The student debt crisis is back in the news. That’s not too surprising, given that 44 million debtors now hold a staggering $1.5 trillion in student loans. What’s more surprising is the immediate source of the media attention: centrist New York senator Chuck Schumer, who (along with Massachusetts senator Elizabeth Warren) is calling on Joe Biden to cancel $50,000 worth of student debt per borrower by executive order.
The Higher Education Act, which empowers the federal government to issue student debt, also permits the Department of Education to cancel debt through the “compromise and settlement” provision. That means that by executive order, without new legislation, the president can make student debt vanish.
It should go without saying that Joe Biden should issue such an order and cancel all student debt. Doing so would inject a massive tranche of money into a beleaguered economy while removing the anvil of debt around millions of workers’ necks. The benefits to ordinary people would be immense and the cost to the government extremely low.
The student debt problem gets worse with every passing year. As I reported last year, student debt has tripled since 2006. That has at least something to do with the fact that tuition has gone up 30 percent since 2006, while rent has jumped 47 percent and real wages have grown only 7 percent in that time.
Student debt is also one major factor driving racial wealth inequality. Not only does student debt hit black and Hispanic people harder than whites, but black students are 130 percent more likely than white counterparts to accumulate six figures of student debt in the first place.
Meanwhile, the government only collects a small portion of the $1.5 trillion in total outstanding debt each year. With an annual revenue of more than $3.3 trillion, the income the government receives from student debt is inconsequential.
In the midst of one of the worst economic depressions in US history, canceling student debt and putting money directly into people’s pockets is more crucial than ever. So why isn’t the issue a slam dunk?
Who’s Got the Power?
It’s easy for people like Chuck Schumer to urge Biden to eliminate student debt. Since the matter is totally out of his power, Schumer can polish his faded progressive credentials by proposing it without upsetting his big donors by actually doing it. So far, the gambit is working. Biden shows no sign of listening to Schumer’s suggestion.
Instead, Biden has touted a much smaller proposal. As NPR described it, Biden is supporting a provision that “calls for the federal government to pay off up to $10,000 in private, nonfederal student loans for ‘economically distressed’ borrowers.”
Who would qualify as “economically distressed,” who would make that decision, and how long it would take to set up the program to do so are all, so far, mysteries. What we do know is that the proposal is not an executive action, but a provision of the HEROES Act — which the House of Representatives has passed, but which faces grim prospects in the Senate.
In other words, Biden’s offer is to give fewer people less money, after a longer waiting period, if and only if the Senate approves legislation it is very unlikely to approve. And by making sure only “nonfederal” (that is, privately issued) loans are eligible, Biden’s plan further reduces who is eligible for relief while making sure banks get their cut.
The result? Millions would remain heavily in debt, while private lenders would get a bailout from the federal government on loans many borrowers might otherwise default on.
But we shouldn’t give up hope yet. While his record gives little reason to trust him, the fact that even moderate Democrats like Chuck Schumer are making relatively aggressive calls for student debt relief is significant. It suggests that, on this issue, political elites are somewhat less unified in their defense of the rich and powerful than on other issues. Combine that with the fact that the mechanism for change — executive order — is much more straightforward than legislation, and you have a prime organizing target.
Biden’s record on student debt suggests he won’t do the right thing without a fight. But student debt is widely and deeply felt by millions of people; we’re mired in a depression where economic stimulus is essential; and the ruling class is more divided on this issue than other big reforms, in part because the material stakes for the capitalist class are relatively lower.
All of these factors add up to a fight we can win. The only question is whether we can organize our side in time.