President Joe Biden attends an Indo-Pacific Economic Framework for Prosperity launch event at Izumi Garden Gallery in Tokyo on May 23, 2022.
Jonathan Ernest | Reuters
The risks of canceling $10,000
On the campaign train, Biden said he favors compensation of $10,000 for all. It would cost approx. $321 billion and completely cancel loans for about a third of student borrowers.
Yet there are fears that a $10,000 aid announcement will cause more frustration and disappointment than anything else. The average student debt balance, after all, is three times higher, at around $30,000. Over 3 million borrowers owe more than $100,000.
As a result, top Senate Democrat Chuck Schumer of New York, along with Sen. Elizabeth Warren, D-Mass., and other Democrats, are pushing the President to rescind at least $50,000 for all.
The NAACP also explained that $10,000 would not go far enough for black student borrowers. Wisdom Cole, national director of the association’s youth and middle school division, recently mentioned on Twitter that nixing just $10,000 would be “a slap in the face.”
However, setting aside $50,000 comes with its own potential risks. This level of relief would cost more than $900 billion and leave 80% of student borrowers with nothing.
But that larger amount is more likely to face political attacks and legal challenges, said higher education expert Mark Kantrowitz.
“The biggest criticism of the $50,000 forgiveness is that it grants forgiveness to borrowers who are able to repay their own student loans,” Kantrowitz said, adding that it’s often those with multiple degrees who owe the most.
Republicans, who largely oppose student debt cancellation, are also less likely to contest a lower amount of cancellation simply because it would cost less, he said.
Any pardon amount may be challenged in court if the president bypasses Congress, which he appears to be considering doing.
Challengers can come forward, Kantrowitz said, “to uphold the principle that only the legislature can appropriate funds.”
Meanwhile, no amount of forgiveness would leave all borrowers happy.
Even if $50,000 were wiped out, the more than 3 million borrowers who have more than $100,000 in the red would still be stuck with large balances.
“There are also concerns about a backlash from borrowers who have already repaid their loans, people who have never borrowed because they saved for college in advance or went to college. academics and people who didn’t borrow because they didn’t go to college,” Kantrowitz said.
Yet history shows that action on student debt can decide an election.
In 2006, Democrats pledged to cut student loan interest rates, Kantrowitz said, “and that helped them gain control of the House and the Senate.”
This is likely a key consideration for the White House heading into the midterm elections.