Student Loan Cancellation – Cancelled!?

Did Biden break a campaign trail promise to cancel student loan debt? No. Because Biden never said he would cancel student loan debt. What Biden did say is that he supported congress forgiving $10,000 of student loan forgiveness for borrowers in the wake of the Covid-19 pandemic. But instead, Congress interpreted the Higher Education Act of 1965 as justification for the President to cancel student loans directly from the Executive Branch.

Cancel 10k, 50k, or $0?

There is ongoing debate about whether $10,000 or $50,000 is the right amount of forgiveness. Sen. Bernie Sanders (a progressive senator from Vermont), Sen. Elizabeth Warren, and Sen. Charles Schumer raised calls for $50,000 in federal student loan forgiveness for every borrower who earns less than $125,000 annually. The pressure began soon after Biden’s January inauguration. However, Biden has never publicly stated that he supports this level of forgiveness and responded by asking the U.S. Department of Education to conduct a legal review of his authority to cancel student loans unilaterally.

What if Student Loans are not canceled by Executive Order?

Cancelled from White House Budget?

White House Chief of Staff Ron Klain confirmed that the Education Department was reviewing Biden’s ability as president to enact student loan cancellation by executive order. Three months have passed while waiting for the outcome of the review that was initially thought of as only requiring a few weeks to complete. And since its commencement, several major developments have transpired. Student loan cancellation was removed from the White House annual budget and was not included in the upcoming Infrastructure package. Notably, it was also not mentioned in Biden’s address to a joint session of Congress.

To the casual observer, this could be interpreted as a foreboding sign that cancellation is not in the cards. Or in other words, being canceled.

A Closer Look

But there may be more at play when looking at the forest instead of the trees. First, the legal memo has not yet been finalized and could ultimately find that Biden does indeed have the authority to act. Second, Biden has already shown an inclination to cancel debt in targeted ways, such as the $2.3 billion he has already cancelled for 72,000 defrauded student loan borrowers and 41,000 borrowers with a total and permanent disability.

So why was it removed from the White House budget and not mentioned in the other packages and proposals? Because Biden served in the United States Senate from 1973 through 2009, served as vice president for 8 years with Obama, and thoroughly understands the way Washington works. Budgets must go through Congress for approval. The House and Senate each must draft a budget and agree to pass a final bill of exact matching language. In the current political climate, it’s very unlikely forgiveness could pass in Congress.

Especially when one considers that the filibuster, a procedural tool that allows the minority party to block the passage of some legislation by imposing a 60-vote majority rule, does not appear to be going away. Democrats hold a razor-thin 50-50 majority in the Senate (Vice President Kamala Harris would break any ties).

So, it could be that the Biden Administration is approaching loan cancellation individually, awaiting the DOE legal review. That justification would potentially make it worth separate focused attention and be worth taking a little extra time to complete.

Now is the perfect time to review your options. The payment pause ends December 31, 2022, so it’s best to start now and ensure that you’re prepared for student loan repayment.