April 5, 2021

Student Loan Forgiveness Review Could Lead To Student Loan Cancellation, But There’s One Problem – Forbes

Student Loan Forgiveness Review Could Lead To Student Loan Cancellation, But There’s One Problem - Forbes

Will your student loans get cancelled after the U.S. Department of Education reviews them?

Here’s what you need to know.

Student Loans

President Joe Biden has asked the U.S. Department of Education to conduct a legal review of the president’s authority to cancel student loan debt. The review could contain at least some of the following components:

The Education Department, led by U.S. Secretary of Education Miguel Cardona, is expected to send the legal review to the president within weeks. “He’ll look at that legal authority,” White House Chief of Staff Ron Klain said, referring to Biden. “He’ll look at the policy issues around that, and he’ll make a decision.”


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Student loan cancellation: here’s the problem

While a legal review of student loans and student loan cancellation is a logical next step, there’s one glaring problem: Why is the U.S. Department of Education conducting this legal review? The Education Department surely has highly capable and accomplished attorneys and policy experts who fully comprehend the legal and public policy components of student loan cancellation. So, it’s not a question of understanding the complexities of the issue or an ability to interpret the law. During the Trump administration, for example, the Education Department opined on wide-scale student loan forgiveness too. The Education Departmemt issued a legal memo that determined that a president does not have unilateral authority to enact student loan cancellation. Today, the Education Department could accept or reject its predecessor’s non-binding memo, or reach an alternative conclusion.

The bigger question, however, is not what the Education Department — which, like the president, is part of the executive branch of the federal government — thinks. The question is what Congress thinks, and specifically, what did Congress intend when it passed the Higher Education Act of 1965? Section 432(a) of the Higher Education Act of 1965 grants the U.S. Secretary of Education the authority “to modify, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.” Based on this provision, Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA) argue that it’s unquestionable that the president (through the Secretary of Education) can cancel student loans for all student loan borrowers by executive order. This provision is the main reason why Democrats plan to cancel up to $50,000 of student loans. Schumer has even suggested on the Senate floor that Congress may cancel student loans more than once. Opponents of student loan cancellation say that Congress never intended to grant the president unlimited, unchecked authority to cancel everyone’s student loan debt — and if Congress intended this, Congress would have written it explicitly in the text of legislation, which Congress didn’t.


Student loan forgiveness: this should happen instead

When Congress drafted the Higher Education Act of 1965, it’s unlikely that any member of Congress envisioned that one day, 45 million student loan borrowers collectively would owe $1.7 trillion of student loan debt. That said, at a minimum, Congress intended for the president (through the Education Department) to cancel at least some student loan debt. Biden has acted on that premise. For example, Biden cancelled $2.3 billion of student loans last month. 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. Biden has proceeded with targeted, piecemeal student loan forgiveness, rather than one-time, wide-scale student loan cancellation. Biden’s view is that he doesn’t believe he has unilateral authority — without any further authorization from Congress — to enact student loan cancellation, even if he wanted to. Biden does want to cancel $10,000 of student loans immediately, and wants Congress to pass the relevant legislation on student loan cancellation.

The Education Department may seem like the right choice to conduct a legal review, since student loan cancellation falls under its purview. However, the necessary exercise is more an analysis of legislative drafting and constitutional interpretation. While the Education Department certainly can conduct a policy review and opine on the law, it seems more fitting that any one of the following may be better suited to conduct the legal review:

  • White House legal counsel;
  • the U.S. Attorney General; or
  • an independent presidential commission comprised of legal scholars and jurists.

Alternatively, it would be helpful to learn more from a bipartisan working group, committee, or sub-committee in Congress that can interpret what Congress intended in its drafting of the Higher Education Act of 1965.


Student Loan Cancellation: Next Steps

Should there be a legal review of student loan cancellation? Yes. That said, a non-binding legal review can only go so far. No matter what the legal review determines, only Biden will decide whether to proceed with student loan cancellation and how much student loan debt to cancel. Biden could stand by his current position that he doesn’t have the legal authority to cancel student loans, or he could change his position and cancel student loans unilaterally. That said, the ultimate arbiter of this legal question may not come from the executive or legislative branches. If Congress or the president cancels student loans, expect legal challenges. This means we could have the judicial branch opine on the president’s authority, which not only could potentially delay student loan cancellation, but also finally could settle the outstanding legal question. Will your student loans get cancelled? Ultimately, that will be up to the president and Congress. In the mean time, as you weigh your options for student loan repayment, here are some smart options to consider to save money:


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