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May 27, 2022, 9:51 a.m. EDT

Here’s how Biden could move to cancel student loans

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By Victor Reklaitis

President Joe Biden made headlines on April 28 by saying he’ll roll out a plan for canceling federal student loans “ in the next couple of weeks ” — and that he’ll aim to forgive less than $50,000 in debt per borrower.

So what’s likely to happen actually, now that it’s been a month?

A Biden move to wipe out some student loans through “executive action, with the sweep of a pen,” would look smart politically before November’s midterm elections, but it easily could end up blocked by the court system, said Mark Kantrowitz, an expert on student loans, in a recent interview.

A second option, according to Kantrowitz, would be for Biden’s Education Department to make a regulatory change that delivers broad forgiveness, with that approach “much more likely to survive legal challenge.”

The third and best route is for the president to work with U.S. lawmakers to enact a law that cancels student debt, as Congress has the “power of the purse” and there wouldn’t be trouble with lawsuits, reckons Kantrowitz, who is the author of books such as “Twisdoms about Paying for College” and “How to Appeal for More College Financial Aid.”

Limiting forgiveness to borrowers who owe $10,000 or less would keep the price tag at $75 billion, but still completely eliminate federal student-loan debt for a third of all borrowers, or more than 15 million people, the expert said, citing a r ecent policy paper that he wrote . And that “cheap” price tag might attract support from Democratic and Republican lawmakers.

The problem with the legislative approach is Congress has struggled to pass substantive bills in recent years, and the “only thing that gets through is naming a post office,” he said. The White House has repeatedly said Biden would sign into law a bill wiping out $10,000 per borrower, but no such measure is close to coming to the president’s desk.

Republican lawmakers have expressed opposition to forgiveness for student loans, with Sen. Tom Cotton of Arkansas saying such debt is “no different than small business loans or car loans” and “ must be paid back .” Sen. Mitt Romney of Utah has said it’s a “bribe” by Democrats as they face “desperate” polling ahead of the midterms.

So hence the buzz around Option 1 — executive action. Biden is considering that route and would forgive at least $10,000 per borrower, according to multiple published reports citing unnamed sources.

The president, who has long supported  canceling up to $10,000 , could announce his executive action when he gives the commencement address this Saturday (May 28) at the University of Delaware , Kantrowitz said.

“If he was going to announce something, that would be the perfect time,” he told MarketWatch. Biden earned a bachelor’s degree at UD in 1965, before heading to Syracuse for law school.

Biden had planned to announce forgiveness for student loans as soon as this weekend as he gives his speech at the UD commencement, but that timing has changed after Tuesday’s school shooting in Uvalde, Texas , according to a  Washington Post report  on Friday citing unnamed sources.

Finalizing details around the executive action could take a while, and there might not be a lawsuit that can block the forgiveness “until they actually have a pronounced policy,” Kantrowitz said. It’s also possible, he said, that there could be a preliminary injunction well before the midterm elections, and then Biden’s move to cancel student debt would be in the rearview mirror by November, leaving some voters to think, “What have you done for me today?”

“But if he times it right — right before the midterm election — and maybe does more than $10,000, then it sets up a sharp divide between Democrats and Republicans, where the voters will see that the Democrats support loan forgiveness, while Republicans are opposed,” Kantrowitz said.

“So the key there is to not have the final court ruling before the elections, because then it’s old news.”

Student loan-issues have been election winners for Democrats in the past, as that party fared well in 2006 after pledging to cut student-loan interest rates in half, Kantrowitz said, adding that he tries to “avoid politics as much as possible” and aims to “be neutral.”

Biden’s authority to cancel student debt seen as ‘wishful thinking’

While advocates for debtors have argued that U.S. presidents have the authority to forgive student loans , Kantrowitz doesn’t buy their view , saying it’s “basically wishful thinking.”

The advocates point to waiver authority granted to the secretary of education in the Higher Education Act of 1965.

One problem, however, is that a preamble limits this authority to the programs already approved by Congress, Kantrowitz said. Another problem is that “in this part” language establishes a link just to an old guaranteed student loan program that ended in 2010.

Kantrowitz said it’s also a “misreading of the law” to see waiver authority from the Heroes Act of 2003 that would allow for broad loan forgiveness.

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