Can The President Cancel Student Debt?

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Student loan forgiveness has been a popular topic in the news lately.  This should not come as a surprise considering there are over 43 million student borrowers in the United States, each with an average debt size of $39,351. As the current total student loan debt in the United States tops $1.7 trillion, President Biden has called for cancelling $10,000 federal student loan debt for every borrower. In fact, in April 2021, President Biden even tasked the Departments of Education and Justice with drafting a memo on whether he has the legal authority to cancel student debt. However, since this memo has not yet been released to the public, the answer remains unclear. This article will broadly explore arguments regarding the President’s legal authority to cancel federal student loan debt. 

To start, the Biden administration has actually already cancelled nearly $10 billion in federal student loan debt as of late 2021. However, this relief was only available to borrowers with disabilities and to victims of college fraud. The legal basis for cancelling the federal student loan debt of borrowers with total and permanent disabilities is the Higher Education Act of 1965, while the Department of Education’s “Borrower Defense to Loan Repayment” regulation allows the government to forgive federal student loans if the borrower’s school misled them or engaged in other misconduct.

The argument for the President’s authority to cancel federal student loan debt stems from section 432(a) of the aforementioned Higher Education Act of 1965 (20 U.S.C. 1082(a)), “which grants the Secretary of Education the authority to modify, … compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.” Notably, the statute suggests that the Secretary of Education has the final right to cancel federal student loan debt, and the President can only direct the Secretary to do so. Harvard Law School’s Legal Services Center supported this authority in a letter to Senator Elizabeth Warren; in this letter, the organization essentially suggested that the Secretary of Education can cancel federal student debts by, as stated in 20 U.S.C. 1082(a), “modifying” or “compromising” such debts. Furthermore, President Biden has already relied on the Higher Education Act of 1965 to pause student loan payments and interest during the COVID-19 pandemic. Former President Donald Trump also used the Higher Education Act as the basis for initially pausing student loan interest in March 2020. However, there is still much ongoing debate about the exact extent of power granted to the President by the Higher Education Act of 1965.

Critics against the President’s authority to cancel federal student loan debt have argued that the Higher Education Act’s power is limited by Congress. The statute starts off by saying that “[i]n the performance of, and with respect to, the functions, powers, and duties, vested in him by this part, the Secretary may…” Critics interpret this language to mean: the Secretary of Education, holding the exclusive authority to forgive student loans, may only do so if authorized by Congress. If true, then the President would not have the authority to cancel student loans by executive order. Even if the President could direct the Secretary to forgive student loans, the Secretary would need congressional approval.

Additionally, some have argued that the President relied on the HEROES Act of 2003 (20 USC 1098bb) to pause student loan payments and interest, rather than the Higher Education Act. The HEROES Act allows the Secretary of Education to waive or modify any provision of Title IV of the Higher Education Act of 1965 in connection with a war or other military operation or national emergency “as may be necessary to ensure that affected individuals are not placed in a worse position financially in relation to that financial assistance because of their status as affected individuals.” The key phrase is “as may be necessary”; an argument can be made that Biden’s student loan payment and interest pause was appropriate under the circumstances of the Covid-19 pandemic, but forgiving student loans entirely arguably goes beyond what is necessary. If this interpretation is accepted, then it weakens the argument that the Higher Education Act of 1965 grants the President authority to forgive all federal student loans because the authority would actually stem from the HEROES Act. However, the HEROES Act only allows for proportionate measures to be taken, and forgiving student loans in their entirety may be viewed as not proportionate. 

Notably, President Biden himself does not believe he has the power to cancel federal student loan debt by executive order. During a Town Hall in February 2021, he stated: “I’m prepared to write off $10,000 debt, but not [$50,000] because I don’t think I have the authority to do it by signing” an executive order.” However, there are others who disagree with President Biden’s stance. Dalié Jiménez, director of the Student Loan Law Initiative at the University of California, Irvine, felt that “[t]he 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.” In contrast, Reed Rubinstein, former principal deputy general counsel under Betsy DeVos at the Department of Education, maintained that “[the payment and interest] pause is the far outer edge of where you can go with your legal authority.” 

In the end, there is currently no clear-cut answer on the President’s authority to cancel federal student loan debt. The memo that details whether the President in fact has such authority to cancel federal student loan debt—which the Biden Administration indicated to be released in late 2021—is still not available. Furthermore, it is still not clear whether the Secretary of Education, the President, or both, hold the authority to cancel federal student loans. Moreover, President Biden does not believe he has such authority, so it is unlikely that he would do so. Therefore, it is unlikely that federal student loans will be forgiven for all borrowers anytime soon.

About the Author: Spencer Li is a 2L at Cornell Law School. He grew up in Queens, NY and has a business administration degree from University at Buffalo. He worked in retail banking prior to law school and plans on pursuing corporate law in NYC after graduation.