Comment Close White House allies are at odds over whether the administration should cancel up to $10,000 in student debt for millions of American borrowers as President Biden nears a decision after months of delays. With the Lower Inflation Act now signed into law, White House officials have rekindled discussions of student debt relief in recent days. They face an August 31 deadline when loan payments are due to resume after a pandemic hiatus. Internal White House discussions have focused on temporarily extending that pause and simultaneously eliminating the $10,000 per borrower for those below an income threshold, but the president has not yet communicated a decision, according to two people familiar with the matter, speaking under the condition of anonymity. reflect private conversations. Another person familiar with the talks said $10,000 is among the options being considered. The issue has divided Democratic lawmakers and influential policy experts in the administration, putting Biden in a spot where he is guaranteed to run afoul of some of his supporters. Supporters say the president should fulfill a campaign promise to ease the heavy debt of millions of young Americans, and critics say it could worsen inflation while mostly benefiting high-income college graduates who don’t need help. Administration officials must choose between canceling significant debt — possibly giving Republicans a new talking point ahead of the midterm elections — and angering young voters and racial justice groups whose support they also need at the polls. Officials had been studying for months whether canceling student loans could alienate voters who had already paid off their loans, and polling results were mixed, said a third person familiar with the matter, who also spoke on condition of anonymity to mirror private conversations. White House officials have previously discussed limiting debt forgiveness to Americans who earned less than $150,000 in the previous year, or $300,000 for married couples filing jointly. A person familiar with the matter said those limits have not changed, although implementing those caps in practice could prove complicated. White House aides tried to prepare a student debt relief policy in May. Those plans have been put on hold amid negotiations over the Democratic economic agenda with Sen. Joe Manchin III (DW.Va.), and the repeated postponements have angered repeal advocates. The measure is expected to apply only to undergraduate debt, and Democratic officials have discussed further limiting eligibility to public school students. Education Secretary Miguel Cardona told NBC News on Sunday that a decision on the repayment freeze would be made “within the next week or so.” The latest White House plan would forgive $10,000 in student debt per borrower “It’s a deep political problem,” said Bill Galston, who served as a top policy aide in the Clinton White House. “The fact that they hesitated for so long to put their chips on the table suggests that they are fully aware of the potential economic and political implications of taking a major step in this direction.” As the president moves closer to a decision, both supporters and critics of debt relief have made increasingly vociferous pleas for their side. On Friday, Senate Majority Leader Charles E. Schumer (DN.Y.) and Sen. Elizabeth Warren (D.Mass.) — two strong advocates of student debt cancellation — spoke again with White House Chief of Staff Ron Klein, according to two other people with knowledge of the private conversation. Schumer and Warren reiterated requests they have made over the past two years to forgive significant amounts of debt, the people said. The NAACP has also been adamant that the administration cancel up to $50,000 in student loans per borrower, citing the higher debt burden of Black Americans. “$10,000 alone is paltry, to say the least — it won’t address the magnitude of the problem,” Derrick Johnson, president of the NAACP, said in an interview. But centrist Democrats have begun to push hard. Lawrence H. Summers and Jason Furman — two prominent Democratic economists who served in previous administrations — stepped up their candidacy against broad loan forgiveness, arguing that it would worsen inflation by increasing overall spending. Summers and Furman, critics of the president’s $1.9 trillion U.S. bailout plan last year, have been outspoken supporters of the deflationary law negotiated with Manchin. But in a Twitter thread Monday, Summers argued that the administration should not contribute to inflation by offering “unduly generous student loan relief” or encouraging colleges and universities to raise tuition. Furman added in an interview: “This is redistricting, and there’s nothing wrong with redistricting — if it was from the middle down. A lot of that is redistribution from the middle to the upper middle.” Canceling $10,000 of debt for everyone with federal student loans would settle the balances of about a third of borrowers and cut overall debt by at least half for another 20 percent, according to the latest figures from the Department of Education. Borrowers are expected to resume payments on September 1, more than two years after the moratorium was first imposed in response to economic turmoil caused by the pandemic. Extending the pause would mean about 41 million people would continue to spend the next few months without interest accruing on their debt and with more time to save money. As of April 30, the moratorium had cost the federal government about $102 billion in interest payments that borrowers should not have made, according to the Government Accountability Office. As of 2021, 37.9 percent of adults age 25 and older have a bachelor’s degree, up from 30.4 percent in 2011, according to the Census Bureau. One in five Americans has student loans, according to a Federal Reserve study. Who has student loan debt in America? The Committee for a Responsible Federal Budget, a D.C.-based think tank that opposes loan forgiveness, found that eliminating $10,000 of debt per borrower could cost about $230 billion. It also found that extending the moratorium would raise core inflation by 0.2 percentage points and wipe out most of the deficit reduction achieved in the first decade of the deflation-reduction act, according to Marc Goldwein, senior vice president of the agency and senior policy director. These claims have been hotly disputed. The Roosevelt Institute, a left-leaning think tank, argued that canceling student debt would “increase wealth, not inflation.” The Roosevelt Institute paper found that the inflationary effect of debt cancellation would be negligible and that ending the moratorium on payments would exceed that effect. Requiring borrowers to keep up payments would reduce inflation by slowing consumer spending. The political impact of the decision is also hotly debated — even among Democrats. Galston, a former Clinton aide, predicted that families who paid off their loans could turn sharply to Biden as Democrats appear to be recovering in the polls. “If they get it wrong, they’re going to have a big backlash on their hands,” Galston said. Bryce McKibben, a former senior policy adviser to Sen. Patty Murray (D-Wash.) on the committee that oversees education, said the more complicated the repeal plan becomes, the less likely it is to help people — or Biden’s agenda. “Every time you ask the borrower to take a step, you increase the chances of people falling through the cracks because the department doesn’t have contact information for a large number of people in the portfolio,” said McKibben, now senior policy director. and advocacy at the Hope Center for College, Community, and Justice at Temple University. And Celinda Lake, a Democratic pollster who has worked for Biden, said the president could improve his voter numbers among young voters, who she said are motivated primarily by three issues — climate, abortion rights and student debt – but sees only the first two as a reason for Democrats to get out. “We’ve got two of the legs – we need the third,” Lake said. “It’s important to do something for young voters who are not as motivated to turn out to vote, but they are by far our best constituency.”
