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Prominent Senators And Representatives Propose A Resolution For The President To Exercise Executive Authority To Cancel Up To $50,000 Of Student Debt Per Borrower.

On February 4, 2021, Senate Majority Leader Chuck Schumer, Senator Elizabeth Warren, and Congresswoman, Ayanna Pressley, joined by a number of Senate and House Democrats[1], proposed a bicameral Resolution for President Biden to cancel up to $50,000 in federal student debt per borrower.  The proponents emphasize that the President can cancel student loan debt by using authority which exists under the Higher Education Act.  The President has already utilized such authority by signing an executive order forbearing payments and interest on student loan obligations through September 2021.

The Secretary of Education has the legal authority to broadly cancel student debt under section 432(a) of the Higher Education Act of 1965 (20 U.S.C. 1082(a)), which gives the Secretary 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.” This authority has been implemented by the Department of Education during the COVID-19 pandemic to provide relief for federal student loan borrowers by freezing payments and interest accrual.

The proponents express that cancellation of up to $50,000 per student borrower will help greatly to stimulate the economy and break down socioeconomic wealth barriers.  Senator Warren proclaims that: “The COVID-19 crisis is worsening the massive inequities in our economy and society, but even before the pandemic the student loan debt crisis was already crushing millions of Americans.  . . . By canceling up to $50,000 in federal student loan debt for borrowers, President Biden can take the single most effective executive action available to provide a massive stimulus to our economy, help narrow the racial wealth gap, and lift this impossible burden off of tens of millions of families.”

As stated in a report published by Senators Warren and Schumer, over 40 million Americans are saddled with over $1.6 trillion in student loan debt.  Of those 40+ million, more than 9 million borrowers are in default of their student loan obligations.  Student loans have a higher delinquency rate than any other type of household debt.

According to a recent press release, the Resolution:

  • Recognizes the Secretary of Education’s broad administrative authority to cancel up to $50,000 in Federal student debt, using the modification and compromise authority Congress has already granted the Secretary in law;
  • Calls on President Biden to take executive action to administratively cancel up to $50,000 in Federal student loan debt for Federal student loan borrowers using existing legal authorities under section 432(a) of the Higher Education act of 1965 and any authorities available under the law;
  • Encourages President Biden to use the executive’s authority under the Internal Revenue Code of 1986 to prevent administrative debt cancellation from resulting in a tax liability for borrowers;
  • Encourages President Biden, in taking such executive action, to ensure that administrative debt cancellation helps close racial wealth gaps and avoids the bulk of federal student debt cancellation benefits accruing to the wealthiest borrowers; and
  • Encourages President Biden to continue to pause student loan payments and interest accumulation for Federal student loan borrowers for the entire duration of the COVID-19 pandemic.

As I reported in an article last month about the introduction of the Consumer Bankruptcy Reform Act co-sponsored by Senator Warren, the bill eliminates student loan debt from the list of nondischargeable debts in Bankruptcy Code § 523(a).  The burden of student loan debt continues to increase.  While forgiving up to $50,000 in student loan debt or eliminating all conditions of discharging student loan debts in bankruptcy may not be the answer, such proposals appear to be a step in the right direction to boost the economy and assist the over 9 million Americans currently in default on their student loans.

[1] Joining the resolution are Senators Sherrod Brown (D-Ohio), Richard J. Durbin (D-Ill.), Tammy Duckworth (D-Ill.), Richard Blumenthal (D-Conn.), Chris Van Hollen (D-Md.), Jeff Merkley (D-Ore.), Edward J. Markey (D-Mass.), Cory Booker (D-N.J.), Ron Wyden (D-Ore.), Brian Schatz (D-Hawai’i), Jon Ossoff (D-Ga.), Ben Ray Luján (D-N.M.), Robert Menendez (D-N.J.), and Bernard Sanders (I-Vt.), along with Representatives Ilhan Omar (MN-05), Maxine Waters (CA-43), Chair of the House Financial Services Committee, Alma Adams (NC-12), Jamaal Bowman (NY-16), Mondaire Jones (NY-17) and Ritchie Torres (NY-15), Nanette Barragan (CA-44), Earl Blumenauer (OR-03), Cori Bush (MO-01), Yvette Clarke (NY-09), Steve Cohen (TN-09), Veronica Escobar (TX-16), Adriano Espaillat (NY-13), Jesus “Chuy” Garcia (IL-04), Jimmy Gomez (CA-34), Vicente Gonzalez (TX-15), Raul Grijalva (AZ-03), Alcee Hastings (FL-02), Jahana Hayes (CT-05), Pramila Jayapal (WA-07), Hank Johnson (GA-04), Ro Khanna (CA-17), Al Lawson (FL-05), Barbara Lee (CA-13), Andy Levin (MI-09), Alan Lowenthal (CA-47), James P. McGovern (MA-02), Grace Meng (NY-06), Jerrold Nadler (NY-10), Grace Napolitano (CA-32), Eleanor Holmes Norton (DC), Alexandria Ocasio Cortez (NY-14), Jimmy Panetta (CA-20), Jan Schakowsky (IL-09), Albio Sires (NJ-08), Bennie Thompson (MS-02), Rashida Tlaib (MI-13), Nydia Velazquez (NY-07), Bonnie Watson Coleman (NJ-12), Nikema Williams (GA-05), Frederica Wilson (FL-24), Madeleine Dean (PA-04), Brendan Boyle (PA-02), André Carson (IN-07), and Mark Pocan (IN-07).

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