Democrats Raise Alarm Bells Over Biden's Student Debt Cancellation Plan

Progressives in Congress are not impressed with President Joe Biden's new student debt cancellation plan.

Democratic leaders from Senate Majority Leader Chuck Schumer of New York to senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont came together to attack the proposed updated student loan forgiveness plan.

The Biden administration's second student debt cancellation program was said to provide insufficient debt relief in a new letter by a group of several Democrats in federal office.

The new student loan program proposal comes after the initial debt cancellation was ruled illegal in June by the U.S. Supreme Court.

Schumer, Warren, Sanders and others wrote to Education Secretary Miguel Cardona, arguing that the new drafted plan "would fall far short of providing the full scale of debt relief that low- and middle-income Americans urgently need."

Other Democrats who signed the letter included representatives Ayanna Pressley of Massachusetts, Frederica Wilson of Florida, Ilhan Omar of Minnesota and Senator Alex Padilla of California.

The letter goes on to say that the new program should expand the number of borrowers who qualify, as well as the monetary amount of loan forgiveness they'd be entitled to.

"It's a delicate balancing act for President Biden, whose policy has to satisfy the more progressive Democratic Party members in Congress while also abiding by the strict targeting parameters set out in June's SCOTUS judgment," Liam Hunt, an analyst and director at SophisticatedInvestor.com, told Newsweek.

The fate of the student loan forgiveness program proposed by Biden will be decided in several months, but final negotiations are set for Tuesday.

The Department of Education previously said that it was reviewing the letter and welcomes any input from lawmakers.

"The Biden-Harris Administration is proud of our record of providing relief to borrowers as we work to fix the broken student loan system," the spokesperson said in a statement to Politico. "This rulemaking process is about standing up for borrowers who've been failed by the country's broken student loan system and creating new regulations that will reduce the burden of student debt in this country."

The Supreme Court ruled that Biden's original student debt plan was illegal and the president could not use emergency powers during the COVID-19 pandemic to reverse $20,000 in debt for millions of borrowers.

What Is the New Plan?

Under Biden's newly introduced plan, the federal government would offer debt relief only to specific types of borrowers, including those whose debt has skyrocketed due to interest rates or those who still owe 20 or 25 years after graduation.

However, since there are more than 44 million student loan borrowers in the U.S., holding a combined total of $1.6 trillion in debt, the new proposal would make only a small impact on a minority of student loan holders. Young people and new graduates specifically would be largely left to fend for themselves, Hunt said.

"President Biden's narrow approach, focused on specific groups of borrowers with ballooning balances or those still in debt after 20-25 years, is leaving many borrowers feeling left out," Hunt said.

The Education Department would cancel up to $10,000 or $20,000 of a borrower's debt that goes beyond what they initially owed.

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

Progressives in the new letter argued that the administration should instead forgive loans for those who "diligently repaid enough to cover their original principal."

Schumer, Warren, Sanders and others also asked for victims of student loan servicer misconduct to have their debts forgiven and for the government to create a "catch-all category for unforeseen forms of hardship" borrowers might face.

The Department of Education previously said it does not anticipate making a decision on the new program until May, when the public could weigh in during a public comment period. Republicans have consistently criticized Biden's attempts to reverse Americans' remaining student debt without congressional approval.

Steve Taylor, the director and senior fellow of education and workforce at the Charles Koch-founded Stand Together Trust nonprofit, said the legal authority of the new policies is still shaky. Kock is a conservative mega donor who has donated millions to get Republicans elected.

Instead of interpreting policy, the Department of Education is essentially now creating legislation, which could prompt a slew of additional legal challenges if Republicans gain full control of Congress, Taylor added.

"President Biden is engaging in an arcane process known as rulemaking because his Plan A was struck down by SCOTUS earlier this year," Taylor told Newsweek. "The rulemaking committee is stacked with far-left voices who don't represent the interests of the majority of Americans....The committee rejected a request to add the voice of taxpayers who didn't take a student loan but will have to foot the bill for those who did."

Hunt said that because of the concerns over even the less expansive student debt cancellation plan, the progressives' call for action is likely unrealistic considering the Supreme Court ruled an executive order on this measure would be illegal.

"The president, then, is in a situation in which he is being forced to compromise. Naturally, this approach will not cater to Democratic Party hardliners who are eager to score political sympathy from progressives who they have alienated in recent weeks," Hunt said, adding that many progressives are unhappy with the Biden administration and Democratic Party's handling of the Israel-Hamas war.