President Biden intends to announce his long-delayed decision on canceling some student debt on Wednesday. Biden has yet to finalize the details of his plan, but any choice he makes on the contentious issue is likely to draw criticism from both parties and risks shifting the political winds that have recently begun blowing in Democrats’ favor.
Biden returns from a two-week vacation Wednesday and preparations are underway for an event at the White House to announce his decision, according to a person familiar with the matter. Aides expect the president to land somewhere close to forgiving up to $10,000 of federal student loan debt for borrowers earning less than $125,000 a year, the person said. More than 40 million Americans making under $125,000 have at least some student debt.
Biden had vowed to act before Aug. 31, when the latest pandemic-driven moratorium on federal student loan payments runs out. He is also weighing whether to extend that pause on loan payments and interest one more time. President Trump first suspended payments in March 2020, and Biden has granted four extensions. So far, the suspensions have cost the federal government more than $100 billion. More than 40 million Americans owe a collective $1.6 trillion in federal student loans.
A fight over student loans could slow the Democrats’ recent momentum and threaten their coalition’s cohesion. The president and his party have seen their poll numbers rise in recent months, buoyed by a series of events that have altered the political landscape in their favor. The Supreme Court’s late June decision overturning Roe vs. Wade alienated women across political lines. The high-profile hearings further illuminating Trump’s key role inciting the Jan. 6, 2021, Capitol insurrection received broad television coverage and hardened perceptions of Republicans as the more extreme party. And Democrats’ passage of three major bills — a climate, prescription drug and tax overhaul, new funding to boost domestic manufacturing of microchips and enhanced healthcare for veterans exposed to toxic chemicals on the battlefield — has shown the public that Biden is far from a do-nothing president.
Before the abortion decision, the Jan. 6 hearings and the flurry of new legislation, some senior Biden aides believed significant student loan debt forgiveness was one of the few measures that could excite the Democratic base and help the party survive a tough election cycle. Despite public and private pressure from Majority Leader Charles E. Schumer (D-N.Y.), Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.) and Raphael Warnock (D-Ga.), Biden has long questioned whether forgiving as much as $50,000 in debt would be prudent.
Schumer spoke by phone with Biden on Tuesday night “to make a final push to the president to cancel as much student loan debt as he can,” according to a Democrat familiar with the conversation.
Now that the president is set to announce smaller-scale loan forgiveness, he risks leaving all parties unhappy. Key Democratic constituencies, including young voters, Black Americans and civil rights groups like the National Assn. for the Advancement of Colored People, have pushed hard for more forgiveness, and may be disappointed. Republicans, meanwhile, will have a new line of attack.
Derrick Johnson, the president of the NAACP, blasted Biden in a statement Tuesday, stating that if reports of the president having settled on $10,000 in debt forgiveness are correct, “we’ve got a problem.” The decision, he went on, would continue a historic trend of federal government policies that are detrimental to Blacks.
“Tragically, we’ve experienced this so many times before,” Johnson said. “The interstate highway system devastated Black communities. Welfare reform tossed poor people of color by the wayside. The Senate’s failure to pass the George Floyd Justice in Policing Act failed to save Black lives. President Biden’s decision on student debt cannot become the latest example of a policy that has left Black people — especially Black women — behind. This is not how you treat the 90% of Black voters who turned out in record numbers to once again save democracy in 2020.”
Biden faces a tricky balancing act, trying to satisfy important Democratic constituencies that want him to do more. But his centrist instincts and the political risk of unilaterally spending billions of taxpayer dollars during a period of record inflation are holding him back.
Lawrence Summers and Jason Furman, prominent economists who served in prior Democratic administrations, have publicly warned Biden about going too far with student loan forgiveness, which, Summers tweeted Monday, “is spending that raises demand and increases inflation. It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.”
Even as some Democrats blast Biden’s plans as insufficient, Republicans are eager to criticize any forgiveness at all. The Republican National Committee Tuesday pointed to a new website with a litany of talking points arguing that debt cancelation was a taxpayer-funded “handout” that would benefit the rich and hurt the middle class while exacerbating inflation.
Much of the GOP’s data was drawn from an analysis by the Committee for a Responsible Federal Budget, a Washington-based think tank that opposes forgiving student loan debt. According to the organization, extending the current repayment moratorium through year’s end would cost $20 billion; and canceling $10,000 of student debt for households making below $300,000 would cost taxpayers about $230 billion.
Those moves, the organization said, would “wipe out nearly 10 years of deficit reduction from the Inflation Reduction Act” and “boost near-term inflation far more than the IRA will lower it.”
The left-leaning Roosevelt Institute disputes those conclusions, suggesting that the Committee for a Responsible Federal Budget’s analysis is distorted. Black borrowers are especially likely to benefit from loan forgiveness because a disproportionate number of them are forced to take out loans to cover the costs of higher education compared with whites. It concludes that “student debt cancellation will increase the wealth of millions of Americans who need it the most and promote racial equity — all without increasing inflation.”
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