The Washington Post - USA (2022-05-28)

SATURDAY, MAY 28 , 2022. THE WASHINGTON POST EZ RE A

Politics & the Nation

BY TYLER PAGER,

DANIELLE DOUGLAS-GABRIEL

AND JEFF STEIN

White House officials are cur-
rently planning to cancel $10,0 00
in student debt p er borrower, after
months of internal deliberations
over how to structure loan forgive-
ness for tens of millions of Ameri-
cans, t hree people with knowledge
of the matter said.
President Biden had hoped to
make the announcement as soon
as this weekend at the University
of Delaware commencement, the
people said, but that timing has
changed after the massacre Tues-
day in Texas.
The White House’s latest plans
called for limiting debt forgive-
ness to Americans w ho earned less
than $150, 000 in the previous
year, or less than $300,0 00 for
married couples filing jointly, two
of the people said. It was unclear
whether the administration will
simultaneously require interest
and payments to resume at the
end of August, when the current
pause is scheduled to lapse.
The people, who spoke on the
condition of anonymity because
they were not authorized to dis-
cuss the deliberations, cautioned
that some details of these plans
could change before the White
House makes the decision official.
The likely decision follows
months of uncertainty over the
fate of student debt for tens of
millions of Americans, with Biden
at t imes sounding s keptical o f can-
celing loans but under pressure
from his collapsing approval rat-
ings among young voters ahead of
November’s elections. The deci-
sion will also ignite new fights
between Democrats and Republi-
cans over federal spending and
could prove to be a defining issue
on the campaign trail, as GOP
lawmakers have already said the
idea amounts to wasteful spend-

ing that primarily benefits afflu-

ent college-educated profession-

als.

The White House said no final

determination has been made

about the matter. Biden said he

would come to a decision on stu-

dent debt in the “next couple of

weeks” on April 28, nearly a

month ago.

“No decisions have been made

yet,” Vedant Petal, a White House

spokesman, said in a statement

Thursday.

Wiping out $10,000 of debt per

borrower could cost roughly

$230 billion, according to esti-

mates by the Committee for a Re-

sponsible Federal Budget, a non-

partisan think tank. However, re-

starting payments for borrowers,

which have been on hold since

March 2020, would bring addi-

tional money into federal coffers.

The think tank said in March that

pausing payments had cost the

federal government $100 billion

and would run around $50 billion

per year to maintain. The Wash-

ington Post had previously report-

ed that the administration was

considering making only under-

graduate debt eligible for forgive-

ness.

The White House has been

looking for economic measures it

can enact without congressional

approval since the collapse of

Biden’s Build Back Better eco-

nomic agenda at the end of last

year. B ut while the administration

has looked at polling suggesting a

large m ajority of young v oters sup-

port debt cancellation, t he politics

of the move remain unclear.

Biden’s approval ratings on the

economy have sagged amid the

fastest price increases in four dec-

ades, and his plans to improve

housing, health care and child

poverty have been blocked by

failed negotiations with Sen. Joe

Manchin III (D-W.Va.). Republi-

cans will further pillory the deci-

sion for being made unilaterally,

without Congress, and even some

centrist Democrats are uneasy

about the idea.

Biden told a meeting of Hispan-

ic lawmakers last month that he

was open to canceling student

loan debt. He had pledged during

the 2 020 p residential campaign to

forgive at l east $10,000 in debt p er

borrower, after Sen. Elizabeth

Warren (D-Mass.) and other liber-

als pushed the idea.

Most of the nation’s 41 million

student borrowers stand to ben-

efit. Canceling $10,000 in debt for

everyone with federal student

loans would settle the balances of

roughly a third of borrowers,

while cutting total debt by at least

half for another 20 percent, ac-

cording to the latest data from the

Education Department. It’s un-

clear, however, how income limits

would affect those numbers. An

estimated 9 7 percent of a ll student

debt was held by people earning

below the threshold of $150,

per person and $300,0 00 per cou-

ple i n 2019, according to Matt B ru-

enig, founder of the left-leaning

think tank People’s Policy Project.

The White House is not expect-

ed to immediately release all the

details of the process borrowers

would use to get their debts can-

celed. B ut it could be q uite c ompli-

cated logistically.

For instance, the administra-

tion is imposing an income cap on

who qualifies to ensure that high

earners do not receive govern-

ment help they do not need. But

there are hurdles to using income

to target debt relief. The Educa-

tion and Treasury departments

cannot readily share borrowers’

tax information, and legislation

easing the restriction won’t take

effect for two years.

Relying on tax data could also

exclude millions of lower-income

Americans who do not file taxes

but d o owe student loans. A s elf-at-

testation process, whereby people

would certify that their income

qualifies, could pose challenges

for the government to verify the

information. Even asking borrow-

ers to apply for forgiveness could

limit the reach of the policy. And

because it probably will take

months for the Education Depart-

ment to implement any program,

the political benefits could be lim-

ited.

Proponents of student debt for-

giveness, including Warren and

Senate Majority Leader Charles E.

Schumer (D-N.Y.), have urged the

administration to go m uch f urther

and cancel at least $50,0 00 per

borrower, if not all outstanding

federal education loans. They say

reducing the burden of student

loans would help stimulate the

economy and close the racial

wealth gap, as Black borrowers

shoulder a disproportionate

amount of debt. Before a rally at

the White House earlier this

month, Wisdom Cole, the n ational

director o f the NAACP’s youth and

college division, said, “The Black

community c ontinues to be s hack-

led by student debt, and $10,0 00

in cancellation will not break the

chains.”

But some economists have ar-

gued that lavishing loan forgive-

ness on college graduates is an

irresponsible and costly policy.

The Committee for a Responsible

Federal Budget estimated that

roughly 70 percent of the benefit

will go to those in the top half of

the income spectrum. Critics of

debt forgiveness also say it does

nothing t o address college c osts o r

the troubled lending system. It’s

not clear whether people who

need to b orrow to start college t his

fall, for instance, would be eligible

to have brand-new loans forgiven.

Still, even by capping forgive-

ness at $10,000, the Biden admin-

istration could help people who

are arguably most in need of can-

cellation — those in default on

their loans. Defaults and delin-

quencies on student loans were

concentrated among borrowers

with less than $10,0 00 in debt

before the p ause o f federal student

loan payments, according to the

Federal Reserve. Economists at

the Fed say borrowers with the

least amount of debt often have

difficulty repaying their loans, in

part because they did not com-

plete a degree needed to improve

their earnings.

Narrowing the parameters of

loan forgiveness is in line with the

Biden administration’s targeted

approach to debt relief. The ad-

ministration has already wiped

out $18.5 billion in loans for more

than 750,000 people by temporar-

ily expanding or streamlining ex-

isting forgiveness programs, in-

cluding those designed to help

public servants and borrowers de-

frauded by their colleges.

Latest student debt plan: Forgive $10,000 per borrower

White House closes in on

decision; higher earners

wouldn’t be eligible

OLIVER CONTRERAS FOR THE WASHINGTON POST

President Biden pledged at least $10,000 in student debt relief on the 2020 campaign trail, and he is

under political pressure from collapsing support among young voters ahead of November’s elections.

Some economists have

argued that lavishing

loan forgiveness on

college graduates is an

irresponsible and costly

policy. The Committee

for a Responsible

Federal Budget

estimated that roughly

70 percent of the benefit

will go to those in the

top half of the income

spectrum.

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