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Biden and student loan debt

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During the 2020 campaign, Joe Biden made a number of fairly bold policy proposals regarding cancelling a lot of student debt. Student debt is a significant economic and social problem that’s rapidly getting worse: outstanding student debt in the USA increased by 48% just between 2014 and 2020, from $1.06 trillion to $1.57 trillion. About 14% of American adults currently hold student debt, at an average of about $37,500 per borrower.

These statistics obscure a lot of complexities however. The class dynamics of student debt make it a politically loaded issue in all sorts of ways. For one thing, the large majority (two-thirds) of American adults don’t have a four-year college degree. A little less than half of that group has spent some time in the higher education system, and this cohort — people who have attended college and either never graduated or have two-year associates degrees — have gotten hammered economically over the past twenty years, as they’ve seen their annual earnings decline by 12.5% in real terms over the last two decades.

The flip side of this story is that nearly half of the people who attend college in America emerge with no debt whatsoever. One reason that tuition has skyrocketed over the past couple of generations is that there are enormous numbers of very rich, somewhat rich, and semi-rich families in America, who can afford to pay high college tuition bills without debt financing, which in turn has exacerbated the tendency of the cost of higher education to resemble a Veblen good — that is, the kind of luxury good that tends to see demand for it increase rather than decrease in response to increasing price, in direct contradiction to the axioms of Econ 101, or at least the first couple of weeks of the course.

The result of all this is that student debt forgiveness, which to a considerable extent should be something of an economic and political no-brainer, remains a very loaded issue. One remarkable feature of this situation is that there’s actually a pretty good legal argument that Joe Biden has the authority to wipe out about 92% of that $1.6 trillion in outstanding debt by unilateral executive action. He doesn’t seem inclined to do that, however:

The Higher Education Act of 1965 empowered the Department of Education to “compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.” And thanks to a reform passed under Barack Obama in 2010, the federal government now owns roughly 92 percent of all student debt. Which is to say, more than $1.5 trillion of Americans’ student debt is owed to the Department of Education — which has the explicit authority to waive “any claim” it possesses and can therefore unilaterally make all that debt disappear.

This theory makes sense to me. But it needs to make sense to federal judges in order to work, and thanks to the Trump presidency, the federal judiciary is quite conservative. “Using an executive order to forgive federal student loans will likely be met with a lawsuit and preliminary injunction and eventually fail,” Kantrowitz told NBC in November.

So for mass student-debt forgiveness to happen through executive action, three things would need to occur: (1) The Department of Education’s review would need to find that Biden has the authority to cancel student debt, (2) Biden would have to decide to use that authority, and (3) the judiciary would need to uphold his right to that authority.

All three of these developments seem unlikely. As I have mentioned, Biden evinces little enthusiasm for the student-debt issue and has generally gone out of his way to steer clear of controversy. Exploiting an obscure federal statute to deliver $430 billion in aid to the minority of Americans who hold student debt — in defiance of Congress and on the basis of a coherent but contested legal theory — just doesn’t seem like Uncle Joe’s game.

Again, the politics of all this are quite complicated: Republicans have spent the last 50 years or so demonizing higher education in this country, and their ability to win elections is overwhelmingly dependent on the fact that a huge percentage of their base consists of white people, especially men, without college degrees.

Another complicating factor is that it’s quite true that the administrative class that runs American colleges and universities has exploited both their students and public support for higher education over the past half century in increasingly self-dealing and indefensible ways.

It’s important not to focus too much on Biden himself here: as Eric Levitz points out in the article linked above, it’s not like there are 50 votes in the Senate for any kind of aggressive student debt forgiveness in any case.

That debt is a growing — in the both literal and metaphorical sense — economic and social problem, that our political system seems particularly ill-equipped to address rationally.

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