Student loan cancellation is not only about policy; it’s about politics too.
Here’s what you need to know.
Will your student loans get cancelled? It’s a question that student loan borrowers are asking, and have been asking, especially for the past year. So, what’s the hold up? Well, there’s a standoff of sorts between progressives in Congress, on the one hand, and the president, on the other. There’s the obvious policy debate that is front and center. Beyond the policy debate, however, there is an underlying political angle that could impact the outcome of student loan cancellation. Let’s explore both to understand the full landscape.
Student loan cancellation: the policy angle
Progressive Democrats such as Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) say student loan debt is preventing a generation of student loan borrowers from getting married, starting a family, saving for retirement, buying a home, and pursuing the American Dream. Schumer and Warren, and others such as Rep. Ilhan Omar (D-MN) and Rep. Alexandria Ocasio-Cortez (D-NY), say that student loan debt cancellation is a necessary policy to decrease disparity and increase opportunity. President Joe Biden agrees. Like his progressive colleagues, Biden wants student loans cancelled, and he clearly recognizes the direct policy impact of wide-scale student loan forgiveness. However, the president and these members of Congress differ on the amount of student loan cancellation and who ultimately will cancel student loan debt. Progressives want Biden, by executive order, to cancel up to $50,000 of student loan debt. Biden wants Congress to cancel $10,000 of student loans. Biden has sought to resolve this standoff, in part, by seeking a legal review of his unilateral authority on student loan forgiveness.
That said, Biden hasn’t allowed a standoff on wide-scale student loan forgiveness to prevent him from enacting student loan cancellation. In his first two months in office, for example, Biden has moved aggressively to cancel student loan debt. Biden already has cancelled $2.3 billion of student loans. His approach to student loan cancellation has been piecemeal and targeted. First, Biden cancelled $1 billion of student loans for 72,000 student loan borrowers and second, he cancelled another $1.3 billion of student loans for 41,000 borrowers with total and permanent disability. Some student loan borrowers have lauded the president’s quick action. Others have said it’s not enough student loan forgiveness and represents only a fraction of total student loan debt. America has definitely reacted to student loan cancellation. It’s that part — the reaction of voters — that is also at play here. Student loan cancellation is more than policy. Let’s learn why.
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Student loan cancellation: the political angle
In Washington, every policy has an underlying, and sometimes, equally important political implication. That includes student loan cancellation. Beyond the policy debate, there are several key political implications. When it comes to wide-scale student loan forgiveness, good minds can debate whether the policy trumps politics. However, there is no ignoring the political realities that lurk underneath the surface of student loan cancellation.
Democrats barely control Congress
Currently, Democrats control the White House, the U.S. House and the U.S. Senate. The U.S. Senate is split 50-50 with Republicans, and Vice President Kamala Harris holds the tiebreaking vote. However, in about a year and a half, Americans will vote in the mid-term congressional election. That election could tip the balance of power in Washington, and if Republicans gain seats in the Senate, Biden’s agenda could be challenged. If Biden or Congress proceeds with wide-scale student loan forgiveness before the mid-term election, expect Republicans to make it a central campaign theme. Republicans will portray student loan cancellation as wealth redistribution, a tax increase and deficit spending. If you support student loan forgiveness, those labels may sound highly unfair. However, if you oppose student loan cancellation, they might ring true come election time and impact election results, particularly in battleground states.
Biden is running for re-election
Biden has been president less than three months, but already has said he will run for re-election in 2024. Biden can read the political landscape; this isn’t his first rodeo. As a former U.S. senator and vice president, Biden knows which policies play well and how voters react. That doesn’t mean he or any other public servant makes decisions solely based on political calculations, but it’s at least a consideration. This may be one reason why Biden has said he doesn’t support student loan cancellation of $50,000, and instead favors $10,000 of student loans. The Republican nominee in 2024 likely won’t support wide-scale student loan cancellation. For independent and moderate voters, an issue like student loan cancellation may not be highest priority. However, on both sides of the political aisle, a president’s action can signal different things to different voters—and potentially sway votes.
Student loan forgiveness is poorly targeted
Opponents of student loan cancellation say there are many reasons why student loans shouldn’t get cancelled. One reason is that student loan cancellation is poorly targeted. The latest student loan debt statistics show that 45 million borrowers collectively owe $1.7 trillion in student loan debt. While 45 million is a relatively high number, it’s less than 20% of the approximately 250 million adults in the U.S. The vast majority of the adult population no longer has or never had student loans. This includes individuals who couldn’t afford college or never attended college, who also may face financial hardship and have been adversely impacted by the Covid-19 pandemic. So, the policy question becomes this: is it fair to cancel student loans for one group of people, and not provide the same financial relief to the majority of the population who also may have different financial struggles? Supporters say student loan debt is a crisis, and no matter how many people have student loan debt, it should be cancelled. The political question becomes: will wide-scale student loan cancellation (particularly up to $50,000) alienate potential voters in the mid-term and presidential elections?
Student loan cancellation: next steps
For supporters of wide-scale student loan forgiveness, the political realities are likely not top of mind. For supporters, student loan forgiveness is good policy and therefore should be implemented. Some members of Congress may say that when it comes to student loan cancellation, the politics are irrelevant and don’t drive policy decisions. For opponents of student loan cancellation, wide-scale student loan forgiveness is bad policy, and they too don’t need to process the political realities because their mind is already made up. For politicians in Washington, however, the political realities are palpable. If the president cancels student loans by executive order, he may further solidify support from progressives. At the same time, he may risk alienating up to 80% of potential voters without student loan debt. If the president doesn’t cancel student loans by executive order, he may upset progressives, but could sure up his existing credentials as a moderate Democrat. That said, as Biden already has noted, Congress can still pass legislation to cancel student loans and he would sign any bill on student loan cancellation that Congress sends him. The reality is that no matter how the president or Congress proceeds, some constituency will be unhappy. However, as student loan forgiveness continues to be a hot button issue, you can be assured that any decision on student loan cancellation won’t be limited to policy ramifications. Expect the political impact to be front and center.
If you’re waiting for student loan cancellation, make sure you evaluate all your options for student loan repayment. Here are some smart options to consider to save money: