What Biden Should Do About Student Debt

Mass loan forgiveness is a mediocre solution to a complex problem. Its time may have come anyway.

Joe Biden rests his elbows on a table with text reading "Office of the President Elect" behind him.
The man has some choices to make. Jim Watson/Getty Images

Canceling student debt wasn’t really at the top of Joe Biden’s to-do list when he ran for the White House. But now that he’s president-elect, everyone in Washington seems to be talking about the idea, from gung-ho progressives to skeptical wonks to scornful conservatives.

Why the sudden surge of interest? In part, it’s because mass forgiveness might be one of the few big, bold, constituency-pleasing and legacy-making moves Biden could realistically make without the help of Congress. Unless Democrats win both of January’s runoff elections in Georgia, Republicans will keep control of the Senate and be able to block most of the incoming president’s legislative agenda. But a handful of legal experts have argued that Biden could cancel all outstanding federal student loans using nothing but his executive authority. This view has been embraced by Senate Minority Leader Chuck Schumer and Sen. Elizabeth Warren, who’ve urged Biden to write off up to $50,000 for each borrower. “We believe that Joe Biden can do that with the pen as opposed to legislation,” Schumer said in a recent interview.

Yet Biden himself doesn’t quite seem to be on board—at least not yet. In March, he backed a Democratic proposal to wipe away at least $10,000 per borrower in response to the coronavirus crisis. But when a reporter asked him about forgiveness on Monday, he voiced support for a narrower section of the HEROES Act, the still-not-passed coronavirus-relief bill that Democrats updated in October. The provision would relieve up to $10,000 for economically distressed borrowers with private student loans but not federal ones. Biden at least sounded urgent about the idea, saying, “It should be done immediately.“ But officials with Biden’s team later told Fox News that the president-elect was only encouraging Congress to act; so far, he hasn’t shown any willingness to go it alone via an executive order.

There are a number of good reasons why Biden might want to be cautious about such a maneuver. Unilaterally forgiving student debt without enacting deeper reforms to how we pay for college is an awkward, temporary fix that could bring up perilous political and legal issues. But right now, it would be a mistake for Biden to rule it out entirely: In a world where only third- and fourth-best policy options are realistic, we may be talking about a mediocre idea whose time has come.

The broad arguments for and against student debt forgiveness are well-rehearsed at this point. The pro side says that it’s fundamentally immoral to make people go into debt for an education and points out that the nation’s $1.7 trillion student loan tab is financially crushing many borrowers, particularly in the Black community. The con side says forgiveness would be unfair to people who’ve already paid back their loans or never went to college, and point out that much of the outstanding debt is currently held by well-off professionals like doctors and lawyers who borrowed for graduate school and don’t particularly need a break.

But the fact that Schumer, a man long known for his relentlessly moderate instincts trained on the suburban middle class, has come around to the idea says a lot about how the politics of debt forgiveness have shifted since it was popularized in the far-left reaches of Occupy Wall Street. The notion obviously appeals to young people and college graduates, who are key parts of the Democratic base. But these days, it also fares pretty decently with the general public. Survey after survey shows it racking up well over 50 percent support; even if you assume that those polls are missing a lot of conservative voters who never went to college (see: polling during the 2020 election) and that the issue would become more partisan if Biden actually pursued it, the results still suggest that cancellation could be much more popular than Donald Trump’s signature legislative achievement, the Tax Cuts and Jobs Act, which Republicans jammed through despite widespread voter opposition. There are worse ways to cater to your base while trying to relieve some economic hardship.

So why has Biden been tepid in his support? I’m sure much of the reason is in fact still political. Student debt forgiveness might poll pretty decently overall, but it generates strong feelings on both sides. Fox News would spin it as the Democrats rewarding spoiled Ivy League Bernie voters at the expense of hardworking real Americans, and you can imagine it helping to seed a Tea Party–style backlash. Republicans might even respond by calling to end the federal loan program if they come to view it as a backdoor route to free college.

Forgiving debt without addressing the root causes of the student loan crisis is also, obviously, not ideal, since the next generation of students will still have to borrow for school, and eventually the country will end up right back where it started. It’s a bit like getting liposuction before returning to a diet of Triple Whoppers and guilt—a quick fix destined for relapse.

Another issue, I suspect, is that it’s not crystal-clear that forgiving student debt via executive order would actually hold up in court if it were challenged. Advocates point out that, under federal law, the secretary of education has the power to “enforce, pay, compromise, waive, or release” any loan made by her department—a broad grant of authority that they say could be used to forgive debts across the board. But Congress pretty clearly didn’t write the Higher Education Act with mass cancellation in mind, and the Supreme Court’s conservatives have been looking to limit the ability of federal regulators to make major policy decisions using creative readings of old statutes. With their new 6–3 majority, it’s possible that the conservative justices would take a lawsuit over debt cancellation as an opportunity to clip the administrative state’s wings. Who would bring a case? Maybe student loan servicers, whom the government pays to collect debts, and who stand to lose some of their business in a big jubilee.

There are other practical implementation issues that could give Biden pause. With some exceptions, the Internal Revenue Service currently treats forgiven student debt as taxable income. If lots of people had loans written off only to get walloped with an IRS bill they couldn’t pay come April, the whole exercise could be counterproductive. Georgetown University Law professor John Brooks has argued that the Treasury Department has the legal authority to waive that liability, but it’s still an area that at least needs exploring.

Finally, there are ways Biden could get relief to student borrowers without going for mass forgiveness. As part of its coronavirus response, the Trump administration has paused student loan collections until Dec. 31. It’s unclear whether our current president—who seems a bit checked out of his gig—will extend the holiday. But if he doesn’t, Biden could issue an order on Inauguration Day halting payments until COVID has been wiped off the map. This is a bit of a no-brainer anyway, since restarting debt collections would suck money out of our ailing economy, just like a tax hike. Keeping student loan payments on ice, conversely, would be sound macroeconomic policy and give the administration time to fix some of the debt-cancellation options the government already offers, such as the perpetually troubled Public Service Loan Forgiveness Program.

But Biden won’t be able to kick the can down the road on student debt forever. At some point, he will have to make a decision about what to do about student debt long term. And for all its downsides, signing an order wiping out a few hundred billion dollars might be the way to go.

Again, some of the reason boils down to politics. Since he said he favors forgiveness on the campaign trail, many of Biden’s younger voters will feel betrayed and further alienated from the Democratic Party if he refuses to even try it just because Republicans won’t go along with his plan, or he’s worried about the Supreme Court. Getting outflanked on your left by Chuck Schumer is not a particularly good look.

But more fundamentally, in a situation where major legislation isn’t possible, it might be one of Biden’s few serious openings for doing lasting good. The student debt crisis is real—if you doubt it, just look at the notoriously high delinquency and default rates on federal loans—and while the discourse about it on Twitter sometimes feels like it’s dominated by creative professionals who went into hock for a prestigious degree, much of the problem is really concentrated among working-class Americans who never finish college or get ripped off by for-profit schools. Even if Biden can’t fix the country’s student debt problem permanently, he could fix theirs. Insofar as there are concerns that canceling student debt would be a giveaway to white-collar professionals, it would be fairly easy to structure the program as a relief effort for the middle class by limiting it to borrowers with somewhat lower incomes. And if the court says no, well, at least the administration will have gone down swinging.

If I were in the White House right now, here’s the path forward I’d consider: First, make sure student loan payments stay paused. Second: Ask Congress for a bipartisan bill fixing the student lending program, on the off-chance that’s possible, and threaten to start forgiving debts should they fail. If Mitch McConnell and Nancy Pelosi can reach an agreement that meaningfully addresses the student loan crisis, it would certainly be preferable to going the executive action route. But if they can’t? Then Biden should be ready to use the power of his signature.