student loans

Biden Searches for the Political Sweet Spot on Student-Loan Debt Relief

Joe Biden faces another dilemma. Photo: Shutterstock

Joe Biden hardly has to be told it’s tough to keep all the promises he made on the 2020 campaign trail. But as a difficult midterm election approaches along with the realization that the window for major legislative accomplishments is closing or may have already closed, he’s having to make some tough choices about initiatives he might yet pursue by executive action. And he is reportedly on the brink of moving on one of the thornier issues out there: student-loan debt forgiveness.

Unlike several of his progressive rivals, Biden didn’t emphasize this issue when running for president or take any terribly provocative positions. As my colleague Eric Levitz noted last year, the 46th president talked about forgiving up to $10,000 per borrower in loan debt, as compared to the total loan cancellation Bernie Sanders has long proposed, or the $50,000 ceiling suggested by Elizabeth Warren and Chuck Schumer soon after Biden took office. Biden has also been ambivalent as to whether he believes has the authority to forgive student-loan indebtedness other than in limited areas.

But after leaving this matter out of his initial budget, and the Senate logjammed on legislation to implement it in any event, Biden’s hand is being forced. And it’s not just because student-loan forgiveness was an important 2020 campaign topic, either: The younger voters most urgently interested in the relief are showing signs of dangerous disengagement from the Democratic Party as the midterms grow nigh. In addition, the interim pandemic-related “solution” of temporarily suspending payment obligations can’t go on forever.

So according to the Washington Post, Biden is about ready to act, and indeed, might have already acted if not for the interruption of normally scheduled activities by the Uvalde school massacre:

White House officials are currently planning to cancel $10,000 in student debt per borrower, after months of internal deliberations over how to structure loan forgiveness for tens of millions of Americans, three people with knowledge of the matter said. … The White House’s latest plans called for limiting debt forgiveness to Americans who earned less than $150,000 in the previous year, or less than $300,000 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.

This latter issue obviously affects the net effect of his proposal on those saddled with debt and/or who won’t qualify for relief. But it also determines whether the cost of forgiveness can be offset by new incoming revenues. The price tag for the level of debt relief Biden is proposing is around $230 billion. That didn’t sound like a lot when trillion-dollar pandemic relief and recovery programs were being designed. But now with revived fears about debt and deficits being fanned by Republicans, who blame government spending or government-encouraged consumption for inflation, it’s a heavier lift. Unfortunately, measures to hold down the cost of debt relief via means tests for eligibility, or limits on levels of forgiveness, create winners and losers and also administrative complications (especially if individual tax data is needed to determine eligibility).

As the Post reports, the administration’s draft proposal is aimed at broad-based if limited relief:

Most of the nation’s 41 million student borrowers stand to benefit. 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, according to the latest data from the Education Department. 

But those with heavy student-loan debts who had been anticipating the more generous relief under discussion in 2020 and later could be bitterly disappointed, even as those who don’t benefit at all might be resentful. Recent polling as reported by the Hill shows some of the mixed political impact of student-loan forgiveness:

majority of millennials polled by Morning Consult late last year supported at least some loan forgiveness, compared to 45 percent of Baby Boomers who said there should be none. … Polling shows older adults are the least likely to support forgiveness. At the same time, some analysts predict borrowers over 60, who account for around 32 percent of the U.S. population, will benefit the least from loan forgiveness. Fairness to borrowers who already paid off their student loans or to Americans who chose career paths without attending college is one major reason for the generational disparity in loan forgiveness views.

You can see how these disparities will invite a savage reaction from Republicans who are already raising hell about deficits and inflation, and whose core constituencies include many over-65 and non-college-educated voters. It’s also well-known that the midterm electorate typically skews older and whiter than the presidential electorate.

But this just illustrates Biden’s dilemma: He needs to induce a more diverse midterm electorate if he can, at the risk of creating generational polarization at the expense of his party — which depends on him finding the sweet spot.

Biden Searches for Political Sweet Spot on Student Debt