. The lenders or the servicers could go to federal court to try to reverse or block the executive action. [If the debt was already forgiven] what’s the harm to borrowers of having it undone, which I see as a real possibility with executive action.” In addition, Bergeron asked about possible tax consequences for borrowers. Would tax implications be different?
Should Joe Biden Forgive Student Loans?
On one hand, student loan forgiveness is a great way to help 46 million Americans reduce their debts. On the other hand, Trump’s EO already suspended loan payments until December 31. Then, there’s the matter of how much is a good amount? Is it $10,000 like what HEROES earlier proposed, or should it be $50,000 like Schumer and Warren wants? Or, do we make it the complete debt as pushed by nonprofits? Finally, who should start? Do we wait for Congress to act, or let Biden issue an executive order? The questions are there. Before proceeding with this noble goal, the government should get their acts together.
Watch this as Fox News’ Hillary Vaughn reports on President-Elect Biden’s proposal to address student loan debt:
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