On Student Debt Forgiveness, the Biden Administration Is Setting Itself Up to Fail Again

Thomas Gokey

The Biden administration could automatically cancel student debt for all borrowers right now. But its announced “Plan B” for debt forgiveness shows it’s setting itself up to be stymied by the Supreme Court all over again.

Joe Biden speaks on his student debt relief plan in Washington, DC, 2022. (Alex Wong / Getty Images)

Interview by
Ben Beckett

On Friday, September 1, interest began accruing again on student loans for more than forty-five million Americans, and on October 1, monthly payments will start coming due again. After Joe Biden’s half-hearted attempt to cancel some student debt was struck down by the Supreme Court, the administration has focused more on getting debtors to pony up than on providing relief.

The results have been chaotic. Borrowers report loan servicers providing wrong information, hours-long wait times when they try to call for help, and a new Biden-developed repayment plan that often tells borrowers they will have a lower monthly payment, only to force them into making a higher payment once they enroll.

The Debt Collective, emerging out of the Occupy Wall Street movement, is a debtors’ union that has long advocated for the cancellation of student loan debt. Jacobin spoke with Debt Collective organizer and cofounder Thomas Gokey about the collective’s new tool to allow borrowers to petition the Department of Education directly for debt relief, as well as the recent past and future of student loan debt.

Ben Beckett

What is going on with student debt since the Supreme Court ruled that the Biden administration isn’t allowed to follow through with its plan to cancel debt?

Thomas Gokey

The Biden administration has announced its “Plan B” to cancel student debt under the Higher Education Act, which is something that the Debt Collective has been pushing for from the beginning. The key thing is to cancel the debt before the Supreme Court has a chance to rewrite the law and prevent cancellation, and the way Biden is pursuing this will unnecessarily give the Supreme Court another chance to kill cancellation.

That’s why the Debt Collective just launched our new Student Debt Release Tool, which will help student debtors draft a demand letter that will get sent to the top brass of the Department of Education to cancel their debt automatically, right now, using the “compromise, settle, and release” authority under the Higher Education Act. The release tool will also walk people through their options to join the student debt strike.

The truth is, student debt gets canceled every day. It is quite normal. My colleague Eleni Schirmer wrote an article for the New Yorker about the aging of student debtors in which she profiled Betty Ann, a ninety-one-year-old student debtor with six figures of student debt.

After that article, Schirmer approached the Department of Education about using the “compromise, settle, and release” authority to cancel all of Betty Ann’s debt, which is exactly what happened. Betty Ann is now debt free. Our new tool lets everyone make the same demand Betty Ann made. None of this debt is just, none of it should have existed in the first place, and instead of restarting student loan payments, Federal Student Aid should start canceling the debt instead.

In another genuinely positive sign, the Biden administration is learning to cancel student debt the right way, which is to say automatically. In August, they started the first wave of a massive account adjustment meant to fix the many failings of the various income-driven repayment (IDR) plans. This is going to impact people who have already been trapped in debt for several decades.

So far, over eight hundred thousand people have been notified that the entire balance of their student loans have been canceled and they are finally free. The best part is that there was no application, no income cap, no means test, and it was the entire balance — not $10,000, but the whole amount.

In other words, the Department of Education just canceled the debt they knew was on the books. It’s impossible to state how life-changing this is for these eight hundred thousand people, and it is proof that cancellation can happen swiftly and actually be delivered if you get rid of the means-testing and applications and just cancel it.

Even though income-driven repayment plans have never worked (indeed, before last month, fewer than two hundred people ever received cancellation from IDR), the Biden administration has decided to try again with a new IDR plan called Saving on a Valuable Education (SAVE). In theory, it would help more people stay at $0 monthly payments; in practice it will inevitably have the same problems past IDR plans have had.

And, of course, the payment pause is ending. Unbelievably, Biden is restarting payments on the very loans he promised to cancel. There isn’t a reason to give up on another pause. It would simply take a new emergency declaration, like a climate emergency, which we are obviously in.

Ben Beckett

Can you say more about the Debt Collective’s new tool?

Thomas Gokey

Because there is no formal process for applying for cancellation using compromise, settle, and release authority, the process is to file a kind of demand letter. It’s a legal petition to cancel the debt, but not a “petition” in the ordinary sense of just collecting a lot of signatures.

In practical terms, people should think of this like an application for cancellation — one we had to make ourselves because it doesn’t currently exist. Whether or not a formal process might exist in the future is one of the possibilities of the upcoming negotiated rulemaking process around Biden’s “Plan B.” The Student Debt Release Tool should also be understood as a way of framing and shaping what is possible in this negotiated rulemaking.

Ben Beckett

Biden’s original debt relief plan was struck down because of a right-wing lawsuit. What other lawsuits are in the works?

Thomas Gokey

The Cato Institute and the Betsy DeVos–backed Mackinac Center tried to stop the IDR adjustment with a meritless lawsuit that they court-shopped in front of a handpicked conservative judge. That judge followed the law and laughed the case out of court. Now, the debt is already gone and, even though Cato and Mackinac are appealing, we have the upper hand, because attempting to stop the IDR adjustment means daring the court not just to violate the law, but to try to reinstate loans that no longer exist.

There are also recent challenges brought by for-profit colleges designed to prevent accountability and debt cancellation from students these schools defrauded.

We can safely expect legal challenges to Biden’s “Plan B,” and any strategy to deliver cancellation needs to factor that reality in and design cancellation in a way that will make it more difficult for these meritless legal challenges to halt them. The safest path is to simply cancel the debt automatically, for everyone, and dare the Supreme Court to try to reimpose the debts once they are already gone.

Ben Beckett

What is the basis for these lawsuits from the Right? If we assume the judiciary is going to rule in favor of the right-wing plaintiffs, is there any way around the suits?

Thomas Gokey

Legally speaking, none these lawsuits have any basis at all. They are all meritless. But they are still quite revealing about the true nature and function of student debt.

The Cato and DeVos lawsuit, for example, is based on the disciplinary power of student debt. The legal theory is that employers benefit from having workers who are in debt and willing to take lower pay and poorer working conditions on the promise of eventual cancellation under programs like Public Service Loan Forgiveness. Cancellation undermines the control employers have over workers, so employers are harmed, and cancellation should be struck down.

One lawsuit in Wisconsin claimed that cancellation was unconstitutional because it was “reverse racism,” revealing the truth that student debt disproportionately burdens students of color. The lawsuit that the Supreme Court ultimately used to kill cancellation was hilariously fake, but it ultimately boiled down to the idea that student loan servicers deserve to make a profit off of student debt.

The Biden administration is still living in a pre-Dobbs world where they assume that, just because the law is on their side, the conservatives on the court will allow them to govern within the law. The Right is waging what some are calling “lawfare,” a way of achieving a political result by any means necessary, even if it means outright ignoring the plain meaning of the laws or making up facts to suit their needs.

It’s time to fight back. At the very least the Biden administration has to stop pretending that the courts will follow the law. This means, in part, delegitimizing an illegitimate court. But it also means designing administrative actions that are more resistant to bad-faith meritless lawsuits and a judiciary rigged by ideologies. There are more and less vulnerable paths to take, and so far the Biden administration has decided to deliver broad-based debt cancellation in ways that are more vulnerable than they need to be.

The recent IDR adjustment is an example of the right way to do this: just cancel the debt automatically, all of it, with no application, and zero the accounts out before the fake lawsuits get in front of lawless judges. This cancellation is perfectly legal, and it is key to act within the law before a [Donald] Trump judge has a chance to ignore the law to stop it.

Ben Beckett

What should Biden and the Department of Education be doing differently? Are Biden’s hands tied? Is there some other way he could cancel debt?

Thomas Gokey

The Biden administration should cancel student debt immediately and automatically, and then have the legal fights after the debt has legally been canceled.

There was nothing wrong, legally speaking, with Biden’s original cancellation plan. If the courts followed the law, they would have allowed it to happen. Jacobin correctly identified the problem with Biden’s approach: by requiring an application for cancellation, he gave dark money right-wing organizations time to mount a series of meritless lawsuits to stop cancellation before it happened.

Biden didn’t have to do that. He could have canceled the debt automatically under the HEROES Act without an application, and the debt would have been gone without the Supreme Court getting a chance to violate the Constitution and rewrite the laws Congress passed, which clearly authorized cancellation.

There are other legal authorities the Biden administration has, including the Higher Education Act. But again, the issue is a practical one: How do you act within the law to cancel the debt before the courts can stop cancellation from happening? The Higher Education Act allows for what is called an “interim final rule,” as Persis Yu explains. This would allow the Biden administration to cancel debt via an executive order automatically, not via a new rule, which requires a long, negotiated rulemaking process. At the end of the negotiated rulemaking process, there will be more meritless lawsuits and a corrupt, ideologically motivated Supreme Court.

Legal experts gave the Biden administration a roadmap for how to cancel debt in the safest way possible from meritless legal challenges. Biden decided not to take that path with his “Plan B.”

The Debt Collective gave the Biden administration a very clear warning: whatever you do, do not make your “Plan B” a notice-and-comment period with a negotiated rulemaking committee because at the end of that process is the buzzsaw of lawsuits and a lawless Supreme Court. Of course, that worst possible version of a “Plan B” is exactly what the Biden administration has decided to do.

This doesn’t mean that the future is fated. Biden has put us on difficult terrain in the short term, but we still have everything to fight for and everything to win. The debt-for-education system has always rested on a series of lies, including the idea that these debts must exist and must be repaid. Nobody can possibly believe this anymore, after three years of nonpayment. Huge tectonic plates have shifted, and no matter how the short-term battles shape up, there are still reasons to be optimistic we will win the long-term war. We can cancel all student debt and win college for all so that future generations don’t have any student debt at all.

Ben Beckett

Why isn’t the Biden administration using your suggested tactics? Is it disagreement with the legal reasoning, incompetence, or malice?

Thomas Gokey

It is hard to say for sure. There are certainly different factions within the Department of Education and the White House as to the legal and political risks.

My own sense, gathered from the very limited and indirect window we have into what is going on behind the scenes, is that there is some real cowardice among the White House legal advisors. We are not asking them to do anything that isn’t legal, but they still seem to think that the Supreme Court will give them brownie points if they tie one hand behind their backs and do less than they could.

Ben Beckett

What impact will the resumption of student debt payments have on borrowers? On the economy as a whole?

Thomas Gokey

For student debtors, resuming payments will be brutal. It’s the difference between being able to make rent, put food on the table, and afford medications. People will be making decisions about which bills to pay and which ones they just can’t afford to.

We have very good reason to believe restarting payments will have a negative impact on the economy. To some degree, that will be blunted by the one-year “on-ramp” that will allow people not to make a payment without having any negative impact on their credit and without any wage garnishments or adverse collection efforts.

There are always some rare exceptions where it makes more sense to start paying, but the Debt Collective is advising almost everyone to get to $0 monthly payments if you can, and if you can’t get all the way to $0, to refuse to pay during the “on-ramp.” So the full force of the negative impact of resumption of payments might take some time to emerge.

Ben Beckett

What’s your sense — how bad will resuming student debt be for Biden and the Democrats in 2024?

Thomas Gokey

For Biden and the Democrats, this is a political own goal. Biden is running his reelection campaign as America’s debt collector, and more Democrats than Republicans voted to restart payments as a part of the bad and unnecessary debt ceiling deal. Student debt is a policy failure, and failing to cancel the debt and collecting on it instead is a political failure. Given that so much else is at stake, from democracy itself to climate change and a livable planet, failing to meet this moment would be truly unforgivable.