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Spokane, Washington  Est. May 19, 1883

Biden’s slow-walk on student loans means more pressure to go big

President Joe Biden talks to staff at the National Institutes of Health on Thursday, Feb. 11, 2021 in Bethesda, Maryland. Biden is considering a loan-forgiveness plan that he says he will make a decision on at the end of August, 2022. (Oliver Contreras/Pool/Abaca Press/TNS)  (Oliver Contreras/Abaca Press/TNS)
By Nancy Cook, Jarrell Dillard and Janet Lorin Bloomberg News

WASHINGTON – While President Joe Biden draws out his decision on forgiving student loans, progressive lawmakers, civil rights groups, labor leaders and other advocates are taking the opportunity to press him to aim for more than $10,000 per borrower.

They’re getting a hand from policy experts within the Department of Education, who have started to study mechanisms to automatically forgive larger amounts of debt for low-income borrowers, according to two people familiar with the agency’s work.

The department is considering how to identify low-income borrowers, including former recipients of Pell grants, people receiving Social Security payments and those who have had their wages garnisheed by the federal government for failure to repay student loans.

White House and Education Department spokesmen didn’t immediately comment on the plans.

Advocates for deeper cuts to loan balances are seeking to persuade Biden to forgive a more meaningful level of debt – $50,000 or more per low-income borrower. That would fulfill one of the progressive movement’s top goals: wiping out large amounts of debt for millions of Americans, especially Black borrowers who carry disproportionately larger balances than White borrowers, as well as people who never earned a degree from their schooling.

NAACP President Derrick Johnson sent a letter to Biden Thursday evening urging him to cancel a minimum of $50,000 per borrower, a level that he said “could open doors to homeownership and wealth-creation for those whose families have faced economic oppression over centuries.”

“It could undo the mountains of debt that families have accumulated over generations in an attempt to achieve the American Dream – a dream that we all know wasn’t designed to be accessible to them in the first place,” Johnson said.

One person familiar with the Education Department’s work said the agency’s research is meant to win over an audience of one: the president. Biden has expressed reservations about forgiving debt for high-income earners like doctors and lawyers.

The top official at the Department of Education overseeing federal student aid is Richard Cordray, a former director of the Consumer Financial Protection Bureau and former attorney general of Ohio. He’s also an ally of Sen. Elizabeth Warren, who is among the progressive lawmakers pushing Biden to forgive a larger amount of debt.

White House aides have worried that forgiving student debt could hurt the administration politically. Republicans have accused Biden and Democrats of flooding the economy with money from their $1.9 trillion pandemic relief measure, fueling inflation. The GOP would likely turn broad student loan relief – which would have the effect of providing borrowers more discretionary income – into a fresh talking point.

To counteract any inflationary pressure, senior White House officials have argued that any loan forgiveness should be accompanied or preceded by the administration ending a pandemic-era moratorium on loan payments and the accrual of interest. Borrowers haven’t had to make any payments on their loans since Biden took office, thanks to his repeated extensions of the moratorium, which began in 2020.

For months, the president has weighed forgiving $10,000 per borrower in student debt and capping the cancellation for borrowers above an income threshold of $125,000 to $150,000 a year, according to people familiar with the White House’s deliberations.

The Congressional Black Caucus has pushed for more than $10,000 and to set the income threshold higher than $125,000, according to one person familiar with their lobbying efforts.

Politico earlier reported the Education Department’s plans, citing documents it said show the government is prepared to provide automatic debt relief to certain borrowers should Biden give the green light.

While the administration deliberates what to do about forgiveness, a payment restart date is approaching. The latest pause on payments and accruing interest expires Aug. 31.

On Thursday, about 100 Democratic senators and House members released a letter urging the Biden White House to again extend the moratorium.

“For over two years, the Department has provided critical flexibility to millions of federal student loan borrowers by pausing payments, as many have struggled during the Covid-19 pandemic. This much-needed pause has helped many borrowers to keep a roof over their heads, secure childcare, and purchase food, health care and medicine during the course of a pandemic responsible for the deaths of more than 1 million people in the US,” read the letter, addressed to Biden and Education Secretary Miguel Cardona.

Another extension would likely draw criticism from Republicans ahead of midterm elections in November, but it could help prevent delinquencies and defaults – which can scar credit histories – among struggling borrowers.

According to data from a survey conducted by New America released this week, the rate for default among Black borrowers is 46%, higher than all borrowers at one third and White borrowers at 28%.

Borrowers with incomes below $30,000 also report disproportionately high rates of default, about 48%.

The White House has been weighing whether to extend the payment pause through the end of 2022 or until next July. Biden told reporters July 20 that he’d make a decision on loan forgiveness by the end of August, though he has previously missed self-imposed deadlines on the issue.