The Journal. - Biden’s New Plan to Cancel Student Debt

Episode Date: April 9, 2024

The Biden administration is proposing a sweeping initiative to slash student debt for nearly 30 million borrowers. WSJ’s Andrew Restuccia unpacks the proposal and explains why it marks a major new White House effort to try to appeal to progressives and young voters seven months before the November election.  Further Listening: - Breaking Down Student Debt Relief  - How Biden Plans to Tackle Student Debt  Further Reading: - Biden’s Student-Loan Plan Seeks to Slash Debt for 30 Million Americans  Learn more about your ad choices. Visit megaphone.fm/adchoices

Yesterday. Hello, Wisconsin. Hello, hello, hello. President Joe Biden was in Madison to make an announcement. He was unveiling a new program to cancel student debt. I will never stop to deliver student debt relief on hardworking Americans. And it's only in the interest of America that we do it. And again, it's for the good of our economy. This feels like something the Biden administration has tried before. It feels like deja vu.

Yeah, if it feels familiar, that's because it is. They tried, you know, but the Supreme Court struck it down. So what they did is they decided to try again. They believe that it'll stand the test of the courts this time. That's our colleague Andrew Rastusha. He covers domestic policy. Why is he doing this again? Like, isn't this kind of risky to be doing this in an election year? President Biden is trailing his Republican opponent, Donald Trump, in most polls. And he is underperforming in particular among young people, which are traditionally a solid, democratic, reliable constituency. And that's a problem. I mean, if Biden wants to win the election, he can't lose any of these key, reliably democratic groups. You know, what's the biggest group of people who have student loans?

That's young people. Welcome to The Journal, our show about money, business, and power. I'm Kate Linebaugh. It's Tuesday, April 9th. Coming up on the show, why Biden is trying again to cancel student debt. Attention all soccer fans, From Orlando to Los Angeles, take to the fields of the USA for your next vacation. Ready to kick off? Discover exciting games and events.

Plus, find amazing hidden gems in cities full of adventures, delicious food, and diverse cultures. You'll love it so much, you'll want to extend your stay beyond the matches. Get the ball rolling on your soccer getaway. Head to visittheusa.com. President Biden has come a long way in his thinking about student debt forgiveness. It wasn't until the 2020 presidential election

that he even supported the issue. Biden was always skeptical of this idea from the beginning. He is an old school guy with old school views and he had to be convinced and pressured by people like Elizabeth Warren and Bernie Sanders during his 2020 presidential campaign to buy into this idea. And he eventually did.

And even when he first got into the White House, there was a long process behind the scenes of his advisors still having to sort of convince him that this was a good idea. Two years into his administration, Biden came out with a bold proposal to cancel student debt for 40 million Americans. And to do it, he used something called the HEROES Act, an emergency measure passed by

Congress during the pandemic. The beauty in the minds of the Biden administration for using the HEROES Act, this pandemic emergency law, was that they could essentially do it overnight. They could wipe away, you know, billions of dollars in loans immediately. And in June 2023, a majority of the Supreme Court ruled that Biden had overstepped. And this program was meant to be used for emergencies, but it was never meant to be a massive rethinking of the student loan portfolio as we know it. What was the public reaction to that Supreme Court decision? The reaction was mixed, and it depends on who you talk to. Young people were frustrated.

They were frustrated, on the one hand, at the Supreme Court for striking down the program. But a lot of young people I talked to were also angry at Biden. And this is a really interesting dynamic that has unfolded. They blame Biden for overpromising. And a lot of them, you know, voted for him in part because of this promise that he made during the campaign. And their argument is, you should have known this was coming and you shouldn't have sort of raised our hopes unfairly, knowing that, you know, you have a conservative Supreme Court that could kill it at any minute. But Biden wasn't ready to give up.

And so on the same exact day that the Supreme Court killed Biden's program, Biden says, I'm not done. I'm going to try again. And he launches this new process using a new legal authority through a 1965 law called the Higher Education Act to do this all over again. Only this time, it's going to be slower and more complicated. And why does the administration think it's going to work this time? A couple of reasons. So if we want to just learn a little bit about the Higher Education Act, which I know everyone, I'm sure, is thrilled to learn about.

But there's a... People are desperate to learn about it, for sure. They woke up today and they were like, the thing I want to learn about is the Higher Education Act. Well, that's what I woke up today and said. So the Higher Education Act, it's a 1965 law, and there's a provision in the law, Section 432A6, that gives the education secretary power to, quote, enforce, pay, compromise, waive, or release elements of the education system. So that presumably includes student debt. of the education system. So that presumably includes student debt. And so what the White House is doing is using this authority and defining a new system that puts a little bit

of meat on the bones of what's pretty loosely defined authority in the law. And they're saying, we're going to use this authority to do all these things. And so that is sort of what underpins all of this. What makes that different from the HEROES Act? Yeah, so they believe that they're on more solid legal ground for two reasons. One, like I said before, they believe the authority is more explicit in the law. They believe that the provision in this 1965 law is much more explicit, and that it's not hinged on a national emergency. And that's really important here. They used the pandemic as their rationale the first time,

and this time they're not. And number two, it's not just executive action that Biden's taking, a stroke of the pen, overnight loans are canceled. They've gone through a really bureaucratic regulatory process that involves stakeholder comment and input from various industries. And typically in the courts, those regulatory processes hold more weight than something that is just an order that's signed by the president. And so that's their rationale for why this time things could be different. And so that's their rationale for why this time things could be different. Biden's new program would do several things. It would provide relief to borrowers whose student loan balances have ballooned because of unpaid interest.

It would also cancel debt for borrowers who've been making payments for decades. And it would eliminate or reduce loans for people facing financial hardship. This new program applies to 30 million people out of the roughly 43 million who have federal student loans. And did they leave anything out of this new program that, like, was in the old one? As in, like, did the administration make some obvious compromises? It's a good question. I think fewer people in this plan will ultimately see relief than the original one. Because the original one was so clean and simple. It was just, you get up to $20,000 in forgiveness if you make below a certain amount of money.

And this one is much more complicated. And it's the reason why they didn't try this route in the first place. This is going to require, you know, the Biden administration to really think, to sort of comb through a lot of data that they have on borrowers to figure out who doesn't qualify. Okay, so let's talk about the opponents to student loan forgiveness. Okay, so let's talk about the opponents to student loan forgiveness. How have they reacted to this new proposal? They've reacted the same way they reacted to the first one,

which was essentially saying that Biden is ignoring the will of the Supreme Court by trying to do this again. The Supreme Court has already signaled that they're skeptical of this broad use of authority. And that is essentially another backdoor way of doing the same thing they tried to do the first time. And so they have signaled that they plan to file a series of lawsuits to overturn this. And what's the timeline to get these programs implemented? So it's going to be tight. One person in the White House that I talked to said that they hoped to have millions of people seeing their loans reduced or eliminated entirely before the November election. Coming up, the political calculus behind Biden's do-over.

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It's all yours. No, really, it's all yours. This treat is too good to share. Everyone will have to get one for themselves. Hurry in to get this flavor before the DQ freezer closes. DQ, happy tastes good. In the 2020 election, younger voters played a key role in Biden's victory. But this time around, Andrew says they're more skeptical.

I talked to hundreds of young people around the country over the last few years, and student loans is probably the number one thing that people raise. People feel like they're drowning in debt. I have been struggling with student loans for over a decade. I worked plenty of overtime and a lot of side jobs so that I could spend every extra penny that I had on my student loan debt. You know, if you are not independently wealthy, it can require taking out tens of thousands, sometimes hundreds of thousands of dollars in loans to go just to undergrad.

And people feel overwhelmed. And it's part of a sort of broader sense of malaise that you're seeing in the country about the economy in general, where particularly young people feel like they just can't get ahead. They can't afford their rent. They can't generate enough income

to buy a house and start a family. And so people feel behind. And student loans is just one sort of symptom of that feeling. If young voters felt burned by Biden the first time, is he kind of walking into the fire again here? Yeah, on one hand, he is. And I guess the calculation they had to make was, is it better to just not try again and blame the Supreme Court and say, we tried, sorry, or to try again and risk this happening all over again? And I think their calculation was they can't not try if they had the legal authority. And it's such a huge issue for progressives and young people

that to not try would, I think in their view, be a bigger political risk. To not try would, I think in their view, be a bigger political risk. And how are young voters feeling about Biden right now? Well, what we know is more young voters support Biden than Trump by about 10 percent. So about 50 percent of young people support Biden and 40 percent support Trump. But 50 percent isn't a great number for a democratic president among young people. It's significantly lower than it was in 2020. And I would say in addition to their frustrations about Biden not being able to follow through on the student loan issue, a lot of young progressives are angry at the president over the way that he has supported Israel in its fight against Hamas and Gaza.

And a lot of young people just feel like they want an alternative. I really don't think Biden has realized that Gen Z is not going to vote for you. You have lost. Many of my mutuals and other creators on this app have begun a discourse on whether or not it's justified for people to rescind their vote for Joe Biden. And that's going to be difficult to overcome. You know, I don't think, you know, you could really make the case that this student loan thing alone will solve all those problems. Right. Like, is forgiving student loan debt enough for younger voters to overcome these other

issues? Yeah. I mean, I guess it depends on the kind of voter you are. And I think the White House is banking on the fact that not every voter is an activist progressive, right? And that some voters vote with their pocketbooks. And we do know that from polls that a lot of voters do. And so if you all of a sudden, you know, have 20, 40, $50,000 less in debt one day than you did last week, I mean, that could be enough to tip the scale if you're kind of undecided

and you're not sure who you're going to vote for. So how difficult is this going to be for Biden to pull off? It's going to be hard. The bureaucratic challenges are significant. The legal challenges are perhaps even more significant. It just takes one judge to stop all of this in its tracks once it's finalized. If Biden's program here does hit a roadblock,

how will that look for him? I think it risks a replay of what happened the first time where voters got their hopes up and read all the stories like ours in the journal about 30 million people potentially getting relief, and then the rug was pulled out from underneath them again. And so I think it risks really angering young people who already feel sort of toyed with in politics. But it remains to be seen how much of that anger will be directed directly at Biden

and how much will be directed at Republicans and the court in general. My sense, if last time is any prelude to what we might see, is that it'll be a mix of both. But Biden really can't risk angering young people and progressives, you know, right before the election. If it doesn't work, would that kind of be the nail in the coffin for student debt forgiveness? It's a really good question. If it gets all the way to the Supreme Court and there's no hope for appeal and the program is just dead, it would be a significant setback for this movement, really, that's popped up around the entire country. And I don't know if there would be another...

I think what the Biden administration would try to do was continue canceling debt on an incremental, targeted basis. But there would be little hope for a sweeping across the board comprehensive effort to forgive this on a massive scale. The only hope, I think, would be for Congress to come together and pass legislation on the issue. But the hope for doing this on the executive level would be significantly set back. And it really could be a nail in the coffin for this.

That's all for today, Tuesday, April 9th. The Journal is a co-production of Spotify and The Wall Street Journal. See you tomorrow.