Loan cancellation is a hot topic in today’s political climate. With rising student loan debt and economic uncertainty, many Americans are calling for some form of broad student loan forgiveness. However, the rules around who can actually cancel student loans are complicated. The president, Congress, and loan servicers all play a role. Understanding the specifics can help borrowers advocate more effectively.
Can the President Cancel Student Loans?
The president has some power to cancel student loans, but there are limits. The White House can forgive federal student loan debt under the Higher Education Act of 1965. This law gives the Secretary of Education, who works under the president, power to modify, compromise, waive, or release student loans. However, this power is not unlimited.
The Higher Education Act states the Secretary’s powers apply only to debt owed to the federal government. So private student loans are not eligible. The Act also limits loan cancellation to situations where borrowers face hardship or their college closed before they could complete their degree. Past administrations have used this power narrowly to help specific groups of borrowers, like those defrauded by for-profit colleges. But some argue the law allows broad debt cancellation for economic hardship during national emergencies, like the COVID-19 pandemic.
The White House can also rely on other laws to forgive debt. For example, after Hurricane Katrina, the Department of Education used the Higher Education Relief Opportunities for Students Act to cancel loans for students whose schools closed due to natural disasters. Following 9/11, government agencies relied on the Stafford Act to help Americans rebuild their lives through student loan forgiveness.
However, legal experts debate how far these powers can stretch. The president faces limits from Congress, which controls the government’s purse strings. Some argue mass student loan cancellation requires Congress to approve additional funding. For now, it remains unclear how much unilateral power the White House has to erase student debt.
Can Congress Cancel Student Loans?
Congress writes laws, controls spending, and oversees federal agencies. So it has broad power to shape student loan policy, including creating loan forgiveness programs.
In the past, Congress has authorized multiple programs to help specific groups of borrowers, such as:
- Public Service Loan Forgiveness (PSLF): Forgives loans for government and nonprofit workers after 10 years of payments.
- Teacher Loan Forgiveness: Awards up to $17,500 for teachers in low-income schools.
- Closed School Discharge: Discharges loans when a school closes before a student graduates.
Congress could pass legislation to forgive loans more broadly. Some proposals include cancelling $10,000 or more per borrower, or forgiving debt for specific demographics. Unlike the president, Congress’s spending power is clear and undisputed.
However, major loan forgiveness still faces obstacles. It would have a large price tag, likely hundreds of billions of dollars. Congress would need to approve that funding through budget legislation. Achieving majority agreement could prove challenging in a divided Congress. Borrower advocacy groups continue lobbying for reform.
What Role Do Loan Servicers Play?
Loan servicers are companies contracted by the Department of Education to handle administrative tasks for federal student loans, including:
- Sending monthly bills and tracking payments
- Providing customer service for borrowers
- Processing applications for income-driven repayment plans
- Managing defaults and debt collection
Servicers have some power to alter or forgive loans in limited cases. For example, they can waive late fees under certain circumstances. Servicers also process applications for forgiveness programs authorized by Congress and the White House.
However, servicers cannot create or expand loan forgiveness rules on their own. Their role is administrative. Advocates often criticize servicers for providing poor customer service and mishandling programs like Public Service Loan Forgiveness. But changing program policies lies outside a servicer’s authority.
Can Individual States Cancel Student Loans?
States have limited power to directly cancel federal student loan debt. States cannot alter the terms of federal loans, since only the federal government has authority over its own programs.
However, some states have created programs to help borrowers repay federal and private student loans. For example:
- Maryland offers state income tax deductions for student loan interest payments.
- Maine allocates funds to pay off health care professionals’ loan debt if they live and work in underserved areas.
- California considered creating a state student loan forgiveness program, but the proposal faced major budget hurdles.
These state repayment programs provide indirect relief to borrowers. But states cannot legally intervene in federal student loans and erase that debt directly.
What Are the Current Student Loan Forgiveness Proposals?
Here are some major student loan forgiveness proposals that policymakers, advocacy groups, and politicians have suggested:
Blanket Federal Loan Forgiveness
- President Biden’s plan: $10,000 per borrower, means-tested
- Sen. Elizabeth Warren’s plan: $50,000 per borrower
- Activist groups: Full cancellation of all federal student debt
Expansion of Existing Programs
- Simplify PSLF requirements
- Expand Pell grants and tuition assistance
- Raise capped forgiveness amounts for teachers, nurses, etc.
- Relax rules for closed school and disability discharges
Targeted Loan Forgiveness
- Cancellation for specific fields like teaching and public service
- Cancellation for borrowers under a certain income level
- Forgiveness for students of predatory for-profit colleges
The details vary widely between different proposals. Some call for erasing all federal student debt, while others focus on expanding existing relief programs. How expansive cancellation could occur without Congress remains legally disputed.
How Do Student Loan Borrowers Feel About Forgiveness?
Many student loan borrowers support some form of debt cancellation, but views differ on the scope. Here are some key survey findings:
| Poll | Results |
|---|---|
| CNBC, April 2022 | 61% of borrowers support $10,000 forgiveness per person |
| Vox and Data for Progress, November 2021 | 54% of borrowers support $50,000 forgiveness per person |
| Morning Consult, October 2022 | 47% prefer blanket forgiveness, while 53% prefer income caps |
Surveys consistently show majority support for $10,000 per borrower in forgiveness. Support declines for larger amounts but remains split. Most borrowers back some level of debt cancellation.
What Are the Main Criticisms Against Loan Forgiveness?
While many borrowers want student debt cancelled, critics have raised several objections:
- Fairness: Across-the-board forgiveness would benefit high-earners and graduate degree holders, not just disadvantaged borrowers.
- Moral hazard: Forgiveness could incentivize irresponsible borrowing if people expect future cancellation.
- Inflationary: Mass loan cancellation may stimulate inflation and raise national debt.
- Elitist: College graduates with debt are better off than non-college goers. Forgiveness excludes the latter group.
To address these concerns, advocates argue forgiveness should prioritize lower-income borrowers. Forgiveness could also be paired with college affordability reforms. Details matter when designing equitable cancellation policies.
How Feasible Are the Current Forgiveness Proposals?
Loan cancellation faces significant legal and political barriers:
- The president’s power to mass forgive debt is legally disputed. Courts may overturn unilateral action.
- A divided Congress makes major legislation on forgiveness difficult currently.
- Moderate Democrats could block proposals costing hundreds of billions of dollars.
- Republicans broadly oppose large-scale student debt cancellation.
More modest reforms, like streamlining PSLF or expanding grant programs, may be easier to enact. But systemic change likely requires consensus-building and multi-step policies.
What Steps Can Borrowers Take on Loan Forgiveness?
Borrowers have several options to advocate for debt cancellation:
- Contact federal and state elected officials to share personal stories and call for change.
- Vote for candidates who prioritize college affordability and forgiveness.
- Join grassroots organizations pressing for reform.
- Submit public comments to federal agencies on improving relief programs.
- Apply individually for income-driven and employment-based forgiveness options.
Staying informed on proposed policies can help borrowers take action. While broad forgiveness will require substantial public pressure, individuals still have tools to lower their debt.
Conclusion
The student debt crisis has renewed public debate over loan forgiveness. While the president and Congress both hold some cancellation powers, major reform requires consensus. The legal and political path forward remains contested. Borrowers can influence the debate by organizing and sharing their experiences. With compromised solutions, progress on student debt relief is possible.