President Joe Biden (Photo by Eric BARADAT / AFP) (Photo by ERIC BARADAT/AFP via Getty Images)
Before President Joe Biden enacts student loan cancellation, these 5 things must happen.
Here’s what you need to know.
Student Loans
It seems like every day there is some legislator, advocate, or student loan borrower calling on Biden to cancel student loan debt. Some say he promised student loan cancellation when running for president. Others say he said he would cancel student loans day one. Still others say he hasn’t cancelled enough student loan debt. The reality is that Biden has cancelled $3 billion of student loans since becoming president. Call the amount substantial. Call it insignificant. However, most student loan borrowers are focused on the potential for a larger prize: wide-scale student loan cancellation. Many don’t understand what’s taking so long, why it hasn’t happen, and when they can expect their student loans to get cancelled. Here’s the thing: like most things, there is a process. Congress hasn’t cancelled student loans because there’s not enough support in Congress from both political parties to cancel student loans, whether for $10,000 or $50,000. Will Biden cancel student loan debt? For that to happen, five things must happen:
1. Biden must have legal authority to enact student loan cancellation
Despite what you have heard on social media or read online, it has not been established that Biden has legal authority to enact student loan cancellation unilaterally without further authorization from Congress. Many politicians, including those who are lawyers, have weighed in with their opinions. However, most legal scholars don’t believe that a president can cancel unlimited student loan debt for every student loan borrower. Yes, Biden has enacted targeted student loan cancellation, which he has authority to do through an executive order. However, he has not enacted wide-scale student loan cancellation because he has said he doesn’t believe he has the legal authority to do so. Hence, Biden has tasked the U.S. Department of Education to provide recommendations on his legal authority to cancel student loan debt. The Education Department has been conducting that analysis for at least four months and could deliver their opinion to the president any day. However, a legal analysis, by itself, is insufficient for Biden to enact wide-scale student loan cancellation.
2. The legal authority must be clear and unambiguous to cancel student loans
It’s insufficient to state that “the president has legal authority.” More importantly, that legal authority to enact student loan cancellation must be clear and unambiguous. Why? If Biden proceeds to cancel student loans based on an ambiguous interpretation of an exiting statute or legislation, a host of issues may follow that could potentially derail wide-scale student loan cancellation. Supporters of student loan cancellation cite Section 432(A) of the Higher Education Act of 1965, and its reference to the Education Department’s authority “to modify, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.” While one could read this language and conclude that the Education Department has unlimited, unilateral authority, there are multiple reasons why your student loans can’t be cancelled legally on this basis. At a minimum, Section 432(A) of the Higher Education Act of 1965 is ambiguous. For example, the legislation doesn’t specifically state that the Education Department can cancel every student loan borrower’s student loan debt. If Congress truly intended to grant such power, Congress would have explicitly stated such in clear language. That said, it’s unlikely that Congress — which has the power of the purse under the U.S. Constitution — gave complete and total power to the executive branch to cancel student loans without limit — and in today’s dollars, more than $1 trillion of federal student loan debt. Maybe the Education Department will reach an alternative conclusion, but the finding should be unambiguous so the president can act with full confidence.
3. It should be made clear if student loan cancellation applies to all student loan borrowers
If the Education Departments recommends that the president can proceed with wide-scale student loan cancellation, the Education Department should make clear whether there are any limitations to student loan cancellation. Can the president cancel every student loan borrowers student loan debt? Is it limited to certain student loan borrowers? Is it limited by student loan type? Is there a total dollar amount limitation? The leading proposal in Congress would limit student loan forgiveness to up to $50,000 per student loan borrower, applies only to federal student loans, and would apply only to student loan borrowers who earn up to $125,000 annually. The president should understand the parameters of his executive power, if the Education Department opines that such executive power exists.
4. The potential legal challenges to student loan cancellation should be made clear
To be clear, the Education Department is delivering a recommendation to the president. This is a non-binding legal opinion that is not considered a judicial ruling, for example. The Trump administration also opined on this same topic, and determined that a president does not have unilateral legal authority to enact wide-scale student loan cancellation. If the Education Department determines the president has clear authority to cancel student loans, the potential legal challenges to student loan cancellation should be made clear. For example, if the president proceeds to cancel student loans, legal challenges should be expected. Practically, this could materially delay the implementation of wide-scale student loan cancellation. What are possibilities of such legal delays? What does it mean practically for student loan borrowers? How long could student loan cancellation be delayed? Are there alternatives to avoid such legal challenges? These questions and others should be addressed so that the president can weigh all the possibilities.
5. Biden must decide whether he will enact student loan cancellation
No matter what the Education Department recommends — whether the president has legal authority or doesn’t — only the president will make the final determination. The president can follow the Education Department’s recommendation or choose an alternative course. Therefore, the fifth thing that must happen is that Biden decides to enact wide-scale student loan cancellation. Biden has stated multiples times that Congress is the appropriate federal branch to cancel student loans, and Biden said he would sign any bill on student loan cancellation that Congress sends him. So, part one is the legal memo, but part two is what Biden decides to do next.
Make sure you have a clear game plan for your student loans. Even if there is student loan cancellation, you may not qualify and the amount of student loan cancellation may not cover your full student loan balance. Here are some popular options:
