Which government agencies have to accept the student loan forgiveness for it to become official?
President Biden has mooted the idea as the US approaches the midterms but this is not the first time the administration has leaked plans without following through.
Student debt cancellation is again on the agenda as the Democrats seek to claw back some support for the approaching midterm elections. How this is actually going to happen is still up for legal debate, if President Joe Biden wants to courts to decide.
When asked in a recent press gathering about student debt, White House press secretary Jen Psaki said, “Not a single person in this country has paid a dime on federal student loans since the president took office”. This references the debt moratorium, which is due to expire at the end of August.
So what power does the president have to deal with student loans and which government bodies must be negotiated with?
Student debt is owned by the US Department of Education, at least 92 percent of it. So really the debt from the students is owed to the US government. This is the legal basis in which some believe Biden has the authority to wipe away with a pen; his executive power is thought to be in control of such matters, such as Senator Chuck Schumer. If this were to happen, no government agency would need to OK the measure.
It could be in the best interests for the government to wipe student debt insofar as it acts as a limiting factor for economic growth. With so many in debt, with such high value and inflation, this takes away from the spending power required to keep people consuming at a rate that keeps the country together. Moreover, around 16 percent of these students are likely to miss payments, if they were to resume, with another 25 percent estimated to be in a position to immediately default.
Announced last week was some small alleivation of debt for millions of Americans, but only 40,000 had their debt eliminated. There remains tens of millions of more students that are in serious debt trouble.
How many times has Biden said that student debt will be forgiven?
The latest signal is by no means the first time the administration has discussed the idea of forgiving student loans. It was a central part of Biden’s election platform and helped propel him to the presidency as he won 61 percent of the votes for people aged 18-29. It is thought that this demographic made up 17 percent of the votes in the election.
So Biden has repaid their support by kicking the student debt can down the road. The March 2020 CAREs act, put in place by Biden’s predecessor Donald Trump, paused student debt payments, as well as preventing the accruing of debt in this time. This has since been extended to August if this year, meaning more than two years of pause.
But this has doen little to deal with the root problem of student debt in the US. It is estimated that there is upwards of $1.7 trillion of outstanding student debt, which will remain with or without a payment moratorium. Without the promised debt cancellation this debt will remain to plague tens of millions of Americans, many who will be blaming him for not keeping to his word.
It is clear that something substantial needs to be doen to tackle the student debt problem. With the crucial midterm elections coming up in November, Biden will need every vote. If the young fail to turn up in their droves à la 2020, the Democrats hopes of continued control of all the levers of power will be threatened.