The Biden administration has said the proposed $1.9 trillion coronavirus (COVID-19) stimulus bill will not contain a provision to forgive some student loan debt. The White House says it will seek separate legislation to do that.
That appears to make loan forgiveness a little less certain for millions of student loan borrowers. Democrats have adopted a strategy of budget reconciliation for the stimulus bill that requires only a simple majority. A stand-alone student loan forgiveness bill would likely require 60 votes.
Consumer advocates expressed hope that student loan forgiveness could be added to the stimulus bill as an amendment, but that hasn’t happened. As things now stand, the bill provides a wide range of consumer and business relief and will not address student loans.
The White House says it remains committed to seeking relief for borrowers, whose student loan debt has mushroomed over the last two decades. The outstanding balances now total $1.7 trillion, according to government data.
President Biden has previously supported forgiving up to $10,000 of student loan debt, but progressives in his party have advocated for much higher levels of forgiveness. Sen. Elizabeth Warren (D-Mass.) has supported up to $50,000 in loan forgiveness.
Congress addressed the issue during its last session but failed to agree on an approach. Most centered on tweaking current measures designed to provide relief, such as the Public Service Loan Forgiveness program.
Executive action could be an option
If Congress fails to agree on a debt forgiveness plan, reform advocates say the president could take executive action. They say the Higher Education Act offers a way for the president to take unilateral action to lighten borrowers’ burden.
In the past, the president has publicly expressed some skepticism when it comes to using executive action to accomplish that goal, but he expressed some openness to it last week. The White House has indicated it is looking into whether it would be legal.
While canceling student loan debt would increase federal spending on top of the massive stimulus measures that have been passed in the last 11 months, some economists suggest that the move could have a huge stimulative effect on the economy.
They note that large debts have prevented many young people from making major purchases at the beginning of their adulthood, including the consumer purchases associated with household formation.