Supporters of student loan cancellation like to point out that President Biden’s education department has already canceled nearly $ 10 billion in federal student loans this year. Senator Elizabeth Warren argues that this precedent clearly indicates Biden’s power to cancel all federal loans by executive order.
“The president has the power to write off student loan debt,” she said in a recent MSNBC interview. “Do you know how I know that?” Because President Obama did it. Because President Trump did. And because President Biden did it.
Senator Warren is wrong. In fact, the Biden administration’s cancellation of $ 10 billion in student loans proves the opposite: the executive does not have the power to write off student debt unless Congress says so.
More recently, the Ministry of Education canceled $ 1.1 billion in federal student loans for 115,000 borrowers who attended the ITT Technical Institute, a now defunct chain of for-profit colleges. The department discharged this debt under the Borrower’s Defense Until Repayment, a law created by Congress to allow borrowers defrauded by their colleges to receive debt relief.
The Biden administration has also forgiven $ 5.8 billion in loans for 323,000 borrowers with total and permanent disability rendering them unable to earn significant income. Like the borrower’s defense, the Total and Permanent Disability Release is a program expressly authorized by Congress. While the Department of Education has some discretion over how to implement these programs, the underlying authority comes from Congress.
Lawyers for debt cancellation by decree report that the Law on Higher Education gives the Secretary of Education the power to “enforce, pay, compromise, waive or release any right, title, claim, privilege or demand, however acquired. “. This provision would appear to give the secretary broad power to write off student debt.
But as financial aid expert Mark Kantrowitz Remarks, another part of the law limits the powers of the secretary. It only has the power to cancel the obligations owed to the United States government “in the exercise of and in respect of the functions, powers and duties vested in it by that party”.
In other words, the Secretary of Education only has the power to write off student debt when Congress grants it.
When President Biden canceled student debt, it was always under the authority of a specific program authorized by Congress. The borrower’s defense is one example: Congress gives the Secretary of Education the power to write off debt after cases of outright fraud. Congress also allows the secretary to write off debt when borrowers suffer from total and permanent disability. Borrowers who work in the public service for ten years can also benefit from a loan discharge.
In each of these circumstances, Congress created a specific provision for forgiveness of the loan and required borrowers to meet certain conditions before receiving a forgiveness. If the secretary really had the broad power to cancel student loans whenever he saw fit, Congress would not need to create specific programs such as civil service loan forgiveness. The very existence of these programs proves the limits of the authority of the executive.
Certainly, Congress could still allow universal loan cancellation if it so wished. But in terms of policy, the massive cancellation of student loans is a bad idea. Most student debt is owned by high income earners who do not need any financial help from taxpayers. Plus, canceling debt today will encourage excessive borrowing tomorrow. Even after forgetting most of the student debt, he wouldn’t take long to bring the student debt portfolio back to its current level of $ 1.6 trillion.
There are better solutions. The federal government should help the subset of borrowers with serious difficulty making their payments, but insist that doctors and lawyers with expensive degrees and high salaries pay off their loans in full. As the moratorium on student loan repayments expires on Jan.31, policymakers should ensure distressed borrowers take full advantage of existing safety net programs.
Congress can also eliminate unnecessary fees and penalties, simplify repayment plans, and help lower-income borrowers pay interest. More importantly, Congress should control future loans. The amount that students can borrow from taxpayers should be capped, and colleges that leave students unable to repay debts they have accumulated should be penalized.
The debate over whether President Biden can write off student debt with a flick of the pen is a distraction. He can’t, but there are better solutions on the table. Congress and the Department of Education should work together to put them into practice.