Why President Biden’s student loan cancellation may be delayed



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Nate Wlodarchak, left, and her husband Shawn Wlodarchak.

Source: Nate Wlodarchak

As Nate Wlodarchak led people to the polls on Election Day, he couldn’t help but imagine his life without student debt. During the election campaign, President Joe Biden had promised to cancel $ 10,000 in loans for all borrowers, which would bring Wlodarchak’s balance to practically zero.

Without the loans weighing on him, Wlodarchak, 37, a scientist who studies tuberculosis, could spend more of his paychecks on his savings each month. And he and her husband Shawn, who live outside of Denver, could finally start to seriously think about the many goals, like having children, that they had to put on the back burner.

Now Wlodarchak and tens of millions of other borrowers struggling with student loans are looking to the new president for debt relief. “We took to heart his promise to make it a core priority,” said Wlodarchak.

However, with the arrival of the Biden administration amid a historic dual economic and health crisis, the cancellation of student loans may not happen as quickly as some had hoped. Vaccinating people against Covid, reopening schools and getting financial aid for unemployed and food insecure Americans will likely be priorities.

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In addition, there is also a heated and unresolved debate on whether the debt cancellation should be delivered through legislation passed by Congress or an executive decision by the government. President.

Supporters say canceling student debt is a crucial part of any meaningful response to the coronavirus pandemic, pointing out that borrowers were already struggling before the crisis. Indeed, even before almost a year of record job losses and as the country was in the midst of its longest economic expansion in history, more than one in four student borrowers were past due or in default.

Others point out that it is people of color who are most affected by the student loan crisis, and that it is also blacks and Latin Americans who have suffered the most from the coronavirus pandemic. An aide to Senator Elizabeth Warren, D-Mass., Said canceling student debt would make the biggest strides towards closing the racial wealth gap since the civil rights movement.

“Debt cancellation would have a huge impact on those most affected by the coronavirus pandemic: Black Americans, older borrowers and recent graduates,” said Alexis Goldstein, senior policy analyst at Americans for Financial Reform .

On his first day in office, President Biden signed an executive order extending the suspension of monthly payments for federal student loan borrowers until September 2021.

Mike Calhoun, president of the Center for Responsible Lending, called the action a “critical first step” but went on to say he hoped “the administration will consider a blanket cancellation, which may provide families with a path to the end. equity and finance. advancement. “

At a press conference in late November, a reporter asked then-President-elect Biden where he stood regarding student loan cancellation.

“They have real problems,” said Biden of the borrowers. “They have to make choices between paying their student loan and paying rent, those kinds of decisions. It should be done immediately.

However, in the president’s outline for a $ 1.9 trillion stimulus package unveiled this month, there is no mention of canceling student debt. Senior officials in the Biden administration maintain that the president still supports forgiveness of $ 10,000 per borrower.

“It’s hard to know how to read tea leaves,” said Rick Hess, director of educational policy studies at the American Enterprise Institute.

The legislation will likely not be proposed until late summer or early fall.

Mark Kantrowitz

higher education expert

Higher education expert Mark Kantrowitz said Biden’s Covid relief plan focuses on the most pressing issues in the public health crisis and debt cancellation is likely to come later.

“I think the chances of forgiveness for student loans are as good as they’ve ever been,” Kantrowitz said. “But the legislation will likely not be proposed until late summer or early fall.”

Passing this legislation could prove difficult.

Even with the victories in the Democratic Senate race in Georgia, they knocked out the slimmest of majorities and have just 50 members compared to Republicans 50, with Vice President Kamala Harris able to cast a deciding vote in when needed. Many on the right argue that a student debt jubilee would not significantly boost the economy, as college graduates tend to be higher earners who would likely redirect their monthly bill to savings rather than additional spending. .

Arguing that the legislative route is taking too long and is too risky, lawyers and other Democrats are calling on Biden to write off the debt sooner through executive action.

Senior Senate Democrat Chuck Schumer, DN.Y., is pressuring Biden to immediately forgive $ 50,000 per borrower. “All you need is a swipe of the pen,” Schumer said last month. “You don’t need Congress.”

And Warren described the cancellation of student debt as “the most effective economic stimulus available through management action.”

In response, Biden said it would be “unlikely” to cancel $ 50,000 in student debt on his own for all borrowers, although an aide to Warren said they were continuing to advocate with the news. administration for a debt cancellation by the president.

For now, Wlodarchak is hoping that his student loans will eventually be canceled. He has his plan for if and when they will be: he’ll take her husband to a surf and turf dinner.

And he even knows what he’s going to order. “A porter with morels, and a cold water lobster, red wine of course,” he says. “Oh, and Bananas Foster for dessert!”

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