Can Joe Biden cancel scholar debt with out Congress? That's what the specialists say

At the moment, it is an open question whether President-elect Joe Biden is interested in testing his power as President in an attempt to cancel student debts.

Joe Raedle | Getty Images

This is an urgent question, and not just for academic and legal scholars. Dozens of millions of Americans have much to do with the answer: Can the President cancel student debt without Congress?

If the president were able to cancel student debt without passing laws, borrowers could theoretically reduce or eliminate their balances overnight. On the other hand, the likelihood that Congress will agree to grant the loans is uncertain at best. In general, Republicans are not in favor of debt relief.

It is also an open question at the moment whether President-elect Joe Biden is interested in testing his power as President in this way.

More from Personal Finance:
Depositors are having trouble getting money back from the Beam banking app
Here's how much your 401 (k) Match business will be worth
Personal Finance 101: The Complete Guide to Managing Your Money

During the 2020 Democratic Presidential Primary, Massachusetts Senator Elizabeth Warren vowed to provide student loans in the early days of her tenure, including an analysis written by three legal experts as part of the student predatory loan project at Harvard Law School. who described such a move as "lawful and permissible".

Biden didn't go that far, however.

A spokesman for the President-Elect would not say whether Biden has taken a stance on whether or not he can cancel student debt without Congress by pointing to comments Biden made at a recent press conference after being asked if he was the executive would take action to terminate the loan.

"You are in real trouble," Biden said of student borrowers. "You have to make a choice between paying your student loan or paying your rent. These types of decisions should be made immediately."

Biden has announced that he would forgive all borrowers of $ 10,000 in debt for students and the rest of the debt for those who attended public colleges or historically black colleges and universities and earn less than $ 125,000 a year. Overall, according to calculations by university expert Mark Kantrowitz, this would reduce the number of outstanding student loans of $ 1.7 trillion by about a third.

Biden is under increasing pressure to go further.

Senator Chuck Schumer, D-N.Y. And Warren called in September for the next president to grant $ 50,000 in student loans to each borrower as soon as they walked into the White House. In an interview with The.Ink earlier this month, Schumer said Biden could cancel the debt "with the pen contrary to the law".

More than 230 organizations and nonprofits, including Americans for Financial Reform, the NAACP, and the National Consumer Law Center, signed a letter on Nov. 18 asking Biden to cancel student loans on his first day as president.

"To minimize the harm to the next generation and to reduce the racial and gender gap, bold and immediate action is needed to protect student loan borrowers," the groups wrote.

The student loan crisis was particularly painful for black borrowers: nearly 85% of black college graduates carry educational debt, compared to 69% of white college graduates. And because of racial wealth and income differentials in the US, black borrowers suffer higher default rates and are also in debt for much longer than their white counterparts. Two-thirds of the country's outstanding student loan debt is now borne by women.

Even before the pandemic, when the country was in the midst of its longest economic expansion in history, with unemployment at half a century lows, more than one in four student loan borrowers was either defaulting or defaulting. A poll found that 58% of registered voters support student loan making and over 820,000 people support a petition entitled "Donald Trump / Joe Biden: Delete Student Loans!" Have signed.

The legal arguments about whether or not a president cannot pay the debt quickly get complicated.

CNBC asked Toby Merrill, founder and director of the Predatory Lending Project at Harvard Law School, how she would explain to a 15-year-old why she believed the president could do so.

"The Constitution gave Congress the power to control government property and debt owed to it," she wrote.

And Congress, Merrill said, gave the education secretary who works for the president "specific and unrestricted authority to create and cancel or modify debt owed under federal student loan programs."

The same question was put to Luke Herrine, Ph.D. Yale Law School candidate who first argued in 2017 that the U.S. Department of Education could cancel student debt.

"Basically, it's like the power a prosecutor must have in deciding whether to bring charges against someone – the prosecutor might think a person has committed a crime but decide not to bring them to trial for whatever reason to initiate, "said Mistress.

In other words, the president could work with the U.S. Department of Education to stop student loan collection, proponents of the argument say.

Others are not confident that bypassing Congress to reduce the debt would be successful.

"The use of an executive ordinance to grant federal student loans is likely to be punished with a lawsuit and an injunction and will eventually fail," said Kantrowitz.

"In addition, attempting this path immediately after taking office would block any attempt to work bipartisan with Congress," he added.

Ryan D. Doerfler, a law professor at the University of Chicago, can also see that such a move is overcome by a multitude of challenges. For example, opponents might say that the US Department of Education can only provide relief to borrowers under certain circumstances.

However, these potential obstacles shouldn't prevent the president from trying, Doerfler said.

"Congress doesn't seem interested at all in taking such steps," he said, "and it is better to pursue debt relief through executive action than to pray for Mitch McConnell to change his mind."

The legal battle aside, other college anniversary critics say it wouldn't give the economy a huge boost, as college graduates tend to be higher-income individuals who would likely redirect their monthly bills towards savings rather than spending.

Merrill disagrees.

Borrowers need help now more than ever, she said.

"People affected by the coronavirus, whose incomes have been cut or who are hourly workers are struggling under the burden of student loan debt," Merrill said.

The US Department of Education offered people the option to suspend their student loan payments until January. Almost all borrowers have taken it: Less than 11% of those with federal student loans pay their bills during the pandemic, according to data analyzed by Kantrowitz. In a recent Pew survey, 58% of borrowers said they would find it difficult to resume payments in the coming month.

Despite its advantages, some say that comprehensive forgiveness would create a backlash among those who haven't attended college, taken out loans, or have already paid off their student debts. These borrowers "may feel that their frugality is being punished," Bloomberg columnist Noah Smith wrote this month.

Mistress resisted this argument.

"It's like saying that providing a COVID vaccine is unfair to those who caught COVID before the vaccine," he said.

Comments are closed.