With the presidential primaries now in full swing, the issue of the nation’s whopping $1.5 trillion in student loan debt – and whether to cancel it – has become a popular topic, highlighting a growing consensus that the current system of debt-financed higher education is broken.
Senator Elizabeth Warren recently proposed a new idea pledging that if elected, she would direct her Department of Education to cancel student loan debt on day one of her presidency. This is certainly big news. But this idea is not so new to us, in fact we provided legal analysis showing that it’s possible. We hope she will be the first of many candidates to pledge to follow through on this simple, but transformational, idea to help families across the country.
You’re probably wondering – can the President really enact mass student debt cancellation on such a broad scale on her own? The short answer is, yes. Legally, the power to create debt generally comes with it the power to cancel it. In this case, Congress granted the Secretary of Education a more specific authority to create and cancel debt owed under the federal student loan programs in the Higher Education Act.
So, yes, the President can direct the Secretary of Education to cancel all federal student loan debt – on day one.
The question then is – why?
At the Project on Predatory Student Lending, we’ve seen first-hand the difference it makes when students’ loans are cancelled. Jorge Villalba, a client who was cheated by the notorious for-profit college ITT Tech, struggled under massive fraudulent debt for years. After a long wait and a separate lawsuit in ITT Tech’s bankruptcy, he finally had his federal student loan debts cancelled. Almost immediately, Jorge’s credit score improved, he became eligible for lower interest rates to pay down his other debt, and he began digging himself out. He is proud to be planning his family’s future for the first time since his debt nightmare began.
Unfortunately, Jorge’s experience is all too rare.
Right now, there are over 44 million Americans with a combined $1.5 trillion in student debt.
Of those, we represent over a million borrowers who hold the worst kind of student debt: federal student loans taken out to attend for-profit colleges. For-profit colleges are notorious for preying on students – many of them low-income, veterans, single mothers, or people of color – with lies about quality training and job placements in order to pocket their federal student aid dollars. These schools provide little to no instruction and the majority of students we hear from report they are worse off today than before they went to school.
State Attorneys General have brought case after case against for-profit colleges that have committed massive fraud against students. On that basis alone, the federal government has the legal obligation to cancel students’ loans. We have even brought cases on behalf of students asserting that right, and won. But the government has refused to cancel the debts, and. Yet the Trump administration continues to ignore the facts and the law.
While the public has acknowledged student debt is at crisis levels that threaten the financial well-being of millions of Americans, there are still those candidates and elected officials who distance themselves from student loan cancellation. This is ill-advised, because research shows that mass loan cancellation will actually help stimulate the U.S. economy.
According to a study by the Levy Economics Institute of Bard College, cancelling all student debt would increase our Gross National Product by one trillion dollars over 10 years. It would cause unemployment to go down, and it would create 1.5 million jobs per year. It would allow students to move out of their parents’ homes and start families, or even their own small businesses.
It’s time that more policymakers see loan cancellation for what it truly is: a non-partisan issue that would benefit students and the economy for generations to come.
Yes, the current President – or our next one – has the authority to cancel more than a trillion in debt held by millions of former students. And it has the obligation to cancel loans of students cheated by their schools.
That should be step one, on day one. Our students, and our country, can’t afford to wait a day longer.