Targeted Student Loan Cancellation Has Been Biden’s Focus–Here’s Why

Joe Biden, the Vice President of the United States (Photo courtesy of Getty Images/Ethan Miller)
courtesy of Getty Images
President Joe Biden has taken this approach to student loan forgiveness.
Here’s what you should know about it, as well as what it implications for your student loans.
Biden has forgiven $3 billion in student debts since taking office in January. Biden has concentrated on targeted student debt cancellation, which means he has cancelled student loans for certain constituent groups that have a specific and indentifiable cause for doing so. In some situations, these student loan borrowers received a complete loan cancellation, while in others, they received a partial loan cancellation. Consider the following scenario:
Under the borrower defense to student loan repayment rule, Biden eliminated $500 million in student loan debt for 18,000 borrowers.
For 72,000 student loan students, Biden annulled $1 billion in student loans.
For 41,000 borrowers with total and permanent disability, Biden cancelled another $1.3 billion in student loans.
Student loan relief was granted by Biden to 1.1 million borrowers who had defaulted on their FFELP loans.

Biden has focused on targeted student loan cancellation for three reasons:

Student loan cancellation with a defined goal in mind is specific and measurable. Unlike large-scale student loan cancellation, which cancels student loans for a wide range of borrowers depending on loan type or income, targeted student loan cancellation is linked to a specific economic or legal wrong, or aims to rectify another specific, societal wrong. When Biden revoked his first $3 billion in student loans, he was able to precisely explain why each loan was cancelled. This isn’t to say that a large-scale cancellation of student loans couldn’t be justified as a “economic wrong” or “societal wrong,” but it’s a tougher sell as a matter of public policy than targeted student loan cancellation. This could be one of the reasons why Congress has not passed any legislation to cancel student loans on a large basis.
ADDITIONAL INFORMATION FOR YOU

The cancellation of targeted student loans is based on clear, established, and unambiguous law. There’s no doubt that the Biden administration can cancel student loans based on total and permanent disability or the borrower defense to repayment law. The legal basis for large-scale student debt cancellation, on the other hand, is potentially questionable. Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) have contended that Biden has unilateral authority to cancel student loans with an executive order under the Higher Education Act of 1965. They point to Section 432A of the Higher Education Act of 1965 as proof that the US Department of Education has 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,” because the Higher Education Act gives the Education Department the authority “to modify, compromise, waive, or release any right, title, claim, lien, or demand, however acquired.” The Act, however, does not expressly specify that the president or the US Department of Education can unilaterally cancel all student loan borrowers’ loans without further congressional approval. Even if Biden were to erase hundreds of billions of dollars in student loans, he would almost certainly face legal challenges. In addition, courts are hesitant to allow one branch of government to act unilaterally based on a text that is potentially unclear.

It is not cheap to cancel a student loan. Estimates range from $400 billion to $1 trillion, depending on the size of the student loan cancellation program. There have also been questions regarding who benefits from the cancellation of student loans. According to new research, student debt cancellation may benefit the wealthy more than low-income borrowers. Of course, the amount of student loan cancellation is determined by a variety of parameters, including the amount of debt owed, the number of borrowers, and other limiting factors such as income and loan type. Biden has saved taxpayers money by using targeted student loan cancellation. Opponents of targeted student loan cancellation argue that it does not go far enough, claiming that not enough student loan debtors and debt have been terminated. Opponents also argue that canceling student loans will stimulate the economy because borrowers who receive student loan forgiveness will spend their money elsewhere. However, despite the cancellation of student loans, Biden is overseeing an economic rebound from the Covid-19 pandemic. From stimulus cheques to infrastructure spending, there are a lot of moving components. The question is how student loan cancellation fits into that wider picture, and if it does, how much money should be allocated to it as Biden assists Americans in their economic recovery.

Is it possible that your student loan may be forgiven? Yes, it is conceivable. Is Biden done with student loan forgiveness? Probably not. The question is how student loans will be cancelled in the future. Will there be a blanket cancellation of student loans, a targeted cancellation, or both? At the very least, more targeted student debt cancellation is probable. There has been no widespread cancellation of student loans by Congress or the administration to date. While the Education Department considers legal possibilities for student loan cancellation, the process has been ongoing for nearly four months. It’s unclear when the Education Department will issue a non-binding legal opinion to the president on whether the president may legitimately enact wide-scale student debt cancellation, or whether Congress would be required to intervene. The Education Department held hearings last month on student debt cancellation and forgiveness, as well as suggestions to strengthen these programs so that more student loan borrowers can seek relief. The Biden administration is also putting a lot of effort into making sure that the existing student loan forgiveness programs run well and enable borrowers who qualify get their loans canceled.
So, how does this affect your student loans? There are no promises that all student loans will be forgiven. If you qualify, you may be eligible for targeted student loan cancellation, but most people will not. As a result, make sure you have a student debt game plan tailored to your specific financial circumstances. Here are some wise student loan options to think about:

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