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Demonstrators urge President Joe Biden to cancel student loan debt

Student debtors take part in a demonstration outside of the White House staff entrance to demand that President Biden cancel student loan debt in August on July 27, 2022. (Photo: Jemal Countess/Getty Images for We, The 45 Million)

Anger Mounts Over Biden's Reported Plan to Means-Test Student Debt Relief

"The hoops of means-testing means that millions and millions of borrowers won't get help," warned one advocate.

Jake Johnson

President Joe Biden is reportedly on the verge of announcing his plan to cancel $10,000 in federal student loan debt after months of delays, but not every borrower will be eligible for relief—and progressives are warning that the administration's commitment to mean-testing could leave millions of vulnerable people behind.

As soon as Wednesday, Biden is expected to make public his intention to unilaterally wipe $10,000 off the balances of undergraduate student loan borrowers with annual incomes of less than $125,000. The president is also poised to extend the student loan repayment freeze for "several more months," according to NBC News.

"If the history of means-testing in America is any guide, bureaucratic snarls will prevent vulnerable populations from receiving relief."

Groups representing borrowers cast the emerging details of Biden's plan as a betrayal. Melissa Bryne, executive director of We The 45 Million, said in a statement Tuesday that "the rumor of $125,000 means tests is an outrageous violation of President Biden's March 2020 campaign promise of a minimum of $10,000 cancellation for all borrowers."

"President Biden must refuse all pressure from unserious, generationally wealthy economists who have never lifted one finger to fight for free higher education and instead see themselves as allies of the banks," Bryne said in a thinly veiled reference to former U.S. Treasury Secretary Larry Summers, a multimillionaire who has vocally attacked the idea of student debt forgiveness.

"Every borrower was already means-tested—they didn't have the means to pay for college," Byrne continued. "Borrowers trust President Biden to do the right thing and tell the pro-means testers to take their concerns far away from him."

The predominant concern among opponents of means-testing isn't that people with high incomes will be denied student debt relief; it's that people eligible and desperate for relief will get lost in the bureaucratic maze that income-based restrictions inevitably create.

As The American Prospect's David Dayen put it recently, all borrowers seeking debt relief under a means-tested cancellation program "will have to navigate the often punishing bureaucracy of confirming their earnings level."

"It means a massive headache for millions to cut out a minuscule proportion of borrowers," Dayen wrote. "And if the history of means-testing in America is any guide, bureaucratic snarls will prevent vulnerable populations from receiving relief to which they are entitled."

Byrne voiced a similar concern Tuesday, saying, "The hoops of means-testing means that millions and millions of borrowers won't get help."

A new analysis released Tuesday by the Penn Wharton Budget Model shows that the majority of the benefits of canceling $10,000 in student debt for borrowers who earn less than $125,000 a year would go to the bottom 60% of earners.

Mark Huelsman, policy and advocacy director at the Hope Center for College, Community, and Justice, stressed the analysis makes clear that "the majority of relief would go toward the bottom 60% of earners even if there was no income cap."

"That's a lot of potential administrative burden for a very similar result," Huelsman added.

The plan Biden is expected to announce Wednesday is a far cry from the ambitious student debt cancellation that prominent Democratic lawmakers and advocacy organizations have been demanding from the president for more than a year.

Sen. Elizabeth Warren (D-Mass.) and Senate Majority Leader Chuck Schumer (D-N.Y.), among many other lawmakers, have called for at least $50,000 in student debt forgiveness per borrower, a proposal that would completely clear the student debt balances of 80% of federal borrowers.

By contrast, canceling $10,000 in student loan debt per person would amount to full forgiveness for just around a third of borrowers.

"President Biden should cancel student debt to: help narrow the racial wealth gap among borrowers, provide relief to the 40% of borrowers who never got to finish their degree, and give working families the chance to buy their first home or save for retirement," Warren tweeted Tuesday. "It's the right thing."

For months, Biden and White House officials have been deliberating over the right course of action to address a crisis affecting tens of millions of people across the U.S. The average federal student loan balance is nearly $38,000, according to the Education Data Initiative, and Americans collectively hold close to $2 trillion in student debt.

The Washington Post reported Tuesday that administration officials have weighed whether canceling student debt "could alienate voters who had already paid theirs off, and polling results have been mixed."

"Centrist Democrats have begun pushing back strongly," the Post added. "Summers and Jason Furman—two prominent Democratic economists who served in prior administrations—have stepped up their case against broad loan forgiveness, arguing it would exacerbate inflation by increasing overall spending."

"These claims have been strongly contested. The Roosevelt Institute, a left-leaning think tank, argued that canceling student debt would 'increase wealth, not inflation,'" the Post noted. "The Roosevelt Institute paper found that inflation resulting from debt cancellation would be negligible and that ending the payment moratorium would more than outweigh that effect. Requiring borrowers to resume payments would reduce inflation by slowing consumer spending."

On top of the potential economic benefits of broad-based student debt cancellation and the relief it would provide to countless hurting households, proponents and observers have also pointed to the political upside for Biden and the Democratic Party heading into the pivotal November midterms.

"At this point people want something, and they need something big like a big policy that they can look at and say, 'OK, he is trying to do something for us,' and debt relief would definitely be that," Robert Reece, a sociology professor at the University of Texas at Austin, told Inside Higher Ed.

Inaction, meanwhile, could be politically disastrous for Democrats. A survey released last year found that 40% of registered Black voters "are willing to stay home unless student loan debt is canceled."

Student debt relief is also massively popular with young voters, another key component of the Democratic base.

But Derrick Johnson, president of the NAACP, warned the president Tuesday that "$10,000 alone is meager, to say the least."

"It won't address the magnitude of the problem," he told the Post.


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