Trump administration tries to hamstring Biden on student loan forgiveness

The Trump administration on Wednesday sought to throw up a bureaucratic roadblock to progressives’ push for the incoming Biden administration to cancel large swaths of outstanding student loan debt through executive action.

Education Department officials released a memo, signed by an outgoing political appointee, that concludes that the agency lacks the power to unilaterally forgive federal student loan debt on the scale that some Democrats want.

The eight-page memo says that “the Secretary does not have statutory authority to provide blanket or mass cancellation, compromise, discharge, or forgiveness of student loan principal balances, and/or to materially modify the repayment amounts or terms thereof, whether due to the COVID-19 pandemic or for any other reason.”

The legal opinion is not necessarily binding on the Biden administration, which could reverse or change its interpretation of the laws that govern federal student loans. But the memo comes as President-elect Joe Biden is already signaling that he will not accede to growing progressive demands that he employ executive action to cancel student loan debt.

The document was signed on Tuesday evening by Reed Rubinstein, who is serving as the acting general counsel of the Education Department. It was first reported by the Wall Street Journal.

Rubenstein addressed the memo to Education Secretary Betsy DeVos, even though she resigned last Friday in the wake of a pro-Trump mob violently storming the Capitol. Rubinstein writes that DeVos had asked for his office to “memorialize” the department’s legal view on the issue of student loan forgiveness.

DeVos has previously called Democrats’ proposals to cancel student loan debt “crazy.” In her farewell letter to Congress earlier this month, DeVos urged lawmakers to reject the incoming administration’s push to cancel student loan debt.

Pressure from Democrats: Some Democrats, including Sen. Chuck Schumer (D-N.Y.), who will become the Senate majority leader next week, have called on Biden to cancel as much as $50,000 of federal student loan debt per borrower. "You don't need Congress," he said in December. "All you need is the flick of a pen."

While campaigning, Biden endorsed $10,000 in student loan cancellation as an immediate coronavirus pandemic response. But he has signaled in recent weeks that he sees that as a legislative, not executive, priority.

A top economic adviser to Biden said Friday that Biden wants Congress to act on the loan forgiveness proposal, though the incoming administration will unilaterally extend the pause on most federal student loan payments and interest amid the pandemic. Biden also said last month that he is “unlikely” to pursue student loan forgiveness through executive action.

A Democrat-controlled Senate could use a tool known as budget reconciliation to pass widespread student loan forgiveness with a simple majority vote. The Obama administration used the tool in 2010 to make sweeping changes to the federal student loan system, including eliminating federal guarantees for private student lenders.

But it’s not yet clear whether Democrats will charge ahead with budget reconciliation or how much support there is in the caucus, especially among more moderate members, for widespread student loan cancellation.

House Democrats last year initially proposed up to $10,000 in student loan forgiveness per borrower as part of their Covid relief proposal, though Democratic leaders significantly scaled back the proposal amid concerns about the price tag.

Separately, the House last year passed an amendment to the annual defense policy bill that would have canceled up to $10,000 of private student loan debt, though it did not survive negotiations with the GOP-controlled Senate, which has been opposed to widespread loan forgiveness. The amendment won a handful of GOP votes in the House, though some moderate Democrats voted against it.

Sen. Elizabeth Warren (D-Mass.), who is among the progressives pushing for Biden to cancel, was the first Democratic presidential candidate last year to make the case for adopting the policy through executive action. Her campaign released a legal memo written by Harvard Law School’s Project on Predatory Student Lending that charted a path for the Education Department to wipe out large amounts of debt unilaterally.

The legal opinion published by Trump administration on Wednesday is effectively a rebuttal to those legal arguments, which have been widely embraced by progressives. The memo also seeks to explain that the Trump administration’s various executive actions in 2020 to provide relief to borrowers — all of which were taken without Congress — were limited in scope and don’t open the door to widespread debt relief.

Advocates for widespread student loan cancellation have argued that the Trump administration created a precedent — if not a legal one, then a political one — for Biden to use executive action to cancel loans.

The memo says that last year DeVos had “considered her authority to provide blanket or mass cancellation” as the administration sought to provide student loan relief during the pandemic but that the Education Department, in consultation with the Justice Department, had “concluded she would lack statutory authority to do so.”

Looking to the HEA: Progressives have cited a part of the Higher Education Act — section 432 — that discusses the Education Department’s power to “compromise” and “settle” student loan debts as the primary way that they hope the Biden administration cancels student loan debt.

The Education Department and White House previously said that the Trump administration had invoked that law as part of its executive actions to provide pandemic relief to student loan borrowers.

Angela Morabito, a department spokesperson, told POLITICO last year that the agency had used section 432 of the Higher Education Act to unilaterally suspend interest on federal student loans.

“The Secretary exercised her authority under Sec. 432(a)(6) of the Higher Education Act to allow a temporary waiver of interest based on the unique and special facts presented by the COVID-19 pandemic interruption and the resulting declaration of a National Emergency by the President,” Morabito said in an email last August.

White House press secretary Kayleigh McEnany similarly cited that law as giving the Education Department “broad” powers to take action on student loans during a press briefing on Aug. 10.

The latest Trump administration memo appears to concede that the Education Department did rely on section 432 to forgive the interest on certain federally-held loans last March for several weeks before the CARES Act took effect. But the memo, in a footnote, describes that action as the “far outer boundary of its authority.”

That part of the Higher Education Act “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 states.