President Biden appears to be nearing a final decision on mass student loan forgiveness.
Speculation has been building that Biden will make an announcement as soon as this Saturday, when he is scheduled to give a commencement address at the University of Delaware, his alma mater. However, more recent reports suggest any announcement on student loan cancellation could be postponed given the recent mass shooting in Texas.
Top administration officials have been saying for weeks that some sort of widespread student loan cancellation initiative is under serious consideration. White House officials said last month that a decision on executive action to cancel student loan debt could be made within weeks, and certainly would occur prior to the expiration of the ongoing student loan payment pause. The payment pause continues until August 31, 2022.
Here’s the latest.
Biden Reportedly On Track to Enact $10,000 in Student Loan Forgiveness
As first reported by The Washington Post, the current tentative White House plan is for Biden to cancel $10,000 in student loan debt for borrowers. No final decision has been made, but this seems to be where the administration is landing.
Biden had flat-out rejected larger amounts of student loan forgiveness in April. Advocacy organizations for borrowers and influential Democrats in Congress had urged Biden to wipe out $50,000 or more in student debt for every borrower, but at an April press conference, Biden said, “I am not considering $50,000 in debt reduction.”
Eliminating $10,000 in federal student loans would cancel the student loan debt of up to 16 million borrowers, representing around a third of all student loan borrowers, according to the Center for American Progress.
Income Limits On Student Loan Forgiveness
The White House also appears to be nearing a final decision on imposing an income limit for its broad student loan forgiveness initiative, according to the The Washington Post. Loan forgiveness would reportedly be limited to single borrowers who earned less than $150,000 last year, or jointly-filing married borrowers who earned less than $300,000 last year.
Advocates had been calling on Biden to make any student loan forgiveness initiative universal and automatic so that the relief could be implemented quickly, and its impacts would be as broad as possible. But imposing any sort of income cap on student loan forgiveness could inevitably make implementation more complicated. Federal law restricts the ability of the IRS to share income tax data with other federal government departments, and the Department of Education has no mechanism to automatically ascertain a borrower’s income. This may mean that borrowers would be required to submit a formal application for student loan forgiveness, which then would have to be reviewed and processed by Department of Education officials or the Department’s contracted loan servicers.
Given that Department officials are already stretched thin addressing other new student loan initiatives, including the Limited PSLF Waiver and a new IDR Adjustment, and given that millions would likely apply for this new relief, any formal application process that requires review would cause delays. Advocates worry that the most vulnerable borrowers would ultimately be left out.
Legal Mechanism for Student Loan Forgiveness
Administration officials have not confirmed the anticipated legal basis for mass student loan forgiveness. Advocates have pushed Biden to rely on language in the Higher Education Act that provides the Secretary of Education with seemingly broad authority to “compromise” or “waive” federal student loan obligations, although some legal experts have questions whether Congress intended the applicable clause to allow for such sweeping action.
Biden officials could also rely on the HEROES Act of 2003, which allows the Secretary of Education to “modify” federal student loan programs during a national emergency. Both President Trump and President Biden have relied on this statute to repeatedly extend the ongoing student loan payment pause, which is currently set to end on August 31, 2022.
Last year, President Biden had ordered legal teams at the Education Department and Justice Department to draft memos outlining his potential legal authority to unilaterally cancel student debt using executive action. Officials had initially indicated the memo would be available within weeks, but it has never been publicly released. Student loan borrower advocates were able to get a copy of the memo through a Freedom of Information Act request, but its contents were heavily redacted.
Some Uncertainty Remains on Student Loan Cancellation Specifics
An initiative involving $10,000 in student loan forgiveness with an income cap does essentially track with what President Biden has publicly stated he could support. But no final decision has been made, nor is it clear when the President would make a formal announcement if he does not make one this weekend.