Warren pledges to use executive power to cancel student debt

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This story is part of Perspective‘s series on how the next president can move forward without new legislation. Read all our articles on the first day agenda here.

Senator Elizabeth Warren, who has focused much of her campaign on kitchen table finance, today announced that she will commit to canceling student debt through existing executive authority as soon as the first day.

Proposal, described on his campaign website this morning, relies on a provision of the Higher Education Act that gives the Department of Education the ability to modify, compromise, cancel or write off student loans. This is commonly referred to as “compromise and settlement”. I wrote on this power within the framework of Perspectiveseries The first day’s agenda.

“The future of our economy and the lives of a generation of student borrowers are in jeopardy, and I pledge to see this fight through no matter what,” Warren wrote in his post.

As president, Warren can direct the education secretary to implement his current plan cancel up to $50,000 in student debt for about 95% of borrowers, or about 42 million Americans. His plan is less solid than Senator Sanders’ proposal to cancel all $1.6 trillion in student debtbut Sanders has not fully committed to doing so through executive action.

In the proposal, Warren notes that other public debt cancellation programs — a whole menu of them — already exist, but few are fully rolled out, leaving thousands stranded. To solve this problem, she promises to simplify the process, reducing complicated paperwork and membership requirements. As I wrote before, some of these programs are so complicated that you would need a lawyer to go through them yourself. Warren says she would engage in “positive borrower outreach” and use “available data to match borrowers with their release options.” Warren also offers borrower protection against additional tax liability when debt is forgiven, a complication with this type of debt cancellation plan that would essentially mean your debt would be routed in part from the Department of Education to the IRS. .

For the publication of the agenda of the first day, the Perspective sent a questionnaire to each campaign, asking if they would commit to canceling student loans using existing authority. At the time, Warren demurred, saying she was “committed to determining whether some or all of this cancellation can be administratively accomplished.” Senator Sanders responded that if Congress refused to support his bill canceling student debt, he would “explore other available avenues to alleviate existing student debt.” But neither seemed entirely committed to the idea, which would dramatically accelerate debt relief. That changed with today’s announcement.

In order to bolster his claims of legality on this issue, Warren include a letter of three legal authorities on student debt from the Project on Predatory Student Lending, part of the Legal Services Center at Harvard Law School. They write that the power that Warren now proposes to use “was contained in the HEA from its original enactment”. The only limitation is that the Secretary cannot settle any claim over $1 million without a review by the Attorney General. But if Warren appoints the right attorney general, this problem can also be overcome. The Education Secretary has the power, these experts say, to modify loans, even zero and even in the absence of implementing regulations. This is even permitted under the budget standards that govern student loan programs, the letter says.

Deanne Loonin, one of the signatories of the memo, wrote a memo on the subject to the Obama administration in 2015, amid the for-profit college crisis. Loonin and Robyn Smith described this same power to then-Secretary Arne Duncan, but the administration declined to pursue this option, opting instead for several less comprehensive debt relief programs for defrauded borrowers with much more of bureaucracy. This choice meant that some defrauded borrowers were still repaying their debt, unable to get relief.

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Luke Herrine, a Ph.D. law student at Yale, wrote a legal paper describing the same power that Warren and his legal experts now cite as the basis of his latest student debt forgiveness plan. In an interview, Herrine noted that this authority is not something the courts can question. Simply put, the Department of Education has the power to decide not to collect student loans, which it does all the time through existing federal debt forgiveness programs. This plan extends that power to millions of borrowers.

In a comment after Warren’s new plan was made public, Herrine noted that it’s important to understand that Warren’s announcement “will change the nature of the debate in the presidential primary and beyond.” It is no longer possible for someone to be an expert on student debt without understanding how a president can deal with the crisis through existing executive authority. “None of this would be on the table without an organized movement of debtor students demanding cancellation when no one ‘serious’ was taking the idea seriously,” Herrine wrote in an email.

Student debt is so corrosive, Warren notes, that a significant portion of “students who began repaying their loans in 2011 hadn’t even paid a dollar for their loan principal after 5 years.” It is now the second highest form of debt in the country, rivaled only by mortgage debt.

Warren’s plan underscores that even this massive student loan forgiveness plan would not fix everything that is wrong with higher education. On the one hand, a one-time loan forgiveness does nothing to stop unfettered tuition increases and inequitable college attendance. Warren reiterates his commitment to making public colleges and technical schools tuition-free and increasing support for “HBCUs and minority-serving institutions” to help “bridge racial gaps.” And she hasn’t changed her mind about denying for-profit colleges access to federal student aid, often the only way these predatory institutions can survive. Warren fought for debt relief for borrowers deceived by for-profit Corinthian Colleges.

What this reveals most is Warren’s willingness to push the boundaries of executive authority to advance progress on issues that matter to him. Student debt has prevented young people from buying homes and starting businesses. In other words, student loans prevent borrowers from living their lives. Warren’s plan could change that. And if Congress does not agree, she has pledged to pull the regulatory levers necessary to achieve this.

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