Biden ‘forgives’ massive amount of student loan debt, shifting costs to public
President Joe Biden is set to “remit” up to $10,000 in federal student debt for those earning less than $125,000 a year and $20,000 for Pell Grant recipients, shifting the cost of loans to the American public, the White House announced on Wednesday.
Biden’s decision marks the first time a president has written off federal student loan debt in such a broad capacity, and comes months before the midterm elections. He had campaigned to waive up to $10,000 per borrower during the presidential race, but there was no mention of an income cap.
Biden is also expected to extend the federal student loan freeze for one final time through Dec. 31.
Lawmakers, including Nancy Pelosi, have argued that Biden’s executive order is unconstitutional and goes beyond the rights of the executive.
Congress, not the president, is the only body that can cancel student debt, Pelosi said in July 2021, arguing that “the president can’t do it.”
“Not everyone realizes this, but the president can only postpone, delay but not forgive” student loans, she added.
The Ministry of Education made the same decision, arguing that the executive branch “has no legal power to cancel, impair, discharge or pardon, on a lump or mass basis, principal balances. student loans and/or materially reduce the repayment amounts or terms thereof.
Senate Majority Leader Chuck Schumer told Biden to provide as much relief as possible in a phone call Tuesday night, according to Politics, saying it’s “the right thing to do morally and economically”.
The estimated total cost of Biden’s one-time cancellation is $300 billion, according to a study released Tuesday by the University of Pennsylvania’s Wharton School of Business. The cost would rise to $330 billion if the program continued over the standard ten-year window, the study showed.
Republican lawmakers have sounded the alarm over Biden’s decision, saying it would lead to inflation.
Biden has argued that cutting the federal budget deficit will pay for student loan “pardon.”
“I hear it all the time: ‘How do we pay?’ We pay for what we have done. Last year we reduced the deficit by over $350 billion. This year, we are on track to reduce it by more than $1.7 trillion by the end of this fiscal year, the largest single-year deficit reduction in American history, and the the Inflation Reduction Act is going to cut it by another $300 billion over the next decade,” Biden said in his speech announcing the action.
Payments for most student borrowers have been frozen since March 2020, when Congress and then former President Donald Trump suspended payments due to anticipated financial hardship resulting from the Covid-19 pandemic. Biden has extended the hiatus four times and the freeze was set to expire on August 31.