President Biden intends to announce his long-delayed decision on canceling some student debt on Wednesday. Biden has yet to finalize the details of his plan, but any choice he makes on the contentious issue is likely to draw criticism from both parties and risks shifting the political winds that have recently begun to blow in favor of the democrats.
Biden returns from a two-week vacation on Wednesday and preparations are underway for an event at the White House to announce his decision, according to a person familiar with the matter. Aides expect the president to land on the verge of canceling up to $10,000 in federal student loan debt for borrowers earning less than $125,000 a year, the person said. More than 40 million Americans earning less than $125,000 have at least one student debt.
Biden had pledged to act before August 31, when the last pandemic-related moratorium on federal student loan payments expires. He is also considering whether to extend this pause on loan repayments and interest once again. President Trump first suspended payments in March 2020 and Biden granted four extensions. So far, the suspensions have cost the federal government more than $100 billion. More than 40 million Americans must a collective of $1.6 trillion in federal student loans.
A battle over student loans could slow Democrats recent momentum and threaten the cohesion of their coalition. The president and his party have seen their polls rise in recent months, buoyed by a series of events that have shifted the political landscape in their favour. End of June from the Supreme Court decision overturning Roe vs. Wade alienated women across political lines. The high-profile hearings shedding more light on Trump’s key role in instigating the January 6, 2021 Capitol uprising received widespread television coverage and reinforced the perception of Republicans as the most extreme party. And the Democrats’ passage of three major bills – one climate, prescription drug and tax review, new funding to boost domestic microchip manufacturing and improving health care for veterans exposed to toxic chemicals on the battlefield – showed the public that Biden is far from a do-nothing president.
Before the abortion ruling, the Jan. 6 hearings, and the flurry of new laws, some top Biden officials thought a major student loan debt forgiveness was one of the few steps that could excite the Democratic base and help the party survive a difficult election cycle. Despite public and private pressure from Majority Leader Charles E. Schumer (DN.Y.), Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.) and Raphael Warnock (D-Ga.), Biden has long wondered if it would be safe to write off up to $50,000 in debt .
Schumer spoke by phone with Biden on Tuesday evening “to give the president one last push to write off as much student loan debt as possible,” according to a Democrat familiar with the conversation.
Now that the president is set to announce a smaller-scale loan forgiveness, he risks upsetting all parties. Major Democratic constituencies, including young voters, black Americans and civil rights groups like the National Assn. for the advancement of people of color, have pushed hard for more forgiveness, and may be disappointed. The Republicans, meanwhile, will have a new line of attack.
Derrick Johnson, the NAACP chairman, blasted Biden in a statement Tuesday, saying that if reports that the president settled a $10,000 debt forgiveness are correct, “we have a problem.” The decision, he continued, would continue a historic trend of federal government policies that are harmful to black people.
“Tragically, we’ve been through this so many times before,” Johnson said. “The interstate highway system has devastated black communities. Welfare reform has thrown the poor of color by the wayside. The Senate’s failure to pass the George Floyd Justice in Policing Act has failed to save black lives. President Biden’s decision on student debt cannot become the latest example of a policy that has left black people — especially black women — behind. This is not how you treat the 90% of black voters who turned out in record numbers to save democracy again in 2020.”
Biden faces a delicate balancing act, trying to satisfy important Democratic constituencies that want him to do more. But his centrist instincts and the political risk of unilaterally spending billions of taxpayer dollars during a period of record inflation are holding him back.
Lawrence Summers and Jason Furman, prominent economists who served in previous Democratic administrations, publicly warned Biden about going too far with student loan cancellations, which, Summers tweeted On Monday, “it is spending that increases demand and increases inflation. It consumes resources that could be better spent helping those who, for whatever reason, haven’t had the chance to go to college. It will also tend to be inflationary by raising tuition fees.
Even as some Democrats call Biden’s plans insufficient, Republicans are eager to criticize any pardons. The Republican National Committee on Tuesday pointed to a new website with a litany of talking points arguing that debt cancellation was taxpayer-funded “handout” that would benefit the wealthy and hurt the middle class while exacerbating inflation.
Much of the GOP data was drawn from an analysis by the Committee for a Responsible Federal Budget, a Washington-based think tank that opposes student loan debt forgiveness. According to the organization, extending the current reimbursement moratorium until the end of the year would cost $20 billion; and canceling $10,000 of student debt for households earning less than $300,000 would cost taxpayers about $230 billion.
These movements, the organization said“would eliminate nearly 10 years of deficit reduction through the Cut Inflation Act” and “raise short-term inflation far more than the IRA would reduce it.”
The left-leaning Roosevelt Institute disputes these conclusions, suggesting that the analysis of the Committee for a Responsible Federal Budget is distorted. Black borrowers are particularly likely to benefit from debt forgiveness because a disproportionate number of them are forced to take out loans to cover the costs of higher education compared to whites. This concludes that “cancelling student debt will increase the wealth of millions of Americans who need it most and promote racial equity – all without increasing inflation.”