The Biden Administration's Latest Attempt at Student Debt Cancellation

President Joe Biden faced a significant setback when the Supreme Court, with conservative justices in the majority, struck down his ambitious $400 billion plan to alleviate federal student loan debts earlier this year. However, the President remains determined, emphasizing that "the battle is far from over."

The 6-3 Supreme Court ruling found that the Biden administration had overstepped its legal authority with the plan, reinstating the responsibility of loan repayments squarely on borrowers.

Nonetheless, a second attempt is now in progress. The Biden-Harris Administration, under the U.S. Department of Education, has introduced preliminary regulatory text outlining forthcoming plans to offer essential relief to select groups of borrowers. While the administration presents this as a commendable undertaking, some skeptics question whether it's primarily a political maneuver to secure support from a significant voter block.

This renewed effort is grounded in the Higher Education Act of 1965, a comprehensive law granting the education secretary the power to "negotiate, pardon, or release" specific debts. However, the law lacks explicit guidance on executing this authority, leading to an ongoing legal dispute since President Biden's inauguration. The new proposal aims to create fresh federal regulations outlining the criteria for debt cancellation, subject to review by a committee of external government representatives in a process known as "negotiated rulemaking."

The proposed debt forgiveness program could erase billions of dollars in student loan debt, raising concerns about fairness. Critics argue that it might unjustly favor those who have chosen not to honor their loan repayments at the expense of responsible borrowers who have diligently met their financial commitments.

As the debate unfolds, it's worth considering that student loan debt is just one part of the broader spectrum of consumer debt in the United States. According to The New York Times, "college graduates are known for their Democratic leanings." Consequently, this debt forgiveness program has the potential to disproportionately favor Democrat voters, potentially solidifying their support in upcoming elections. This debt forgiveness could be seen as republican taxpayers footing the bill for Democratic borrowers.

Vice President Kamala Harris & President Joe Biden File Photo

Furthermore, critics contend that student debt forgiveness could inadvertently drive up the cost of college tuition, worsening an already inflationary environment. The average mortgage debt among Americans is $236,443, per Experian's 2022 State of Credit Report, up from the average mortgage debt reported in 2021: $220,380 as of an August 17, 2023 report. Regarding credit card debt, the average credit card debt in America is $7,951, based on 2022 data from the Federal Reserve and the U.S. Census Bureau. Additionally, it is essential to note that while graduate students represent about 16% of students enrolled at colleges and universities, they hold 47% of federal student loan debt, according to College Board data from July 2023. Private loan borrowing constitutes 6.9% of the outstanding student loan debt, with a national private student loan balance of $128.8 billion, where 88.93% of that balance is for undergraduate loans and 11.07% is for graduate student loans as of August 2023.

While these initiatives seem to offer temporary relief, they may not address the underlying structural issues contributing to the student debt crisis or the mounting economic repercussions of the situation.

With the resumption of federal student loan payments last month, borrowers are now facing the challenge of transitioning back into repayment status and wondering if the next attempt to forgive their debt will work.