As we get closer to the most important date in the world student loans right now, which is September 30, more and more people are getting anxious to what the state of their student loans would be like.
Two things that are very important for student loan borrowers right now are an extension to the payment pause and the widely-called for mass student loan cancellation.
But as we move forward, and I look deeper into this thing, the more that I am convinced that one of those two things just isn’t possible anymore. I think the reasons why student loan cancellation won’t happen is starting to outweigh more than why it’s going to happen.
We’ve all been hoping for some sort of news about student loan cancellation. But so far, the only cancellations we’ve heard of are those of the targeted kind. Despite having no news for mass cancellation, Biden’s administration has cancelled a total amount of $3 billion in student loans ranging from borrowers with disabilities to those who have been defrauded by their former colleges.
If they were able to cancel student loans for those borrowers, why can’t they do a wide-scale student loan cancellation?
Here are some reasons why we still haven’t seen mass cancellation yet:
1. It wasn’t included in Biden’s spending and budget plans.
At the end of the first quarter of 2021, Biden’s American Jobs and Families Plan came as a bag of mixed reactions. People supported it, people opposed it. But one group in particular that weren’t happy about it was student loan borrowers.
While both plans had mentioned upgrades in school infrastructures and changes in education such as free college, one thing that student loan borrowers cared about most was missing: student loan cancellation.
I think the reason why this wasn’t included in those plans was because Biden understood the unlikeliness of student debt relief being passed in both the House and the Senate, where Democrats only hold small majorities.
2. Biden’s legal authority to cancel loans is unclear and ambiguous.
According to an article by Zack Friedman on Forbes,
“Despite what you have heard on social media or read online, it has not been established that Biden has legal authority to enact student loan cancellation unilaterally without further authorization from Congress. […] However, most legal scholars don’t believe that a president can cancel unlimited student loan debt for every student loan borrower. Yes, Biden has enacted targeted student loan cancellation, which he has authority to do through an executive order. However, he has not enacted wide-scale student loan cancellation because he has said he doesn’t believe he has the legal authority to do so.”
Zack Friedman, Forbes
While there is a massive call for Biden to just sign an executive order and cancel student loans, there are many who don’t believe that he can do that easily. Many progressives cite the Higher Education Act, which was signed in 1965 and has been updated since, as a key provision for cancellation.
According to Poynter.org, “the law grants a presidential administration, via the Education Secretary, authority to ‘enforce, pay, compromise, waive, or release’ government-held federal student loans.”
Through the Higher Education Act, President Trump and Biden were given authority to pass the student loan payment pause throughout the pandemic using executive action.
A memo from the Education Department’s Office of the General Counsel also stated, “we believe the [Secretary of Education] does not have the statutory authority to cancel, compromise, discharge, or forgive, on a blanket or mass basis, principal balances of student loans, and/or to materially modify the repayment amounts or terms thereof.”
Congress is responsible for federal spending. And since student loan cancellation is a form of federal spending, it is under Congress’s purview and not the president’s. In the same memo, if Congress had wanted to give full authority to the Education Secretary, they would have done so and written the law as such. Congress have already given authority to the Education Department to cancel student loans but only in limited circumstances.
3. Most of Congress do not support cancellation.
Aside from the ambiguity of Biden’s authority to cancel student loans unilaterally, most of Congress do not support the idea of cancelling student loans.
It is important to note that student loan cancellation didn’t actually start with Biden. Sen. Bernie Sanders was an early champion for the cancellation, along with other fellow progressives. But despite the constant push for Biden to cancel student loans, Congress does not have enough votes to cancel it. Republicans do not support it, and even a majority of fellow Democrats don’t.
But what’s crazy though is that in the memo I mentioned, it stated that:
“Although Congress could enact legislation authorizing the Department to provide blanket or mass cancellation, compromise, discharge, or forgiveness of student loan principal balances, and/or to materially modify repayment amounts or terms, it has not done so.”
UNITED STATES DEPARTMENT OF EDUCATION OFFICE OF THE GENERAL COUNSEL,
MEMORANDUM TO BETSY DeVOS, SECRETARY OF EDUCATION
So what I understood from this is that Congress has the power to cancel student loans, not the president, because they have the authority to approve the spending for cancelling student loans.
Now, I’m not a lawyer or expert in student loans. And there may be some other legislations or policies that I haven’t been able to cover regarding this. So please do your own research about this matter to arrive at your own conclusion.
4. We don’t know who is going to receive cancellation.
Whether it’s $10,000 or $50,000, the cost to cancel student loans will be big. If they don’t know who gets what, costs can’t be calculated and a decision can’t be made.
Are they cancelling private or federal or both? If both, how is it weighed on both loans? Who gets cancellation now? Who gets cancellation later? What about those who have already paid off their student loans? Do they get some form of reimbursement, some tax credits or something?
The uncertainty of this makes it an obstacle to actually support wide-scale student loan cancellation.
If you think about it, 44 million borrowers times $10,000 is $440,000,000,000. That is a big chunk of money that Congress will have to allocate for one group of people. While many are saying that there are economic benefits to cancelling student loans, how will we know of its effects? Who will benefit the most from this, and who will suffer the most?
We might think that this is free money from the government. But nothing is really free. In some form or another, this free money must be taken from somewhere else.
No one is going to win if they choose to select one or the other. Student loan is a blanket term used by everyone. Regardless if you have private or federal loans, people consider themselves as having student loans. And when you talk about student loan cancellation, people are expecting for their entire student loans to be considered for cancellation.
So having learned those reasons, you can simply point out that the two biggest reasons why student loan cancellation still hasn’t happened are money and politics.
Decisions are not being made regarding the matter because they’re saying it costs too much. The blame game is alive and well in the government. Biden is putting the responsibility on Congress because they have the authority, while Congress (or some of them) are blaming Biden for not enacting student loan cancellation.
Be Hopeful, But Don’t Count on It
I do think that long-term, cancelling student loans would have long term positive effects. It could stimulate the economy by putting back money into consumers’ pockets, and encourage borrowers to spend saved money back into the economy. It also saves a generation from financial ruin and mental stress.
While those are some lofty ideals and we will never know what the effects of cancelling student loans will be until it is tried, we have to be realistic. Having your student loans cancelled is great, but don’t count on it.
A lot of us student borrowers got into this situation because we weren’t responsible enough to look at our own finances. We easily got sucked into the idea that if we went to a “good” school, we would get a job right after graduating and make money to pay those loans. Getting educated is great, but unfortunately, the system we were in was broken or imperfect.
There weren’t enough measures to stop or slow down students to keep borrowing money, or policies to make schools and lenders responsible for their consumers, or assistance to students who are new to borrowing money and don’t know anything about personal finances.
This is one of the reasons why I want to keep making videos about personal finance and investing because it’s a necessary life skill, but is unfortunately not taught in our early education years.
We don’t know when and if student loan cancellation will happen. But one thing is certain, we need to focus on fixing our finances now and how we look at money, so that we can live a more fruitful and prosperous life.
Good write-up. I definitely appreciate this site. Stick with it!
Thank you!
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