Should Student Debt Be Canceled?

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S1: Hey, everyone, we are talking about college costs in this episode, so what do you know? We saw just like a little you’ve been warned. Last week, when Joe Biden held a town hall in Milwaukee, Wisconsin, he got all kinds of questions. A mom asked the president to calm her daughter’s fears about covid-19. A pastor got up and asked how police departments could be reformed while keeping communities safe. But I wanted to talk to Slate’s Jordan Weisman about a different exchange, the United States. I want you to meet Jocelyn Fish, a Democrat from Racine, just this moment with student debt. Can we talk about it a little bit? It was weird how it played out. Hello. Good evening, Mr. President. Student loans are crushing my family, friends and fellow Americans, too. She says, listen, we really need 50000 dollars worth of debt relief, like this is what needs to happen. And Joe Biden says, nope, not going to do that. I will not make that happen. But he says it in this way that he’s like, you’re welcome. Like, it sounds like he won. This is bizarre.

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S2: I will not make that happen. I doubt that happened. Yeah, it was it was quite a moment. I was I was taken aback by the firmness with which he just rejected this town hall participants plea for help. You can’t accuse him of trying to dodge the question.

S1: Jordan says, to understand Biden’s take here, you’ve got to understand how aggressively he’s been pulled into this student loan debate in the primaries. He characterized student loan forgiveness is unrealistic for Joe Biden.

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S2: This isn’t exactly his cup of tea. And I think for him, he does see this as sort of an elite complaint that just the sense I get he he understands the problem with college costs, but he thinks this idea of forgiving all debt is a little bit strange. And, you know, I don’t think his reasoning is that different than from a lot of peoples who are skeptical of this issue. During the town hall, he said, I don’t want to get forgive loans for kids who went to Harvard or Yale.

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S1: The problem is many of the people who got Joe Biden elected see this issue pretty differently, which is why now he seems to be bargaining. When that woman asked the president about a 50000 student debt relief package, he volleyed back, tried to sell his own 10000 dollar debt relief plan. I’m prepared to write off the ten thousand dollars debt, but not 50. It’s funny listening to you. I get the sense that through this one issue, you can see how Joe Biden has shifted economically in terms of how he sees these issues.

S2: Right. He’s he’s no longer dismissing the idea entirely. He says he’s open to it. Is he is he really interested? And that’s that’s a bit of a question mark.

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S1: Today on the show, will Joe Biden forgive college debt and would that fix what’s ailing higher education? I’m Mary Harris. You’re listening to what next? Stick with us. This student debt relief we’re about to talk about, it’s a policy that’s a little unusual, it’s a Band-Aid really canceling a certain kind of debt without any additional work to address the causes of rising college costs. If you remember a few years back when a billionaire showed up at Morehouse College graduation and told all the seniors he was going to pay off their student loans, this it’s sort of like that for the whole country, a one time thing that would help folks who’ve graduated, but not next year’s incoming freshmen. It was originally discussed as a kind of stimulus plan that could be passed without Congress. The drumbeat for me for student loan debt relief, it started right after it was clear Biden was going to be president. Like I could see politicians lining up behind this issue. Did you say the same thing? Like, what did that look like to you?

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S2: Oh, absolutely. I mean, I wrote an article saying he should go for it. And the reason was pretty simple. At the time when Joe Biden was elected, it was not clear he was going to have a Democratic Senate. So, in fact, it seemed very probable that he would not have a Democratic Senate. And not a lot of people saw Georgia coming. And so that left a lot of people in Washington wondering, well, what can Joe Biden actually do at his presidency? What will how will he be able to help the economy through executive authority? And there was this idea kind of sitting around that academics had pushed for a while and that Elizabeth Warren had embraced that the president could forgive student loan debt unilaterally, that the that they could use a section of the Higher Education Act just to write down the all of the loans in the country, to write them off, to just cancel it all with, you know, kind of a stroke of the pen, just wave a wand and it would all go goodbye.

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S1: Well, what’s interesting to me is that even after the Democrats won the Senate, this debate didn’t go away and people didn’t start talking about it as now we’re going to do legislation. It was still Joe Biden can wipe out this debt with the stroke of a pen. And it quickly became this debate about two numbers, like whether the debt that should be relieved would be like 50000 and less or 10000 and less. How did we coalesce behind these two numbers?

S2: So we have Elizabeth Warren to thank for the fifty thousand dollar idea, mostly for a long time when people talked about student debt forgiveness, it was a little bit of an all or nothing proposition. Right. The idea was just I forgive all the debt while the big jubilee and often critics would respond by saying, well, you’re just going to give away a lot of money to doctors and lawyers, you know, people who, you know, are pretty well off now who don’t need the help, which isn’t an unfair criticism. It’s not totally unfair. It’s a question of, you know, there are counterarguments. But the way Elizabeth Warren dealt with this during the presidential campaign was she came out of plan without came out the plan saying we’re going to forgive up to fifty thousand dollars in loans for people who make under a certain amount of money. Right. We’re going to we’re going to cap forgiveness for higher earners and we’re going to phase it out. But, you know, she kind of built a student loan forgiveness plan that was targeted at the middle class. So Elizabeth Warren obviously lost the presidential primary. However, her plan was later embraced by none other than Senate Majority Leader Chuck Schumer, who’s trying to make himself a little bit more progressive these days. Yeah, he was moved in a more progressive direction. He used to be an angry moderate. Right, who used to you know, that was his thing. He always used to, you know, kind of assess policy by imagining how a bunch of Reagan Democrats and Long Island named the Baileys would react to it. And now, you know, the joke is that the Baileys have been radicalized and there and they’re upset because their kid accidentally took on sixty thousand dollars in loans going to NYU. And so, you know, but so Chuck Schumer’s gotten behind behind this idea. And so during the campaign, Elizabeth Warren said, I will do this on day one using executive authority. And she got this opinion from the Legal Services Center at Harvard Law School saying that, yes, yes, you can legally do this. And Chuck Schumer also got behind this plan and started pushing Joe Biden on it. And so that’s where this fifty thousand dollar concept kind of came from. The other figure that you mentioned, ten thousand dollars, was an idea that Democrats talked about when they were doing their initial rounds of coronavirus relief during the Keres Act. It just never really made it into the bill. But at the time, Joe Biden said he would support that. And so that’s where this other figure sort of originated.

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S1: So classic congressional, let’s compromise. Find something in between zero and 50. It’s 10.

S2: Yeah, sure. Why not say there’s nothing really there. So I wrote an article about this how like once you’ve committed to student debt relief, there’s nothing really scientific about the idea of ten thousand dollars. I mean, there there’s there’s a rationale for it, but it’s not there’s no there’s no strong philosophical reason why you would do ten thousand dollars instead of like 20. It’s just it’s a no. And, you know, it’s it’s it’s not too big a no.

S1: So let’s talk about the arguments here on both sides. I want to start off by talking about the people who are pro 50000 dollars debt relief and then move on to the Biden idea as sort of a morphosis as it is in terms of how he’d get it done. The people who are in favor of higher debt relief, Elizabeth Warren, Chuck Schumer held a press conference earlier this month and they called on Biden to cancel this debt by executive order. Biden can do this, but just isn’t willing to, is that the idea?

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S2: And I I’m a little skeptical and I’m I’m not a lawyer. There are much smarter law professors than me out there who have made lengthy arguments about why this should be legal. But it’s not entirely a legal question either. It’s a little bit political as well as legal. The argument that Biden can forgive all of this debt on his own hinges on a reading of the Higher Education Act and a specific section that says the secretary of education has the power to essentially forgive or compromise on any student loan. It’s this it’s the forgiveness and compromise section. And it’s kind of a creative reading of that section of the bill. Nobody really thinks that the forgiveness and compromise power, it was meant to be used to cancel all of the outstanding loans in the country. Right. That was not I’ve yet to find anyone who says, yes, this was the Congress’s intention in writing this part of the bill. What most people, you know, what it was for was to help with debt collection. If someone owed too much, needed to be able to give them a break on their loans, they could collect more of it. However, the language is a little bit broad. And so if you read it very, very literally, you can say, oh, yeah, they have the power to, you know, forgive and compromise and cancel any bill, any debt they want. They can cancel all of them. And then you get very you can get deeper into the weeds of statutory and regulatory interpretation and yadda, yadda. But that’s that’s the gist, right. The problem is, again, this is kind of a creative reading of a slightly vague, vaguely worded statute. And the Supreme Court has been signaling that it wants to crack down on the ability of federal agencies to very creatively interpret statutes.

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S1: So the question for like a Biden administration is, do you want to f around and find out?

S2: Yeah, exactly. Let’s put this way. It is not clear cut that they could actually get away with this. They might they might be able to you know, maybe the Supreme Court would decide they don’t want to interfere because it would be just such a it would cause so much political blowback for them. But I don’t know if it’s it’s a sure bet.

S1: When we come back, why the fight over student debt relief is also a fight over racial justice. The argument I hear a lot is that forgiving this bigger amount of debt would be a step towards achieving racial justice. And I know that you’ve looked at the numbers and dug into, you know, what you see there about who owes what and who would be impacted by this kind of forgiveness. What did you find?

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S2: So the unfortunate truth about student debt is that black families have more of it. And it’s one of the major issues that fuels the racial wealth gap in this country. At least, you know, for middle class households, you know, just just looking at undergraduate debt, there’s about a seven thousand four hundred dollar difference, at least according to the Brookings report that came out a few years ago. You know, a black college graduate finishes with about twenty three thousand dollars worth of debt on average versus sixteen thousand dollars for a white student. And if those numbers sound a little bit low to you, it’s because they include non borrowers. So if you’re only looking at borrowers, the numbers are a little bit they are are bigger even. And that that that gulf between black bars and white bars actually gets much bigger after college because black students tend to borrow a lot more for grad school to. They are one of the things that this this Brookings paper I’m actually sitting in front of me found kind of famously now is that there’s a big issue with black Americans attending for profit graduate schools, which charge them a lot of money. And that’s become a kind of that’s further fueled this crisis for them. And so the bottom line is that black Americans, in order to just, you know, get the basic credentials you need to get ahead in this country, have to go deeper into debt. They start they kind of start the race several meters behind. And so that’s part of the reason why student debt forgiveness has become a matter of racial justice in people’s eyes. And I think that this also strikes at something interesting about the topic more broadly, which is that or at least about the politics of the issue more broadly, which is that in a lot of ways, you know, student debt kind of brings together two key pieces of the Democratic coalition. Right, because like who is the core of the Democratic Party right now? It’s it’s college graduates and black voters. Right? Right. And who are the people who care a lot about student debt forgiveness? Right now? It’s college graduates and black voters. It’s who are the people, you know? And so it’s sort of it’s kind of in a lot of ways a perfect base issue for progressive Democrats.

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S1: Yeah, I mean, I was listening to Ayanna Pressley a little bit, the representative from Massachusetts, because she’s one of the legislators really pushing for more debt relief. Yeah. And she just spoke to the American Federation of Teachers earlier this month. And she gave this really emotional appeal every a month.

S3: And the pandemic has made it impossible to ignore the fact that we can and we must take bold action to address the inequities and disparities in our country.

S1: She talked about how her constituents get in touch with her. She’s had 70 plus year olds come to her and say they’re still paying off student loans. She talked about how it wasn’t abstract to her because she’s a black woman who went to college and she said like 85 percent of black students I had to borrow and that she defaulted on her loans and that black and brown students are five times more likely to default. And at one point, she calls the current state of student loan regulations policy violence, which was such an intense way to put it to me. And then she used Biden’s own language.

S3: This is why we must work to ensure that any effort to really build back better includes massive investments in our public colleges, and that means this larger amount of debt relief.

S1: But she was also talking about kind of a new deal for colleges, you know, making everything more affordable. And it struck me listening to her, I was like this executive action that we’re talking about here, it wouldn’t touch some of those bigger things that she’s hungering for. That also sound really important.

S2: Right, and so this is sort of this is one of the the big questions about if if you’re going to do student debt forgiveness, in what context should you do it? You know, a lot of people are uncomfortable with the idea of just doing student debt forgiveness on its own because you’re just going to end up back in the same place after a few years unless you reform the system. Right. Like if you don’t also do something about college costs and rein in predatory institutions and figure out better ways to make debt sustainable in the future, you’re just going to just see it’s going to be Groundhog Day, right? We’re going to you know, it’s and in fact, it actually would create incentives for some scam schools to keep charging students as much as possible because they might get forgiven. Again, there’s there’s sort of a moral hazard issue. So it makes sense to pay pare student debt forgiveness with a big reset of how we do higher ed. The question is, you know. To what extent do you think student debt forgiveness is itself necessary to reset how we do higher ed, or are there other ways we could reform student loans to make them less of a burden on people? I’ll also say that, you know you know what Presley said about it being policy violence. I think that really does reflect the way it’s it’s viewed in parts of the black community now, because, again, you’re talking about a group of Americans who essentially feel like they’ve been asset stripped. Right. Throughout history. Right. You know, it’s like you try to keep black people tried to build up. You know, home equity is, you know, tried to buy houses and get in on the American dream. And they were essentially cheated out of their cheated out of their savings by the fact that they couldn’t get normal mortgages thanks to redlining and were forced into these rent to own schemes. You know, student debt sort of plays into that same sense of historical injustice that in order to try and get ahead in America, black people are forced to go into hock and other people are making money off of them, whether it’s, you know, whether it’s private, for profit colleges or even in some cases the federal government that makes a profit off some of its loans.

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S1: So let’s talk about the policy that President Biden says he prefers. And it’s hard to say that he prefers it because it’s unclear whether he would use an executive order to make this happen. But he says he’s in favor of eliminating 10000 dollars worth of college debt, not 50000, 10000. What would that do? How would that compare to this, that bigger number?

S2: I mean, ten thousand dollars do a lot of good. This is something I’ve tried to emphasize that, you know, it’s not fifty thousand, but it would help a lot of people, you know. So if you just look at the federal government’s, you know, student loan portfolio. Right. Approximately one third of balances are under ten thousand dollars right now. That’s a lot, right? Yeah. So and that includes some students who are still in school. Right. Like that. But about one third of all outstanding student loan balances are under 10K. So that’s that’s just a third of all borrowers would be have their debts totally forgiven for the time being unless they are still in school. Another 20 percent of borrowers have between ten thousand and twenty thousand dollars worth of debt. So they would have their loans at least cut in half, if not more. It’s a lot of relief. And again, you know, it would help some of the people who are actually most burdened by their loans right now.

S1: So just to spell it out, what you’re saying is that for about half of people with student loans, we’re talking about eliminating 50 percent or more of their debt, 50 percent to 100 percent of their debt.

S2: Yes. And in some ways, it would kind of target some of the people who most need help very roughly target them. One of the unintuitive things about student debt is that the people most likely to default actually tend to have lower balances. They tend to people who borrowed a little bit of money and got into trouble with it. And, you know, you think, well, why is that the case when borrowing more money make you more likely to get into trouble? And the reason why it’s not so is that the people who tend to default are often former students who dropped out of school. Right. They took out a, you know, a few thousand dollars to try community college for a few semesters or they they went to a for profit school and it didn’t work out. And nobody told them how to manage the debt afterwards and they didn’t get a very good job. And so they’re in financial trouble and they eventually default, whereas people with higher balances, they tend to have either graduated or maybe they went to grad school or they tend to make a little bit more money. Debt balances actually tend to grow with income. So it actually is for the most part, the the kind of smaller borrowers who need the most, who need help the most urgently. And so that’s kind of like that’s that’s kind of the argument in a nutshell of ten thousand dollars. It’s cheaper than forgiving fifty thousand dollars of debt. It helps a lot of people who need it and it wipes away a third of balances altogether.

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S1: So, OK, final question, John Weisman, you are sitting in the White House as a policy adviser. You are watching this debate play out. You go into the Oval Office. What are you saying to Joe Biden?

S2: I would say some student debt forgiveness could be worth it. Yeah, as part of a big reset, it makes some sense. There is another argument, though, that I kind of subscribe to, which is the I kind of call it the the Uncle Sam is like predatory lender theory of student debt forgiveness, which is essentially the federal government offer student loans with zero questions asked, practically zero questions that. Right. So anyone can get a student loan if they’re attending college. And the terms are kind of onerous. It’s really hard to get out of a student loan. You can’t just get rid of it in bankruptcy. Usually it’s you have to have really, really extenuating circumstances. It’s four years. It was thought to be practically impossible. So you’re you’re stuck with this debt once you have it at the same time, it was allowing, you know, essentially predatory for profit schools. With little to no regulation to just enroll tons of students for free, right, like it was it was allowing a creditors to go out and just give the green light to all these fly by night operations to to basically lard up kids with debt for profit. And in a lot of ways, again, the federal government, by providing the loans, was a handmaiden to all of this. But the bottom line is a lot of people were given loans to go to schools they never, ever should have been and in circumstances they should and were given way too much in loans.

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S1: So what you’re talking about is like a crisis of management, the debt not being the problem, the lack of regulation being the problem?

S2: Well, the lack of regulations that led to the debt. Right. The governor, you know, to put it really simply, the government fucked up, you know, in some in some meaningful ways that the government played a role in fueling this crisis. And so it’s I think it’s morally incumbent on it to some extent to forgive some of this debt and find a way to lessen the harm. But you’re not going to fix it with an executive order? Probably not. You can try, but I just I don’t know if like again, I don’t know if Neil Gorsuch is going to give you the give you a pass.

S1: Jordan Weissmann, thank you so much for joining me. Thanks for having me. Jordan Weissmann is Slate’s senior business and economics correspondent. And that is the show What Next is produced by Mary Wilson, Davis, Landolina Schwartz and Danielle Hewitt, Allison Benedikt and Alicia Montgomery make this show better each and every day. And I’m Mary Harris. You can go track me down on Twitter and Memories Desk. Meanwhile, I’ll catch you back here tomorrow.