Here’s why Biden can’t cancel student loans

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This new memorandum from the US Department of Education says the president cannot cancel student loans.

Here’s what you need to know – and what this could mean for your student loans.

Student loans

According to a new legal note, the US Secretary of Education does not have the legal authority to write off large-scale student loan debt. This implies that the new education secretary, or even President-elect Joe Biden, would not be able to write off student loans to millions of student borrowers with a “stroke of the pen.” The non-binding note provides legal arguments for which only Congress can cancel student loans. While advocates of student loan cancellation such as Senator Elizabeth Warren (D-MA) will likely disagree with the contents of the memo, here are some main arguments that are offered.


Student loan cancellation: the argument in favor

Before reviewing the reasons for not canceling student loans, it is important to point out the many reasons for canceling student loans. Advocates say canceling student loans will boost the economy, help borrowers save for retirement or buy a home, reduce disparities and save a generation from financial ruin. There are various proposals to cancel student loan debt even though the student loan cancellation was removed from the last stimulus package. These proposals range from the cancellation of $ 10,000 in student loan debt to the cancellation of the entire $ 1.7 trillion in student loan debt for 45 million borrowers. What legal authority, if any, does the Secretary of Education have to cancel the student loan debt of all student borrowers? Warren and others argue that:

  1. The Higher Education Act of 1965 (which is the current law) gives the United States Secretary of Education the authority to cancel student loans.
  2. According to them, the president already has the legal power to cancel student loans. They refer to Section 432 (a) of the Higher Education Act, which grants the United States Secretary of Education the power to “modify, compromise, waive or release any right, title, claim, privilege or demand. , whatever its form, including any equity. or any right of redemption. ”

More recently, Warren and Senate Minority Leader Chuck Schumer (D-NY) called on Biden, by executive order, to write off up to $ 50,000 in student loan debt for every borrower who earns $ 125,000 or less per year. To date, Biden has not backed the proposal, opting instead for a $ 10,000 student loan debt cancellation.


Why the president can’t cancel student loans

According to the note prepared by the Office of the Legal Adviser of the Department of Education, “we believe that [Secretary of Education] does not have the legal authority to cancel, compromise, release or cancel, on an aggregate or massive basis, student loan principal balances and / or materially alter the repayment amounts or terms of those -this. The memo includes several reasons why student loans cannot be canceled en masse, including:

1. Congress controls spending (and student loan cancellation is an expense)

Of the three branches of government, co-equal, only Congress can appropriate federal spending. According to the US Constitution, “[n]o The money will be taken from the Treasury, but following the appropriations opened by law[.]“The education department, like the president, is part of the executive branch. According to the memo, the executive branch, on its own without Congress, cannot make spending decisions.


2. Congress would have explicitly written that the president can cancel anyone’s student loans

As the memo states, “Congress does not hide elephants in mouse holes.” (Gonzalez v. Oregon). If Congress really wanted to delegate full authority to the Secretary of Education to write off millions, billions, or trillions of dollars in student loan debt or student loan debt, Congress would have explicitly written the law as such. . It would be rare for Congress to draft legislation loosely enough to unilaterally authorize the executive branch to write off student loan debt – without congressional involvement – for millions of student borrowers.


3. The Education Department can cancel student loans, but only in limited circumstances

Congress has empowered the Department of Education to cancel student loans in limited circumstances. While the Secretary of Education has relied on this provision to cancel student loans, most student loan cancellations have been relatively small compared to current proposals for blanket cancellation of student loans. For example, student loans can be canceled due to fraud, school closure, or total and permanent disability. This implies that the cancellation of student loans is done more on a case-by-case basis than on a large scale. According to the memo, Congress could authorize the Department of Education to write off student loan debt for all student loan borrowers, but has not yet done so.


Next steps

Biden called on Congress to immediately cancel $ 10,000 in student loans for each student borrower. Biden says student loans are unlikely to be canceled by executive order. Student loan cancellation may be included in the new stimulus program, along with $ 2,000 stimulus checks. Alternatively, the cancellation of student loans could be delayed if Congress limits the size of the new stimulus package and prioritizes other financial remedies in response to the Covid-19 pandemic. Above all, this note is not legally binding and a future presidential administration could reach alternative conclusions. Congress could also pass a law to cancel student loans, or could pass a law to give the president the power to cancel student loans. Until then, it’s unlikely that Biden or the US Secretary of Education will unilaterally cancel student loans.


How to pay off student loans faster

What’s the best way to pay off student loans? There is no guarantee that Congress will cancel student loans as part of the new stimulus package or through stand-alone legislation. Even if there is a student loan cancellation, Congress has not finalized who qualifies for the student loan forgiveness. That’s why it’s essential that you make a student loan game plan now. Start with these three options, all at no cost:


Related reading

5 student loan changes for 2021

Biden wants to cancel student loans, but it has to happen first

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