Elizabeth Warren says her plan to eliminate student loan debt can bypass Congress

Personal Finance

Democratic presidential candidate Sen. Elizabeth Warren (D-MA) speaks to guests during a campaign stop at Fisher Elementary School on January 12, 2020 in Marshalltown, Iowa.

Scott Olson | Getty Images

Presidential contender Sen. Elizabeth Warren said on Tuesday that she would begin to forgive student loan debt on the first day of her administration, using legal tools that would allow her to bypass Congress.

The announcement, which comes just weeks before voting begins in the first primary and caucus states, adds urgency to legislation she introduced over the summer to cancel the bulk of the nation’s outstanding student loan debt.

That bill, introduced with Rep. James Clyburn, D-S.C., would forgive up to $50,000 in student debt for individuals with household incomes under $100,000. But Warren wrote in her plan on Tuesday that the U.S. Education Department already has authority to cancel student debt, “and we can’t afford to wait for Congress to act.”

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“I will start to use existing laws on day one of my presidency to implement my student loan debt cancellation plan that offers relief to 42 million Americans — in addition to using all available tools to address racial disparities in higher education, crack down on for-profit institutions, and eliminate predatory lending,” she wrote in the plan.

Warren is fighting to make a splash in the Iowa and New Hampshire contests early next month. The Massachusetts progressive has slipped in state polls in recent weeks, and is now behind former Vice President Joe Biden and Sen. Bernie Sanders, I-Vt., in both states. She also trails Pete Buttigieg, the former mayor of South Bend, Indiana, in Iowa.

Americans hold more than $1.5 trillion in student debt, and the problem is particularly acute in Iowa and New Hampshire. More than 60% of new graduates in Iowa and 76% of those in New Hampshire have outstanding student debt, according to The Institute for College Access & Success. And recent graduates in those states also carry higher balances than the national average of around $30,000.

Warren’s plan to eliminate student debt goes further than the proposals put forth by Biden or Buttigieg but stops short of Sanders’s call to erase student debt entirely.

Alongside the new plan, Warren released a letter written to her by three legal experts who vouched for the legality of a president cancelling student debt through executive action. The experts, based at the Project on Predatory Student Lending at Harvard Law School, described such a move as “lawful and permissible.”

The experts, Eileen Connor, Deanne Loonin and Toby Merrill, cited a provision of a sweeping higher education bill passed in 1965 under President Lyndon Johnson. The provision grants the Education Secretary the authority to “modify” existing loans, they wrote, adding that the secretary “has the authority to modify a loan to zero.”

However, higher education expert Mark Kantrowitz said that authority did not extend to all student loans.

“The U.S. Department of Education does not have the discretionary authority to cancel student loan debt except in limited circumstances specified by the statute, such as death, disability or closed schools,” Kantrowitz said. “Likewise, the authority to compromise debt is limited to situations in which the borrower demonstrates severe financial distress.”

Meanwhile, a rush to forgive student loan debt could destabilize the entire higher education system, said Wayne Johnson, the former chief operating officer of the Office of Federal Student Aid. Johnson resigned last year to launch a Senate campaign in Georgia.

“What do you do to the loans you make tomorrow or next week?” Johnson said. “Is everyone who takes out new loans going to think, ‘I don’t have to do anything, they’re just going to be forgiven anyway?'”

Yet many people struggling with student debt are in need of quick relief, said Luke Herrine, a PhD student at Yale Law School. Previously, Herrine was the legal director of the Debt Collective, which successfully lobbied for the debt forgiveness of thousands of for-profit college students.

Student loans, he said, present “a real emergency for a lot of people.” Around 30% of borrowers are in delinquency or default.

Herrine, who published a white paper in 2019 making the case for student debt cancellation via executive action, said he expects the argument to gain traction. Until Warren proposed the debt jubilee last year, he said, “the question of forgiving student debt on a mass basis wasn’t even considered a serious policy to think about among the people who pay attention to these laws.”

Warren wrote that the new plan does not mean she will avoid Congress on student debt entirely.

She said she would still fight to enact the rest of her college affordability plan, as well as the wealth tax that she has said would offset its cost.

“If we want to achieve the kind of big, structural changes that will make our education system, our economy, and our society work for everyone, we’re going to need to use every tool, every scrap of opportunity that comes our way, to help working families,” she wrote.

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