Biden Student Loan Cancellation in Limbo

As the White House is expected to meet Tuesday with top lawmakers to rediscuss debt ceiling negotiations to avoid a potential default, dropping the student loan forgiveness plan may not be a sacrifice Democrats are willing to make.

House Speaker Kevin McCarthy, a California Republican, galvanized enough Republicans to pass the "Limit, Save, Grow Act" late last month by a 217-215 vote. The bill intends to cut most federal spending to last year's levels, offering a preview of the GOP's intentions prior to making some sort of deal to raise the federal debt limit through March 31, 2024, or until the debt increases by $1.5 trillion.

The House GOP package would also nix the Biden administration's executive order to cancel roughly $400 billion in student debt, which the U.S. Supreme Court is set to rule on late next month. Under Biden's executive order, an estimated 40 million borrowers would be forgiven $10,000 or $20,000 in student loans based on their households' income.

A source familiar with the negotiations told Newsweek via email on Monday that the White House is not prepared to take student loan forgiveness off the table.

"House Republicans have done our job by passing a bill to take default off the table, so Chuck Schumer should prove he can pass something out of his Senate—then we can go immediately to conference," House Majority Whip Tom Emmer told Newsweek via email. "Otherwise, pass our bill."

Emmer, a Minnesota Republican, called Biden's student loan bailout "illegal."

Meanwhile, Senate Majority Leader Chuck Schumer announced that McCarthy's bill was "DOA" or dead on arrival in the Senate, criticizing cuts to Medicaid, Supplemental Nutrition Assistance Program (SNAP) benefits, the Low-Income Home Energy Assistance Program, and Biden's student loan relief plan.

Moody's Analytics chief economist Mark Zandi appeared before a Senate subcommittee on economic policy in March, warning that Congress' failure to raise the nation's borrowing cap could result in about 7 million lost jobs and a financial crisis similar to the Great Recession.

The Clean Debt Limit scenario assumes that the moratorium on student loan payments ends this summer, according to analysis published by Moody's in April. However, Biden's student debt forgiveness and income-driven repayment plans remain in place. It also assumes that lawmakers will "agree to increase the debt limit just enough" so as to not become an issue again prior to the 2024 election.

Estimates by the nonpartisan Congressional Budget Office (CBO) approximate that the House bill would reduce the national deficit by $4.8 trillion overall and decrease mandatory spending by a net $700 billion.

Read more: Student Loan Forgiveness Updates and FAQs: Who Qualifies and How To Apply

On Saturday, McCarthy wrote on Twitter that "Biden doesn't want a deal. He wants a default." Meanwhile on Monday, the House speaker told NBC's Ali Vitali that he and the White House are still "far apart."

"I remain optimistic because I'm a congenital optimist," Biden told the White House pool on Sunday in Delaware, according to C-SPAN's Craig Caplan. "But I really think there's a desire on their part, as well as ours, to reach an agreement, and I think we'll be able to do it."

Last Wednesday, Senate Minority Leader Mitch McConnell said in a statement on his website, following a White House meeting, that the Biden administration has wasted three months worth of potential negotiations and needs to "wake up."

"Speaker McCarthy and House Republicans have passed the only legislation currently in existence that prevents default," McConnell said. "He's spent months waiting for President Biden to come to the table."

Republican Representatives Andy Biggs, Ken Buck, Tim Burchett, and Matt Gaetz voted against the House bill, each citing the legislation not going far enough.

"This bill will only reduce the projected deficit by $4.8 trillion dollars over the next 10 years, leaving America with a $52 trillion debt during that time and our country on the brink of a fiscal crisis," Buck wrote in a statement shared to his Twitter account late last month. "Republicans must distinguish ourselves from Democrats by taking a stand against out-of-control spending and reversing course before it's too late."

Newsweek reached out via email to Senate and House leadership for comment.