Read on Twitter
Should President Biden cancel student debt through executive action? I've read smart folks weigh in on both sides of this question, so I thought a quick thread of pros/cons might be useful.
Seems like the biggest pro is that the president could (maybe) do it even if Congress doesn't pass any more relief packages.
Senators Schumer and Warren have encouraged the next president to cancel up to $50,000 in debt per borrower: https://www.warren.senate.gov/newsroom/press-releases/schumer-warren-the-next-president-can-and-should-cancel-up-to-50000-in-student-loan-debt-immediately-democrats-outline-plan-for-immediate-action-in-2021
Senators Schumer and Warren have encouraged the next president to cancel up to $50,000 in debt per borrower: https://www.warren.senate.gov/newsroom/press-releases/schumer-warren-the-next-president-can-and-should-cancel-up-to-50000-in-student-loan-debt-immediately-democrats-outline-plan-for-immediate-action-in-2021
But I'm not a lawyer so don't have a view on whether the president/ED secretary actually have the authority to do this. I'd be interested in reading the case against it; here's the pro case: https://www.warren.senate.gov/imo/media/doc/Ltr%20to%20Warren%20re%20admin%20debt%20cancellation.pdf
Another big pro of loan forgiveness is that it would help Black families with student debt, who have been hit hardest by the pandemic and struggle the most with student debt due to the racial wealth gap and other forms of structural racism: https://www.urban.org/urban-wire/what-do-racial-and-ethnic-wealth-gaps-mean-student-loan-policy
But white families also hold a lot of student debt, so broad-based forgiveness would only have a modest impact on the racial wealth gap according to research by @louise_seamster et al: https://rooseveltinstitute.org/wp-content/uploads/2020/08/RI_StudentDebtForgiveness_WorkingPaper_202008.pdf
I ran the numbers on different approaches to loan forgiveness and found strong trade-offs between generosity and targeting. The main reason is that people with more debt tend to have more education and income. https://www.urban.org/urban-wire/can-we-design-student-loan-forgiveness-target-low-income-families
Another pro of forgiveness through executive action is that it can be done automatically without collecting information from borrowers (unlike income-driven repayment). Forgiveness could be targeted based on income (e.g. using IRS data), as Schumer-Warren proposal suggests.
But forgiving a lot of debt while continuing to make new loans on the same terms would raise fairness concerns and could undermine the program -- should new borrowers expect their loans to be forgiven or is forgiveness a one-time thing?
Forgiveness has been put forward as a way to help borrowers during the pandemic and stimulate the economy during a recession. It would certainly strengthen borrowers' financial positions.
But the benefit would be spread over a long period of time, especially since student loan payments are currently paused.
This makes debt cancellation a relatively cost-ineffective form of stimulus, as @dmarron and I argue here: https://www.urban.org/urban-wire/student-loan-forgiveness-effective-form-economic-stimulus
This makes debt cancellation a relatively cost-ineffective form of stimulus, as @dmarron and I argue here: https://www.urban.org/urban-wire/student-loan-forgiveness-effective-form-economic-stimulus
Putting this all together, I tend to see broad-based forgiveness as a less equitable and efficient distribution of relief compared to using the same dollars on targeted relief that also includes Americans who never went to college.
But forgiveness becomes a more appealing option if that alternative is not available. I wonder if executive action to forgive a lot of student debt could be used as a bargaining chip to push Congress to consider more equitable and efficient alternatives.
I also think the case for forgiveness is stronger if it's a one-time fix for some of the harms created by the loan system that's enacted at the same time as structural changes to that system.
I'd love to see more discussion of how to fix the loan system going forward.
I'd love to see more discussion of how to fix the loan system going forward.
