Today, Explained - Student loan forgiveMESS

Episode Date: October 5, 2022

President Biden’s plan to forgive billions of dollars in student debt is both historic and controversial. Now some red states are suing to block it. NPR’s Cory Turner explains. This episode was produced by Victoria Chamberlin with help from Jillian Weinberger, edited by Matt Collette, fact-checked by Laura Bullard, engineered by Paul Robert Mounsey, and hosted by Sean Rameswaram. Transcript at vox.com/todayexplained Support Today, Explained by making a financial contribution to Vox! bit.ly/givepodcasts Learn more about your ad choices. Visit podcastchoices.com/adchoices

Ahead on Today Explained, President Joe Biden has a plan to relieve student debt. NPR's Corey Turner has an explanation of why it's not going very well. So in the past six weeks or so since the announcement. Using the authority Congress granted the Department of Education, we will forgive $10,000 in outstanding federal student loans. We've gone from, you know, borrower jubilation. Like a weight was lifted off my shoulders, mostly for my parents because it stresses them out like a lot. And conservative excoriation.

I think it's against the law what this president and the Democratic party are doing. To rolling out of this plan, everyone is waiting for the application to come out in the coming days or weeks. And then last week, the lawsuits hit. The all-new FanDuel Sportsbook and Casino is bringing you more action than ever. Want more ways to follow your faves? Check out our new player prop tracking with real-time notifications.

Or how about more ways to customize your casino page with our new favorite and recently played games tabs? And to top it all off, quick and secure withdrawals. Get more everything with FanDuel Sportsbook and Casino. Gambling problem? Call 1-866-531-2600. Visit connectsontario.ca. Six Republican-led states taking action to block it. In a lawsuit jointly filed today in federal court in Missouri, the state accused the president of overstepping his executive authority. Today explained, no good deed goes unpunished. President Biden tried to

relieve a bunch of Americans of their student loan debt, and now he's being sued. Corey Turner's been following the story for NPR. Not only did three different lawsuits hit last week, but we also saw the administration very quietly in response to these lawsuits start to actually change the plan itself, which suggested a kind of fear of legal exposure that we hadn't seen before. I want to talk more about the lawsuits eventually, but let's just dial it back for a minute here and talk about how President Biden decided he would forgive student loan debt. Well, I think there are a couple different answers here. The first one is he made this promise back on the campaign trail when he was running for president.

That's why I proposed and the House, Nancy, put it in the plan to immediately provide $10,000 in debt relief as stimulus right now, right now for students. Because he was running against more liberal candidates like Senator Elizabeth Warren, I think he knew he needed to make some sort of promise to borrowers that he would do something like what she had already committed to. $10,000 is just not enough help for enough people. $50,000 helped us reach the point where we could cancel all debt for about 85% of those carrying student loan debt. And I think the challenge for him is after he won, the pressure was pretty unrelenting. From civil rights groups, from borrower advocates, and frankly, from other politicians in his own party.

The president can do it with the flick of a pen. All he has to do is sign an executive order. He doesn't need a single senator. Also, there's a very real argument to be made that our higher ed system is pretty broken, that our lending system is broken, and that it does disproportionately hurt traditionally disenfranchised borrowers, black borrowers especially, who often are showing up at college without the kind of family wealth that many white borrowers have to protect themselves from incurring a lot of debt up front. Who, due to generations of what I would characterize as precise, intentional policy violence, have been forced to take on higher rates of student debt for just a chance, the same degree as our white peers. It was just getting out of hand. And there was a very real equity argument to be made there. And then there's the practical argument, which is he did it because he could do it,

or he thought he could do it. And so he was faced with this decision where because of this law that was passed back in the early 2000s by Congress called the HEROES Act, and it was passed in the wake of 9-11, the HEROES Act basically says, look, it's a national emergency. And in a national emergency, we think the education secretary should have the right to maybe exercise some flexibility and grace on behalf of borrowers who are struggling. And so what the Biden administration saw in that law was flexibility to say, well, we're in another national emergency. It's different from 9-11. It's COVID, but it's still a national emergency. And maybe we can use that authority to not only pause repayment, but erase debts entirely.

And now what we're seeing play out is a very real legal debate around whether or not he overstepped. So what does Biden do? What does the forgiveness look like? I mean, the basic contours of the plan are if you as an individual earn less than $125,000 a year, you qualify for up to $10,000 in debt relief. They did something kind of last minute, which was super interesting, which is they expanded that to $20,000 debt relief if you received a Pell Grant, to go to college. And a Pell Grant is essentially free federal money that flows to borrowers who are low-income,

who might have trouble affording college otherwise. Both of these targeted actions are for families who need it the most. Working and middle-class people hit especially hard during the pandemic, making under $125,000 a year. And so it's a really interesting way of means testing this debt relief on the back end, assuming that if you received a Pell Grant to go to college, you may still be low income. Obviously, it's not a completely clear assumption. Some borrowers 10, 15 years out of college might not be low income anymore, but

the Biden administration took a swing and that's what they came up with. How many people stand to have their student debt relieved or completely wiped out by this plan? I mean, we think it's the vast majority of borrowers in the student loan portfolio. We're talking about probably more than 40 million people people. And somewhere around half technically should qualify to have most or all of their debts erased. When you find out the Pell Grant kids get an additional $10,000. The administration has said the application will be straightforward and simple. There's no application yet? They have not released it yet. They are still working on it. Huh. Yeah, they announced the policy at least six weeks or so before they even had an application.

Is it kind of like Obamacare where they passed Obamacare, but then they had to build the thing, and then the thing rolled out, and it was kind of a mess, and then they had to fix it and tweak it? Exactly. I mean, I think the very tired metaphor that's really apt here is they're building the plane as they fly it. Is that because this has really not been tried before? Is this unprecedented? The very tired metaphor that's really apt here is they're building the plane as they fly it. Is that because this has really not been tried before? Is this unprecedented? It is. It hasn't been tried before.

It's enormous in scope. Obviously, people who were going to save thousands upon thousands of dollars were happy when this was announced. But a bunch of other people were also quite unhappy. I don't have the words to capture their loathing for this policy. Somebody please explain to me why these kids that took out big old loans for a useless education think that the loans should be forgiven. Why? And what reality is that acceptable? Think about our veterans who couldn't afford college, who were promised that they would get college tuition paid, and now they hear they didn't really need to go serve. We're also simultaneously angry on behalf of the people who paid off their loans and feel screwed. And you know why they feel screwed? It's because they got

screwed. That's why they feel screwed. But it know why they feel screwed is because they got screwed. That's why they feel screwed. But it's also blatantly unconstitutional for President Biden to unilaterally take this cynical election year action without the required congressional authorization. He is, after all, the president, not our king or dictator. I mean, they see it as illegal. They see it as unconstitutional. You know, they argue that the Constitution is very clear. Congress controls the purse. Congress gets to spend money, not the president. And, you know, the Congressional Budget Office has said this will eventually cost the U.S. government about $400 billion. Has the Biden administration said anything about how this is essentially being paid for,

this $400 billion giveaway? Not really. No, because really up until the CBO score, I think the Biden administration has tried to distance itself from other estimates. One thing that I think you'll hear from administration officials and also some outsiders is that this isn't simply cutting a check for $400 billion, which also figures into the administration's legal argument here that, you know, the president isn't spending $400 billion. He's canceling debts equivalent to roughly $400 billion. And so the administration would argue that like, you know, look, before the pandemic, we know that one in five borrowers were in default anyway.

So there is a very real argument that a lot of this money was never going to come back to the federal government. Some of it would have though. And I think what they're saying now is, well, we don't dispute the cost anymore, but we still think it's worth it. We still think this is going to help millions of people start new lives, buy homes they couldn't previously afford, buy that car they couldn't previously afford, help cover childcare, you know, with money that they don't have to spend on a student loan payment anymore. In addition to criticism coming from conservatives who take the side of the lenders, perhaps, there's also this criticism that these aren't the people who need a handout from the federal

government. Does the Biden administration have an answer to that critique? Not a direct answer because I'm not sure there's anything you can do to undercut that argument's legitimacy. It is on its face accurate. These are millions of Americans who this policy will not help simply because they didn't go to college. Like that is a fair argument. You know, I want them to feel seen as well. I'm not going to downplay what must be some very real frustration on their part. It ain't just controversy Biden's courting here.

It's lawsuits. More with Corey on that in a minute on Today Explained. Spend management software designed to help you save time and put money back in your pocket. Ramp says they give finance teams unprecedented control and insight into company spend. With Ramp, you're able to issue cards to every employee with limits and restrictions and automate expense reporting so you can stop wasting time at the end of every month. And now you can get $250 when you join Ramp. You can go to ramp.com slash explained, ramp.com slash explained, R-A-M-P dot com slash explained,

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Can you imagine? Forgiveness. Imagine forgiveness. Today explained Vox, Corey Turner, NPR. People are suing the Biden administration over its plan to relieve students of their debt. Who is suing thus far? Let's talk about lawsuits. I'll give you the laundry list. We basically have three suits from last week that I think are interesting,

and they're all very different. Conservatives, it feels to me like they're lining up the planes on the tarmac, and each one will take off, and they're trying to figure out what are the legal headwinds here. Where do we get purchase against this policy we don't like? And so one lawsuit goes, and then they see how the administration reacts, and then the next one goes, and then they see how the administration reacts, and then the next one goes. And it's different. Huh. The first one was filed by a borrower who lives in the state of Indiana.

And that's important because Indiana is one of a handful of states that says it will charge income tax. It will tax this debt relief. Frank Garrison's attorney says this student loan forgiveness program will do nothing for him except to make him pay a one-time state tax payment of $1,000. And his argument is, I don't want this relief because I don't want to have to pay that tax because in a couple years I'm going to qualify for public service loan forgiveness that will erase all of my debts. The second lawsuit was filed by six states just a couple days after that first one. Iowa is suing the Biden administration along with five other Republican-led states. The six states accuse the administration of overstepping its executive powers.

And this one is more complicated. The most important part of the suit is that it was filed in federal court in Missouri. And that's because at the center of the suit really is this loan servicer called Mojila. At Mojila, we understand that student loans can seem like this. But with our help, student loans don't have to be scary. We're just regular people like you. Even if you're behind on your payments or nearing default, we will help you find a plan

that fits your needs. You could even qualify for a repayment plan with a monthly payment as low as zero dollars. Our representatives will help you complete the application. We can help you with just one call. Speak with us today by calling 636-787-2631. And Mojila services a lot of federal direct loans. A lot of borrowers who might be listening to this right now have Mojila as a loan servicer. They also, though, hold on to a lot of those old fell loans. And the argument in this case from a bunch of state attorneys general, including the AG from Missouri, is Mojila is going to be hurt by this policy to let all of these old fell borrowers basically cancel their debts. Mojila was profiting off of this, and they

were planning for years to come to have these debts as like a source of revenue. If you just erase them all, well, that hurts Mojila. And Mojila is a state-based agency. So that hurts the state of Missouri. And there's a third lawsuit. And then there's the third suit that was filed at the very end of last week by the attorney general of Arizona. And again, he made a couple new arguments. He argued that in canceling all of these loan debts, the state ofized the impact of a different student loan forgiveness program, public service loan forgiveness, which he said his office, the Attorney General's Office

of Arizona, had used the promise of PSLF to entice a lot of good young attorneys who were coming out of school with a lot of debt, you know, come work in the AG's office, put in your 10 years and have your debts erased. Well, his argument is this is going to make it harder for me now to recruit good attorneys who are going to find much more lucrative jobs in the private sector. So you've got three lawsuits, a borrower saying, I don't want this relief. You're messing with my finances. I had a plan. Another lawsuit about interfering with state revenue. Another lawsuit about interfering with other programs. These all sound somewhat legitimate in terms of arguments being made about this messing with some other stuff. How is the Biden administration responding to these lawsuits? Well, so its response to the first lawsuit with the borrower was to include an opt out in the policy. As soon as that lawsuit was filed, the White House came out and said, this guy's not

going to be harmed because he can opt out. Anyone who doesn't want debt relief can just opt out. That was news. They hadn't actually announced an opt-out before, but it also seemed to work. The judge in that case a couple days later said, look, if there is an opt-out, which there seems to be now, it's difficult for you to argue you're going to be hurt by this. That was easy. In response to the second lawsuit that argues these private lenders and state-based agencies that profit off of these old-fell loans will be harmed. It's the federal family education loan. These loans are guaranteed by the federal government, but they're held by private banks, commercial lenders, state-based agencies. We've learned borrowers whose federal student loans are guaranteed by the government but held by private lenders will now be excluded. That's

around 770,000 people. Even though back in August, they were told all they had to do was consolidate their loans into new federal loans and then they qualify. And then the third lawsuit, we haven't seen much of a response to. So as things stand now, a judge has weighed in on the fursuit and said, okay, yeah, I'm not convinced here. The other two, though, are still interesting and active, and everyone I talk to is really curious to see if any of these plaintiffs are granted standing. So that's what we're waiting for. This is what the administration is worried about. If they're granted standing, then they could get a temporary restraining order or potentially some kind of injunction that could prevent the Biden administration from implementing its relief plan. It is hard to overstate the importance of the wild card here, which is, who's the judge? Where's the court? Right? So the second lawsuit was filed, like I said, in federal court in Missouri,

right? And all it takes is one judge to say, yeah, I think you've got enough here that I will grant you standing, and I might entertain the idea of at least pausing this thing. Let's see. From your reporting on this story, do you get the sense that the Biden administration saw this coming, saw the blowback coming, or do you think there are factions of the White House right now who are regretting going out on a limb here? They had to have known what they were getting into. The thing that surprises me about all of this, especially the last week, is they

were clearly either surprised or miscalculated, or else they would not, six weeks after having told hundreds of thousands of borrowers they qualify for debt relief, they would not have then turned on a dime and tried to very quietly change the language on the Ed Department's website to say, no, you don't qualify for debt relief. That's a mistake. That's the kind of thing they should have either been clear about from the start or not done at all. You know, because ultimately what this created was simply false hope. And they clearly made this change in response to the lawsuits. Then again, all of the experts I've been talking to say like they should have seen this legal strategy coming from a mile away. This just feels like another reminder that it's really hard to push your agenda without legislation in this country.

The fact that it's not legislation is the reason it's happening. Again, Biden tried to expand the child tax credit. He pitched free universal child care. He pitched high-quality free preschool. He pitched free community college. And it all got log jammed in a divided Senate. And so this is happening, this policy, as opposed to any of those, simply because of language that was included in a law that was passed back in the early 2000s

in response to 9-11, and it just so happens. You know, that's how we got here. It's really interesting how tenuous those threads are. Where does this leave the people caught in the middle of this? How are people supposed to know if they can count on this debt relief or not and plan the next 5, 10, 15 years of their lives? Whether you feel sympathy for people who owe student debt or not. So I won't pretend to know what's going to come of these lawsuits. It is possible that nothing will come of these lawsuits. And if that is true, then the vast majority of the borrowers who were celebrating in August that they're going to have $10,000 or even $20,000

of student loans erased will be able to celebrate again at some point in the coming weeks or months when those debts are in fact erased. The people who will not are those failed borrowers we talked about earlier.

$800,000, a million, we're not sure. They have been cut out of this, at least for now. And it's unclear how they might be included in the future. Those folks probably get the worst deal right now. It's hard talking to these borrowers and not feel their frustration and anger. But again, the vast majority of borrowers who will qualify for this will get debt relief unless one of these lawsuits finds, you know, a sympathetic hearing in court. And then that opens the door for these sides to really argue the merits and to debate, you know, Heroes Act on one side, traditional reading of, you know, the powers

of the presidency versus Congress on the other side. And who knows what will happen. Corey Turner is an education correspondent at NPR. Listen to him on the radio. Find his work at NPR.org. Our show today was produced by Victoria Chamberlain, who, full disclosure, had her student loans forgiven through the Public service loan forgiveness program after serving in Army. We were edited by Matthew Collette, who finished paying off his undergraduate loans in the pandemic. Congratulations, Matthew. Paul Robert Mounsey discovered he might be eligible for loan forgiveness while mixing this show. Congratulations, Paul.

We were fact-checked by Laura Bullard, who went to cheap, state-subsidized schools her dad helped her pay for. Ditto for me. Thanks, Dad. Call me. Thank you.