Moneybox

Elizabeth Warren Says She’ll Cancel Student Loan Debt With or Without Congress’ Permission

Elizabeth Warren speaks to a crowd, with an American flag in the background.
Elizabeth Warren just made a huge promise.
Scott Olson/Getty Images

Elizabeth Warren said on Tuesday that, if elected president, on day one in office she would direct the Department of Education to begin canceling the bulk of America’s student debt without waiting for legislation from Congress, a dramatic promise that could thrust loan forgiveness into the center of the Democratic primary’s policy debates.

Warren previously released a plan to cancel up to $50,000 of student loan debt for households that make $100,000 or less, and smaller amounts for higher earners, as part of a broader effort to reform higher education that would also eliminate tuition at public colleges. That proposal was silent on whether she would wait for congressional authority, and it has always been doubtful whether moderate Democratic lawmakers in Washington would go along with either idea. In a blog post published Tuesday, she said her administration would act on its own to reduce what borrowers owe. “The Department of Education already has broad legal authority to cancel student debt, and we can’t afford to wait for Congress to act,” she wrote. “So I will start to use existing laws on day one of my presidency to implement my student loan debt cancellation plan that offers relief to 42 million Americans.”

Warren says that she would wipe away debts using the Department of Education’s power to “compromise and modify” outstanding loans, which gives the department the authority to forgive some or all of a borrower’s balance. It’s typically brought up in the context of students who were defrauded by their schools, such as those who attended predatory for-profit institutions. But left-wing academics have lately argued that an ambitious White House could use the same tool to enact a mass student debt jubilee. A group of attorneys from the Legal Services Center of Harvard Law School, including the director of its Project on Predatory Student Lending, have provided Warren with a six-page letter arguing that her plan would be legal.

My guess is that we’ll see some fairly intense debate about whether that’s really the case in the coming months. Any plan to unilaterally forgive debt would also almost certainly face opposition, and potential lawsuits, from the loan servicing companies that the federal government contracts with to collect loans, and that could see much of their business evaporate in the event of jubilee.

But even leaving aside the legal issues, Warren’s new promise radically changes the politics of student debt forgiveness. What once might have seemed like a somewhat unrealistic proposal meant to energize left-wing voters and demonstrate Warren’s commitment to address student debt has now become a central promise for her campaign. That could give her a boost in the primary, given that Democratic voters generally support debt forgiveness, but may be more controversial in the general election. In a weird way, it’s a bit like the progressive equivalent of Trump’s Muslim ban—an aggressive, dramatic vow to carry out a marquee policy proposal using administrative authority that revs up the candidate’s base, and that they would have little political choice but to follow through on once in office. (To be extra clear, I’m not equating the two on the merits, just the politics. Warren’s plan is not a racist sop to anti-Muslim hysteria.)

One fairly obvious question Warren’s new plan raises is what happens if she begins forgiving debt and Congress doesn’t move to change our current system of paying for college? Will the Department of Education just continually issue student loans, then cancel them? That would create some perverse incentives for people to borrow for school when they otherwise might not. (Though one could maybe think about it as a roundabout approach to guaranteeing free college, for at least a few years.) It would also somewhat undermine some of the philosophical argument for debt forgiveness, which is that it makes victims of our current higher-ed system whole en route to a future where college is permanently tuition-free. Here, you just get the forgiveness with no reforms.Then again, the weird side effects might force Congress to take action, rather than let a President Elizabeth Warren act unilaterally. (There’s also the question of how Republicans will react. Could they use a move like Warren’s to justify ending the entire federal student loan program, or partially privatize it again? Possibly!)

So what now? Given that Bernie Sanders has his own, more expansive debt forgiveness plan—unlike Warren, he has promised to cancel all outstanding loans—it seems pretty likely that he will follow her lead and promise to do it on executive authority alone. Either way, by putting it on her day one agenda, Warren is now making loan forgiveness a central topic in the Democratic primary, which has already seen a few skirmishes between the leftist and moderate wings over the value of free college. Some of the ensuing argument will likely focus on the price tag: Warren’s campaign had previously estimated that her full plan would cost the government $650 billion, but the reality is that nobody has a reliable estimate of how forgiveness would affect the budget. You can also expect to hear some candidates question the wisdom of forgiving the debt of college graduates en masse while people who never went to school still struggle financially. If it’s not guaranteed to be part of a larger overhaul of higher education, I’m not sure there’s a good answer for that.