Can Biden Cancel Student Debt? Depends Who You Ask

Four months ago, it was announced that President Biden had directed the Department of Education and the Department of Justice to examine his legal authority to unilaterally cancel student loan debt. Though the results of the inquiry haven't yet been released publicly, other legal experts have already tackled the question -- with fundamental disagreement between them on the limits of the president's power.

Biden campaigned on the promise that he would forgive a minimum of $10,000 per person of federal student loans. And while the administration has cancelled more than $1.5 billion in debt for students who were defrauded by their institutions, widespread debt cancellation hasn't happened, despite repeated calls for it from advocates and Democrats in Congress.

Supporters of student debt cancellation by the administration typically rely on a memo sent to Senator Elizabeth Warren, a Democrat from Massachusetts, last year as an explanation for the legality of the action. The memo -- prepared by Eileen Connor, Deanne Loonin and Toby Merrill of the Legal Services Center of Harvard University Law School -- specifically addresses Warren's proposal for administrative debt cancellation that she released while campaigning for president. Her plan called for directing the secretary of education to exercise authority to cancel up to $50,000 in debt for 95 percent of student loan borrowers, but the legal arguments can still apply to any similar administrative action.

"The way they lay it out appears to be pretty clear," said Kyra Taylor, a staff attorney at the National Consumer Law Center. "The president -- via the secretary -- has the authority to compromise or modify debts under the Higher Education Act."

Specifically, the memo states that the secretary of education has been granted an "unrestricted authority to create and [sic] to cancel or modify debt owed under federal student loan programs" by Congress. That power is granted in a section of the Higher Education Act of 1965 that says the secretary may "enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption."

"That provision empowers the secretary to execute the broad debt cancellation plan you have proposed," the authors wrote.

The Biden administration has already used this legal authority in not allowing interest to accrue for borrowers during the COVID-19 pandemic, said Dalié Jiménez, director of the Student Loan Law Initiative at the University of California, Irvine.

"Call it what you want, but the best legal reasoning for it is the same that the secretary or the president could be using to cancel student debt," Jiménez said. "The law and the regulations give the secretary a lot of power, and they do not have an explicit cutoff for that power because it has not been tested. No one has challenged the forgiveness of the interest."

But Reed Rubinstein, former principal deputy general counsel under Betsy DeVos at the Department of Education, said there is a limit to that power, and the pandemic-related pauses surrounding student loans are it.

"The pause is the far outer edge of where you can go with your legal authority," Rubinstein said.

Rubinstein concluded in a January memo to former secretary of education DeVos -- prepared in conjunction with counsel at the Department of Justice -- that the secretary doesn't have "the statutory authority to cancel, compromise, discharge, or forgive, on a blanket or mass basis, principal balances of student loans, and/or to materially modify the repayment amounts or terms thereof." The memo is no longer available on the Department of Education's website.

The memo states that Congress appropriated funds for student loans with the expectation that those loans would be repaid except in very limited and specific circumstances, such as borrower defense to repayment. And since those circumstances have been detailed by Congress, they should be adhered to.

"We believe [the HEA provision] is best construed as a limited authorization for the Secretary to provide cancellation, compromise, discharge, or forgiveness only on a case-by-case basis and then only under those circumstances specified by Congress," the memo says. "Congress has made explicit statutory requirements … and they must be observed."

Rubinstein said he hasn't seen a colorable legal case for the idea that the administration can authorize blanket forgiveness of student debt.

"I think if you look at this fairly and you detach from the policy, the conclusion we came to is the best one, in my opinion," Rubinstein said. "There's no statutory basis for that and there's certainly no constitutional basis."

Disagreements on the president's legal authority have also extended to members of the Democratic Party. While Warren and Senate Majority Leader Chuck Schumer, a Democrat from New York, believe that Biden could cancel debt "with the flick of a pen," House Speaker Nancy Pelosi, a Democrat from California, said he doesn't have that authority.

A report by The Intercept alleges that Pelosi's comments were prompted by a memo circulating around Capitol Hill from the organization Freedom to Prosper, which was founded by a couple closely connected to Pelosi. The memo states that the Biden administration can't cancel student debt due to the Antideficiency Act, which prohibits executive branch officials from spending money Congress hasn't appropriated.

"Broad student debt cancellation would trigger The Antideficiency Act, because the Department of Education would be spending funds that have not been appropriated," the memo says.

Pelosi's office didn't respond to a request for clarification from Inside Higher Ed on the legal basis of her comments about the president's authority.

Jiménez said she thinks the question of whether or not Biden has the authority to cancel student debt is more a policy question, rather than a legal one.

"People who don't want to do this, they don't want to do it for policy reasons," Jiménez said. "The law is an excuse."