As centrist Washington rallies around the Fiscal Responsibility Act—the GOP austerity bill blessed by the Biden White House as a shining example of elegant, difference-trimming compromise—student debtors are facing a far less pleasing lesson in bipartisan lawmaking. The debt agreement abolishes the pandemic-era pause on student debt repayments—a senselessly punitive reversal that comes as the US Supreme Court is preparing to decide a right-wing challenge to President Joe Biden’s own student debt-relief plan, pledging $20,000 in debt forgiveness per borrower. It will almost certainly rule in favor of the plaintiffs seeking its overthrow. In this charged atmosphere, Biden’s mishandling of the debt crisis is a stunning repudiation of yet another bold claim that Biden has made about his egalitarian record: commitment to relieve “unsustainable debt” for college students seeking basic middle-class economic security, and to “fix a broken system” of spiraling tuition and debt for college students.
The present rollback renders all that talk a dead letter. “I think in the fine Napoleonic tradition, this is worse than a crime; it’s a mistake,” says University of Utah economist Marshall Steinbaum. “It’s a mistake, first off, in terms of bargaining with the Supreme Court. A smarter administration would have continued to withhold payments until the decision. That would have engaged the Supreme Court as a political actor, which is what you have to do, and what the Democrats can never seem to manage.”
The pending court reckoning represents one lamentable consequence of the administration’s cave-in; another is the potential for a not inconsiderable political backlash, precisely among the vital demographic of younger and left-leaning voters that Democrats can ill afford to alienate in a rapidly approaching presidential election cycle. “Biden has been saying, ‘No one has fought for debtors harder than I have’—well, now he’s got to do something, and do it fast,” says Astra Taylor, cofounder of the Debt Collective, the post-Occupy advocacy group that helped put debt forgiveness on the Democratic agenda. “That’s the phrase we came up with today: Stop gaslighting, start fighting.”
Even as the White House came gradually to embrace a fairly far-reaching forgiveness plan for student debtors, Taylor says, it squandered a good deal of political capital by inexplicably getting in its own way—particularly with its disingenuous means-testing provisions. “They’ve spent more time orchestrating the optics than legislating,” she notes. “When I start to describe the mechanics of all this, I can feel my blood pressure rising. Everything was about optics; the whole reason the administration went ahead with an application process for relief was vibes. Everyone told them that the people holding the greatest debt with the fewest resources won’t fill them out. But they wanted to make it look like they were leaving behind these imaginary rich debtors.”
The vibes mandate is also the guiding axiom for the feckless debt agreement, which was the culmination of an act of budget extortion by the congressional right to produce just these kinds of punitive cuts to functioning and beneficial government income supports. Indeed, Steinbaum is helping to release a report with the Jain Family Institute demonstrating the follow-on benefits of the now-suspended repayment pause. “The headline from that study is that the repayment pause was somewhat paradoxically the most successful program to get student debt repaid. Before the repayment pause, student debt balances were growing out of control, and a large plurality of borrowers weren’t paying them back. The pause took those high-debt borrowers and put them on a path to repayment.”
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Reversing the repayment pause is thus a passage through the looking glass, by any measure of rational economic policy-making. “Now the White house is saying, ‘Don’t cancel student debt—we’re putting together these targeted income-driven repayment [IDR] plans.’ But we already know how those work—they cause people to defer repayment and have balances grow indefinitely. That’s both more punitive and less effective as a means to get student debt discharged.”
What’s particularly irksome about this giant step backward is that nothing about debt relief needs to be complicated—indeed, as the Covid pause has shown, such programs work best when they’re not means-tested but extended to most borrowers as an across-the-board benefit. “Canceling debt is completely banal; the Department of Education does it all the time,” Taylor says. “Let’s not accept the frame of this as some sort of a radical thing…. We always say that Biden has a Swiss Army knife set of solutions to student debt relief. The question on the table now is will he use them or not? We want to stand strong against this idea that it’s just the Republicans who are stymying debt relief; the White House is sitting on its hands.”
Indeed, Biden is empowered to instruct Education Secretary Miguel Cardona to wipe out existing debt under the “compromise and settlement” provisions of the 1965 Higher Education Act. Earlier this year, the Supreme Court declined to hear a case that challenged a DOE ruling to expunge $6 billion of such debt for students of for-profit universities. As Swiss Army accessories go, that’s both tested and sharp.
Yet, as Steinbaum argues, the White House has elected to box itself into a half-measure response all but designed to fail. “The administrative hurdles of IDR are there to reward the savviest people who know how to navigate the system. Everyone else can then be thrown to the wolves. Once you’re basically facing this wall of repayments that are turned back on—and to my knowledge, the IDR plans still have yet to be approved or adopted, which means the servicing has not been brought to the point where it’s up and running.”
Steinbaum notes that his own research shows “that the strength of the repayment pause was that everyone qualified. You just signed up, and the loan servicers were told this debt no longer exists; the interest payments are zeroed out. But the IDR is always going to be a gymnastics act, one that shifts the onus to the people least qualified and least able to participate. You turn the payments back on and say, ‘We’ve created access to this targeted new program,’ similar to the development of Obamacare—you can then just say, ‘Well, this exists, and anyone trying to get better access to it isn’t our problem.’”
But as with the Obamacare plan to make bloated and obstructionist private insurers health care providers of first resort, the potential for political blowback in the student debt sphere is huge. “By the White House’s failure to declare a new student debt emergency or any other kind of emergency, we’re headed toward a disaster where the Supreme Court strikes down Biden’s relief program on bogus grounds,” Taylor says. “What you’ll have then is Democrats collecting on these debts for 43 million people. Those people are going to get a reminder every month when they get their bills for loans they were told had been forgiven: You got played.”
Some D.C. insiders have waved away such concerns, noting by way of a parallel that the Covid child tax credit was also recently suspended, with comparatively little outrage. But the cases aren’t really comparable, Taylor says. “This issue is different. We’ve done 10 years of organizing—debtors were organized in a way that parents weren’t. It’s also not like you’re taking away a bonus—you’re imposing a payment every month. That’s where this is more than an unforced error. It’s cruel to the public and it’s politically shortsighted not to deliver on relief when there are other tools at your disposal.”
At least some of that cruelty may be the point, Steinbaum says. “When people say the child tax credit was no big deal, that’s because it didn’t make much of a splash politically in Washington. The same now seems to be true of student debtors. That’s more surprising, since it’s the Democrats who say that people who want to get middle-class jobs need higher education to get ahead. So they tell state university systems to raise tuition as high as they want to, and tell students to keep on taking on whatever debt they have to in order to pay higher tuition costs.”
The resulting political math here is hard to overlook, he adds. “Now, we all know poor people are not that well represented in the political system, even though in the case of the child tax credit, it was not just poor people who benefited. Here it’s seemingly a more politically empowered group of people who are getting played. And that’s telling us what we already knew: that we do not live in a democracy, in the sense of a government that’s serving the aggregate interests of citizens and the public.”
That’s a grim lesson indeed for former college students struggling to regain their footing in a regime of punishing debt. But it can get much grimmer, Taylor warns: “If you can’t go around a lawless Supreme Court on this issue, how will you ever make progress on any other fronts? It’s not even that most debt holders are young, but still, you’re telling this to young people and expecting them to think you will deliver anything again?”