President Joe Biden (Photo by MELINA MARA/POOL/AFP via Getty Images)
Another major newspaper published an editorial today opposing student loan cancellation.
Here’s what you need to know.
Student Loans
The Los Angeles Times Editorial Board wrote that “lawmakers should think far more strategically about student debt, rather than simply showering everyone with tax-free loan forgiveness in such high amounts.” This follows 5 signs that Biden won’t enact student loan cancellation. Whether you support or oppose wide-scale student loan cancellation, there are several key issues raised in the editorial that are worth exploring in more detail:
1. Student loan cancellation could cost up to $1 trillion
The editorial notes that if Congress cancels up to $50,000 of student loans, the total cost to federal taxpayers could be up to $1 trillion. Of course, there are lower potential cost estimates too. For example, there have been cost estimates ranging from $400 billion to $600 billion depending on which student loan borrowers and which types of student loans qualify. Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA), who proposed wide-scale student loan cancellation up to $50,000 per borrower, would limit student loan forgiveness to federal student loans only. Under their plan, only student loan borrowers who earn up to $125,000 annually would qualify. In contrast, if Congress cancelled up to $10,000 of student loan debt per borrower, the cost estimate would be lower. The editorial notes that cancelling up to $50,000 of student loans would cancel nearly two-thirds of all outstanding student loan debt. Under Schumer’s and Warren’s plan, the U.S. Department of Education estimates that nearly 36 million student loan borrowers — out of a total of 45 million — would have all their federal student loan debt cancelled.
2. It’s financially irresponsible for the president to cancel student loans
If you have followed the latest updates on student loan cancellation, then you’re aware of the legal debate brewing with wide-scale student loan forgiveness. According to the editorial, “But it’s hard to imagine a situation in which a president could responsibly spend that much money with the stroke of a pen, without an explicit authorization from Congress.” At issue here is the legal question whether the president has unilateral authority to enact wide-scale student loan cancellation through an executive order without further authorization from Congress. Progressives in Congress say that President Joe Biden already has such authority, and as evidence, they cite the Higher Education Act of 1965. While the language in the Higher Education Act may be debateable, the editorial makes the more practical point whether a president should authorize up to $1 trillion by the “stroke of a pen” without explicit authorization from Congress. It’s unlikely that members of Congress in 1965 intended to give blanket authority to the president — a member of the executive branch — unilateral authority to spend up to $1 trillion. They also likely couldn’t imagine that aggregate student loan debt would grow to $1.7 trillion.
3. Student loan cancellation excludes a lot of people
The editorial explains that wide-scale student loan cancellation would help student loan borrowers who have experienced financial distress, with some unable to buy a car or house. At the same time, the editorial mentions the various constituencies who would not benefit from any student loan cancellation. For example, student loan borrowers who recently paid off their student loans but are still experiencing financial struggle. Since student loan cancellation would be one-time, future student loan borrowers would get no financial relief. Another constituency not mentioned (but should be considered) are those who didn’t go to college but are also struggling financially. There are other constituencies too who wouldn’t benefit. Supporters of student loan cancellation say that while others may struggle financially, student loan cancellation should still be implemented to provide concrete relief to a broken higher education system.
4. Student loan borrowers shouldn’t all be treated the same
The editorial highlights the unfairness of treating all student loan borrowers the same. For example, some student loans borrowers needed student loans to attend a low-cost public college, while others chose an expensive private college and didn’t think about the comparative cost. Other student loan borrowers have sufficient financial resources to pay off their student loans and don’t need a bailout. Schumer and Warren have sought to address the last point somewhat by inserting an income limitation. However, the income limitation, some believe, is too high. An income cutoff of $125,000, for example, is $50,000 higher than the income cutoff for the latest stimulus check, which had a $75,000 income cutoff for individuals. The income cutoff also doesn’t account for a student loan borrower’s amount of savings, which could be used to pay off student loans.
5. Student loan relief should focus on the underlying problem
Rather than wide-scale student loan cancellation, the Editorial Board applauds other recommendations to provide student loan relief. For example, the reason there is so much student loan debt is the cost of college is prohibitively expensive. Lower the cost of college, and you’ll have less aggregate student loan debt. Biden has proposed multiple measures to make college more affordable: tuition-free community college, increased Pell Grants, a simpler student loan forgiveness program, and lower monthly student loan payments through income-driven repayment plans. Democrats in Congress have also proposed to forgive student loans with 4 changes. Ultimately, the editorial says if there is any student loan cancellation, the amount should be smaller and the student loan forgiveness should be targeted to low income students. This is consistent with Biden’s approach so far to enact student loan cancellation that is targeted and piecemeal. For example, Biden recently cancelled $2.3 billion of student loans. (You can find out here if you qualify for this student loan cancellation). Interestingly, the Editorial Board says that Biden and Congress should pressure colleges to lower costs, including a reduction of administrators, and also encourage employers to eliminate the requirement for a college degree for some jobs, which would reduce the need to borrow student loans.
If you have student loans, make sure you understand all your options. Student loan cancellation may not happen now or in the future, and if it does, it could be limited in reach. Here are some potential options to consider:
