As 78-year-old President-elect Joe Biden’s inauguration gets closer, he’s getting more pressure to cancel student debt when he takes office. Biden’s former rivals 73-year-old Sen. Elizabeth Warren (D-Mass) and 79-year old Bernie Sanders (I-Vt.), continue to pressure him on eliminating at least $50,000 of debt per student. Biden hadn’t said much on the popular idea with his party’s left-wing about canceling student debt. But one thing that doesn’t sit right with Biden and many other folks is the idea that you can borrow money then renege on your obligations. U.S. economy, for better or worse, is built on extending credit to individuals with a promise to repay loans. If Biden agrees to retire student debt, what’s to prevent other groups, equally deserving as struggling students, from demanding their debt forgiven? Biden has many competing interests hammering him on student debt relief to free college tuition.
Rep. Alexandria Ocasio-Cortez, 31, a big supporter of Bernie Sanders, wants Biden to forgive all student debt like he’s got omniscent powers as U.S. president. Biden doesn’t know the legality of signing an executive order to cancel student or any other debt, something subject to legal challenges. When it comes to student debt, Warren, Sanders and Ocasio-Coretz think educational debt is different from consumer debt or health care debt, a dubious proposition. “I’m going to get into trouble saying this,” Bdien said at a Dec. 22, press conference. “The president may have executive power to forgive up to %50,000 in student debt. Well, I think that’s pretty questionable. I’m sure of that. I’d be unlikely to do that,” Biden said, irking his liberal base, thinking, as president, Biden can wave a magic wand when it comes to debt. Biden’s right about legal consequences to debt forgiveness.
When it comes to student debt, Warren, Sanders and Ocasio-Cortez want to give students special exemptions for debt, but not homeowners, consumers or others saddled with debt, unable to pay their bills in the Covid-19 era. Instead of using an executive order, Biden wants Congress to pass student debt forgiveness which he agreed to sign. Signing an executive order for debt forgiveness would violate every principle of the U.S. or global mercantile system, where debt, or a promise to pay a loan, is what keeps the U.S. and global systems afloat. As soon as you let folks take out loans with a promise to pay, it undermines the system when you don’t expect repayments. Banks who borrowed the money from the Fed and loaned out the money to students have a right to be repaid like any other debt instrument. With over $1.55 trillion in student debt on the books, debt forgiveness sends the wrong message.
Biden shared in the Dec. 22 press conference a little bit of his philosophy of the presidency. “It’s a balancing act, but I’m optimistic that we can get a lot of things that I’d like to do done,” Biden said. “I’ve spent most of my career arguing against the imperial presidency. We got three equal branches of government. I’m confident that there are a number of areas that are of such consequence that they go beyond partisan boundaries.” It’s actually reassuring to hear Joe opine about complex matters as student debt forgiveness, something his more liberal colleagues think can be disposed of with the stroke of a pen. “President Biden can undo this debt—can forgive $50,000 of [student] debt—the first day he becomes president,” said 71-year-old Senate Minority Leader Chuck Schumer (D-N.Y.). “Your don’t need Congress. All you need is the flick of a pen,” something highly dubious.
Sxhumer holds a J.D. from Harvard University but has no clue what’s legal for the president when it comes to retiring student debt. When it comes to federal student loan forgiveness, it’s clear that Congress, that regulates the national banking and lending industries, would have to pass legislation forgiving student debt. Lending institutions that stand to get hurt would have to have government guarantees that they wouldn’t take massive losses on their balance sheets. When mortgage–backed securities failed in 2008, it sent Wall Street—and the U.S. economy—into a tailspin. Schumer thinks retiring billions in student debt can happen with the “flick of a pen.” Schumer thinks Bidne’s 45-year-old newly minted education secretary Miguel Cardona can order student debt forgiveness, something so preposterous, it makes you wonder about Chuck’s lucidity to take over as Senate Majority Leader.
Forgiving student debt goes to heart of U.S. lending practices. Whatever class of borrower, they agree to repay the debt or the whole system implodes, like it did when mortgage-backed security went bust in 2008. Before any debt forgiveness, Congress needs to debate the issue, with experts from the government, banking industry and colleges and universities giving their assessment of why education costs have become so astronomical. But whatever the reasons of exploding student debt, the government has to figure out an equitable formula for discharging some fraction of student debt. For borrowers with large incomes, it seems obvious that there are differences with underemployed or unemployed borrowers it terms of their ability to repay debt. Biden’s right that Congress needs to debate the issue of student debt forgiveness and come up with a reasonable fix.
