In a 6-3 decision, The Supreme Court ruled in Biden v. Nebraska that Biden didn’t have authorization to forgive student debt under the Heroes Act. If you want to read the text itself, you can do it here (warning: PDF).
Biden is now saying that he’s going to do it again via the Higher Education Act. The New York Times reports:
Even as he denounced the Supreme Court ruling striking down his student debt forgiveness program and blamed Republicans for going after it, President Biden said Friday that his administration would start a new effort to cancel college loans under a different law.
The law Mr. Biden cited, the Higher Education Act of 1965, contains a provision — Section 1082 of Title 20 of the United States Code — that gives the secretary of education the authority to “compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.”
According to Wikipedia, William Edward Hickson is credited with popularizing the proverb:
‘Tis a lesson you should heed:
Try, try, try again.
If at first you don’t succeed,
Try, try, try again.
The main thing that I was wondering was “what is the nature of all this college debt, anyway?” and, luckily, I found an article from Brookings. The high notes I gleaned from the article:
About 75% of student loan borrowers took loans to go to two- or four-year colleges. Those borrowers account for about half of all outstanding student loan debt.
Despite horror stories about college grads with six-figure debt loads, only 6% of borrowers owe more than $100,000.
About 75% of student loan borrowers took loans to go to two- or four-year colleges; they account for about half of all student loan debt outstanding. The remaining 25% of borrowers went to graduate school; they account for the other half of the debt outstanding.
Most undergrads finish college with little or modest debt: About 30% of undergrads graduate with no debt and about 25% with less than $20,000. Despite horror stories about college grads with six-figure debt loads, only 6% of borrowers owe more than $100,000—and they owe about one-third of all the student debt. The government limits federal borrowing by undergrads to $31,000 (for dependent students) and $57,500 (for those no longer dependent on their parents—typically those over age 24). Those who owe more than that almost always have borrowed for graduate school.
My main takeaway from that is that a debt-forgiveness program of ~$10,000 would leave the majority of the problems out there given that fully half of the student debt is held by about 25% of the indebted.
Maybe the HEA gambit will result in the post-grad debts being forgiven this time. If it doesn’t, we will pass debt forgiveness and still end up reading stories like this one:
In 2012, I graduated from Fordham Law School with $180,000 is student loan debt.
I’ve been paying loans for 11 years. Even paid two of them off completely.
In 2023, my balance is $206,000.
— Alessandra Biaggi (@Biaggi4NY) June 30, 2023
Biaggi is being disingenuous here, of course. If her balance is going up despite consistently making payments, she’s probably on an income-driven repayment plan, which means that she will never be required to pay off the full balance. Likely the two loans she paid off in full were private loans ineligible for income-driven repayment.
I never thought I’d say this again after Trump, but Biden might legitimately be the worst President since Nixon.Report
The $10,000 wasn’t calculated to solve student loan debt problems, it was calculated to be the amount of debt relief that would maintain roughly the same level of delinquency and default rates that existed prior to the pandemic. Whatever one thinks about the policy or or its legality, its reach was limited in scope to the Pandemic pause. The new theory won’t be so limited.
(I thought the program wasn’t authorized by statute, but none of the parties had standing. The revenge of Massachusetts v. EPA is underway)Report
From what I understand, getting to the other side of inflation from 2019 to 2023 is one heck of a lot of debt relief in and of itself.
If the plan isn’t to solve student debt but to… what? Make Grad School free?
We’re going to not only have this problem again in 5 years, it’s going to be *WORSE*.Report
Do you have any good sources for an analysis of the forgiveness based on the Higher Ed Act? I found this one, which makes it sound clearly not applicable, but that was just from a random search.Report
Not really. The HEA came up in oral argument. The Solicitor General used HEA waivers to argue that this type of relief is not unusual since Congress had approved its use, while the Nebraska AG pointed out that HEA had different language, indicating Congress did not want HEA style waivers in the Heroes Act.
My instinct is that there are different issues to address under different laws and the program would end up differently, but maybe they just use the same underlying analysis. Otherwise, why wouldn’t the Administration use the HEA in the first place? It might be that HEA waivers would open up a can of worms to continuous calls for debt jubilees that would pose political problems for Democrats and incentives to rack up more and more student loans (political, not legal issues).Report
Another one:
If you check her bio on Wikipedia, she got her BA from Whitman College and her JD from the University of Pennsylvania.
Whitman College shows up on the “100 Most Expensive Colleges” lists.Report
She also appears to have never worked in a high-paying job. Human rights law is an honorable field, but it’s a choice that’s not going to boost the bank account. And the office of the Secretary of State in Colorado earns less than $100k.Report
On the one hand, I find her to be among the least sympathetic of people in this situation, probably due to my survivor’s bias of graduating law school in the pit of the financial crisis but somehow salvaging a successful and lucrative (enough anyway) career. Not that she hasn’t also done that in a way, assuming one has the brains and perspective to understand that a public service inclined career involves certain trade offs.
At the same time, it reinforces my hypothesis about why reform is harder than it seems. Fixing it over the long term may well require telling poor people who are smart and academically successful that they are still not going to be able to go to college. That is a very difficult argument to make politically from any mainstream perspective.Report
We keep comparing SLACs to No College and we shouldn’t.
We should compare SLACs to State University.
We should compare State University to State College.
We should compare State College to Compass Directional State.
We should compare Compass Directional State to Community College.
And we should compare Community College to No College.
Because that’s where the margins change.Report
We should also compare full-time college and loans, to night / online school and smaller loans, to ROTC or Starbucks and no loans.Report
Agree 100%.Report
Eh, tell her she can go to college and to law school, but also tell her that if she doesn’t put in a few years in the private sector she’ll have no right to complain about not paying off her loans. She’s been out of law school for 13 years, and now she has a ton of unique experience. Bang it out in a few.Report
This is why I don’t have a lot of sympathy for her in particular. She could have a very lucrative career and at some point almost certainly will. Most likely she falls into the High Earner Not Rich Yet class.
But the issue she raises is still IMO one that needs to be addressed if we ever get to reforming the system, even if she is a pretty terrible example of it.Report
I think there is an important distinction btw/ what the U.S. government loans, which is around $31k for a four year degree, and the private loans that people necessarily took out in to order to cover the rest. I don’t know that the U.S. government profits from the former, I would count these as subsidies to make college available to more young people, just not the most expensive colleges. The government can’t do much about private loans; maybe the government can impose enough regulatory requirements on them that the business folds.Report
Are the private loans dischargeable in bankruptcy (in theory)?Report
I believe I have read about some cases over the last few years that suggest they might be depending on the particular facts, and what the loan was actually used for. That said I think the answer is at best unclear and therefore not the safety valve we need. Getting that means changing the bankruptcy code, which IMO we should do.Report
Some relevant reading on ongoing developments:
https://news.bloomberglaw.com/bankruptcy-law/navient-loses-student-loan-bankruptcy-battle-but-long-fight-loomsReport
I don’t see any mention of the co-sign issues, but this paragraph seems important:
“Homaidan and Youssef contend that the loans Navient continues to bill for were discharged in bankruptcy because those loans exceeded the cost of attendance at a Title IV college. Such loans don’t count as a “qualified education loan” exempt from discharge under the bankruptcy code, they argue.”
I’m not sure what the loan would be used for above the cost of attendance other than room and board, when the school’s stated “cost of attendance” is based upon cost of living in a dorm.Report
While the bankruptcy code absolutely needs to be changed, I’m wondering whether there is any grapeshot that is whiffable in the meantime.Report
I think the issue is that these loans almost always need a cosigner, usually a parent. A student getting bankruptcy relief doesn’t protect the cosigner.Report
Hrm. Asking two households to declare bankruptcy is probably too much.Report