Yahoo Finance Why Biden is stuck on student-debt cancellation
Inflation is the biggest threat to Joe Biden’s presidency. Prices are rising nearly 8% per year, and could go higher still before Federal Reserve rate hikes or other measures bring some relief to family budgets.
But inflation isn’t the only risk Biden faces, and a key cohort of voters have another major complaint: student debt. As a candidate in 2020, Biden pledged to cancel up to $10,000 in student debt per borrower. As president, however, Biden has done very little, and he’s once again stuck between liberal demands for sweeping action and the pragmatic solutions he offered as a candidate trying to win centrist and moderate voters.
As an awkward compromise, Biden's boldest action on student debt has been an indefinite moratorium on paying most of it back. The CARES Act, which Congress passed in 2020, during Donald Trump’s presidency, deferred student loan repayments for several months, interest-free. Trump extended the deadline twice, and Biden has now extended it four times, with the latest move, on April 6, pushing the deadline from May 1 to Aug. 31. The government says that each month the payment pause is in effect, 41 million borrowers hold onto an additional $5 billion, or $122 per borrower.
The August deadline probably won't hold, either, since the 2022 midterm elections are just two months later. Having gone this far, there's no way Biden will end the moratorium and force a resumption of payments right before millions of people vote. So expect another extension that punts the matter all the way into 2023.
Deferring that long might seem like a shrewd political move. But it could backfire if Democrats lose control of one or both houses of Congress this year, as many forecasters expect. If that happens, Democrats will have essentially no chance of addressing student debt through legislation, which is the course Biden prefers. Some activists, including a number of Biden's fellow Democrats in Congress, want to Biden to cancel up to $50,000 in debt per borrower through executive action. But it’s not clear Biden can do that, and legal action would probably ensue if he tried.
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A year ago, Biden asked Education Secretary Miguel Cardona to recommend a way forward. Other Biden review requests have come with a 90-day deadline. The student-loan request is open-ended, and the White House hasn’t said when it expects an answer. That suggests a stall-a-thon is underway, while Biden’s policy team prays for divine intervention.
If you were Biden, you might stall, too. Student borrowers owe $1.6 trillion, and much of that debt is money well spent on an education that will dramatically raise lifetime earnings. But some overburdened borrowers still have a hard time paying off their loans, building wealth and progressing to normal activities like buying a house. Borrowers who took on debt but never finished college may be worst off, because they don’t have the degree that money was supposed to pay for. Some borrowers carry debt into their 50s or beyond and never break free.
People in their 30s owe the most, followed by 20somethings and 40somethings. Biden’s popularity has sunk by about 15 points since he took office in 2021, and that happened at the same time inflation was worsening. So the link between rising inflation and Biden’s falling approval seems fairly clear. It’s harder to make the link with student debt inaction, but a January CBS News poll found support for Biden has fallen most among voters under 30. Biden’s approval among that group plunged from 70% last year to just 42% this year. That’s double the drop in any other age group.
Biden might have himself to blame, for promising something that was always going to be hard to deliver. During the 2020 Democratic presidential primary campaign, Bernie Sanders ran on forgiving all student debt, while Elizabeth Warren called for forgiving up to $50,000 for qualified borrowers. Biden, pitching himself as a pragmatic centrist against the liberal Sanders and Warren, was more circumspect, calling for the cancellation of $10,000 in student debt. The fine print in his plan said Congress should do it through legislation.
Congress hasn’t come close. The American Relief Plan it passed last March included a small provision for borrowers in income-driven repayment plans, but no large-scale debt forgiveness. Democrats, with tiny majorities in both houses of Congress, have famously struggled to pass any favored legislation since then. Biden’s “build back better program” died last year, and that didn’t include student-debt relief. Biden didn’t even mention student debt in his March 1 State of the Union address and there’s nothing on debt cancellation in his 2023 federal budget, either.
Liberal Democrats in Congress are pushing Biden to act, but this a familiar game between liberals who don’t have the votes to get what they want and a president trying to satisfy everybody on the liberal to moderate bands of the political spectrum. As Biden has done with other progressive priorities such as paid family leave, expanded child care and the child tax credit, Biden is talking up the concept and saying he’ll sign the bill—while knowing Congress can’t pass it. He’s endorsing the liberal wish list without ever having to explain to moderates why he signed off on expansive new programs they might view as overreach.
In reality, there are many problems with forgiving student debt, which Biden manages to avoid as long as Democrats can’t pass a bill and he shuns executive action. Student debt cancellation would be a subsidy for people who chose to go to college during a given point in time and financed it by borrowing—with no similar subsidy for people who paid their way through college, went to trade school or chose something other than college. There’s also a potential outrage factor among people who just paid off all their debt, or who are just taking on new debt, and who wouldn’t get the benefit. It would also deprive the government of billions of dollars in revenue, for years to come—those canceled debt repayments—which is money not spent on other things. Voters modestly favor student-debt cancellation, but policy experts don’t.
Biden, to his credit, has pushed through some small improvements he touted as a candidate, such as canceling debt for students defrauded by for-profit schools and debt forgiveness for 300,000 borrowers with disabilities. Biden officials have also argued that extending the 2020 moratorium (indefinitely?) is itself a form of debt relief.
The problem for Biden may be the voters who blame him for doing nothing. Those young voters helped elect the oldest president ever in 2020, and if they lose faith in Biden they may not be replaceable. And oh yeah, they’re struggling with inflation too, on top of all that student debt.
This article was originally published on April 5 and updated on April 6.
Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips.
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