Rep. Alexandria Ocasio-Cortez called on President Biden to bypass Congress and cancel billions of dollars in student loan debt, just days after he assumed the White House and extended pandemic relief for millions of borrowers through September.
"OK now let's cancel them," Ocasio-Cortez, D-N.Y., tweeted after the new president ordered a freeze on student loan payments through Sept. 30, 2021.
The Department of Education announced in March that borrowers wouldn't have to pay their student loan bills or worry about interest for 60 days -- an order that's been repeatedly extended. It was poised to expire at the end of January. About 41 million Americans will continue to benefit from the federal government’s pause of student loan payments.
Biden pledged to cancel billions of dollars in student loan debt during his campaign, and has indicated that he will ask Congress to immediately cancel $10,000 in student debt for all borrowers — a move that will likely draw criticism from both Republicans who are wary about the nation's ballooning deficit and progressive Democrats, including Ocasio-Cortez, who want the president to move further left on the issue.
Ocasio-Cortez, along with Sens. Chuck Schumer, D-N.Y., and Elizabeth Warren, D-Mass., have urged Biden to use an executive order to cancel $50,000 of outstanding federal student loans per borrower.
But Biden has said it's "arguable" whether the president has the power to forgive $50,000 in student debt without the approval of Congress.
“I’m going to get in trouble for saying this, [but] it’s arguable that the president may have the executive power to forgive up to $50,000 in student debt,” Biden told The Washington Post in December. “Well, I think that’s pretty questionable. I’m unsure of that. I’d be unlikely to do that.”
A working paper published in December by the University of Chicago’s Becker Friedman Institute for Economics shows that erasing all student loan debt would distribute $192 billion to the top 20% of earners in the U.S., but just $29 billion to the bottom 20% of U.S. households.
Under a universal loan forgiveness program, the average individual among the top-earning borrowers would receive $5,944 in forgiveness, while those with the lowest incomes would receive $1,070 in forgiveness, according to the study, authored by economists Sylvain Catherine and Constantine Yannelis.
"Full or partial forgiveness is regressive because high earners took larger loans, but also because, for low earners, balances greatly overstate present values," they argued, noting that individuals on income-driven repayment plans will already have their remaining balances forgiven after 25 years.
Less than one-third of all student debt is held by households without a bachelor's degree – while nearly two-fifths of debt is held by households with graduate degrees. A recent survey conducted by the Pew Research Center shows that most of the economic suffering from the crisis is concentrated among less-educated individuals.
Under legislation endorsed by Biden, economically distressed borrowers would immediately have $10,000 in student debt forgiven. The government would also cover monthly loan payments for people with private student loans until September 2021 and forgive $10,000 of their debt.