‘The authority to compromise debt is limited to situations in which the borrower demonstrates severe financial distress…’
(Claire Russel, Liberty Headlines) Presidential hopeful Sen. Elizabeth Warren, D-Mass., said she would forgive all student loan debt on “day one” of her presidency if elected—even if Congress disapproves.
Warren suggested that she would use an executive order to bypass Congress and “offer relief” to the 42 million young Americans affected by student loan debt.
“I will start to use existing laws on day one of my presidency to implement my student-loan debt cancellation plan that offers relief to 42 million Americans—in addition to using all available tools to address racial disparities in higher education, crack down on for-profit institutions and eliminate predatory lending,” she said.
The order would fall under the jurisdiction of the Education Department, Warren claimed.
But while the Education Department can cancel federal student loans due to death, disability or fraud, it does not have the authority to simply wipe the slate clean for the tens of millions of students who collectively owe more than $1.5 trillion in student debt.
Warren recruited three legal experts from the Project on Predatory Student Lending at Harvard Law School to vouch for the legality of her plan, and in a letter they wrote that Warren’s plan to bypass Congress is “lawful and permissible.”
Several other higher-education experts disagree.
“The U.S. Department of Education does not have the discretionary authority to cancel student loan debt except in limited circumstances specified by the statute, such as death, disability, or closed schools,” expert Mark Kantrowitz said, according to CNBC.
“Likewise, the authority to compromise debt is limited to situations in which the borrower demonstrates severe financial distress,” he said.
Legislation would still be part of Warren’s plan in order to make the cancellation more permanent.
She wants a bill that would cancel $50,000 in student loan debt for every person with a household income under $100,000, and less for those with a household income between $100,000 and $250,000. Anyone with a household income above $250,000 would not be eligible for student-loan debt cancellation.
We have a student loan crisis—and we can’t afford to wait for Congress to act. I’ve already proposed a student loan debt cancellation plan, and on day one of my presidency, I’ll use existing laws to start providing that debt cancellation immediately. https://t.co/bvhpuQmHH1
— Elizabeth Warren (@ewarren) January 14, 2020
However, Warren’s “phase-out” program is not as extreme as that of Sen. Bernie Sanders, I-Vt. The current Democratic primary front-runner—according to several polls—wants to erase student loan debt entirely, regardless of income.