Cancel $50K Of Student Debt Per Borrower, Dem. AGs Urge

By Hannah Albarazi
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Law360 (February 19, 2021, 10:32 PM EST) -- Wiping out up to $50,000 of federal student loan debt per borrower would improve the U.S. economy, help close the racial wealth gap and protect against "dashed dreams," said a group of Democratic attorneys general urging Congress to push President Joe Biden into making the proposal a reality.

This immediate relief would help millions of borrowers in the U.S. struggling under unmanageable student debt now exacerbated by the coronavirus pandemic, a coalition of 17 attorneys general said in a letter to Congress.

But the $50,000 proposal, which has the potential to forever alter the trajectory of millions of lives, lacks the support of key Democrats, including President Biden, who flat-out rejected it at a televised town hall meeting Tuesday, telling one student borrower, "I will not make that happen."

President Biden, however, has previously endorsed wiping out up to $10,000 per student loan borrower.

But the Democratic attorneys general — led by New York and Massachusetts with California's support noticeably absent — urged Congressional leaders on both sides of the aisle to approve Senate Resolution 46 and House Resolution 100, which call on the president to use his authority under the Higher Education Act to immediately and permanently nix up to $50,000 worth of federal student debt owed by all borrowers.

Whether student loan debt should be discharged by the president remains up for debate, but it's largely accepted that the U.S. is facing a worsening student debt crisis. Outstanding U.S. student loans — of all types — totaled more than $1.6 trillion in 2020, more than tripling since 2006, according to a report by Moody's Investors Service last year.

The attorneys general coalition points to a flawed system in their plea to Congress, noting that roughly one in five federal student loan borrowers are in default. They say student borrowers who can't afford to pay have few options but to default.

Even full-time public service employees who apply to have their loans discharged under the Public Service Loan Forgiveness program are up against a rejection rate of about 98%, according to the coalition.

"The current options for borrowers have proved to be inadequate and illusionary," the attorneys general told Congress in a letter to Senate Majority Leader Charles E. Schumer, Senate Minority Leader Mitch McConnell, House Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy on Friday.

The attorneys general impressed upon Congress their extensive efforts over the years to obtain student loan discharges for students who have been defrauded by predatory, for-profit schools in their states, saying they have been "stymied" by the U.S. Department of Education under the Trump administration.

The attorneys general, who are responsible for enforcing their states' consumer protection laws, elaborated on the damaging impact of for-profit schools' misconduct, telling Congress that students who attend those schools and take out federal student loans to pay for them are "disproportionately likely to suffer dire consequences." 

"Significantly, the for-profit school industry has deliberately targeted people of color, who, as a result, are disproportionately represented among students struggling with federal student loans incurred to attend for-profit schools. Student debt cancellation can substantially increase Black and Latinx household wealth and help close the racial wealth gap," the attorneys general said.

"Student loan debt holds too many struggling borrowers down and prevents them from achieving financial stability," New York Attorney General Letitia James, who co-led the coalition, said in a statement Friday.

"Many fall behind on their payments or enter default, leading to a downward spiral of ruined credit and dashed dreams. Cancelling up to $50,000 in student loan debt will not only free these borrowers to move forward with their lives, but will simultaneously help close the racial wealth gap and move our economy to new heights," James said.

"This measure would help remedy predatory practices that have disproportionately harmed people of color, boost our struggling economy, and create a viable future for millions of Americans," said the coalition, which includes the attorneys general of New York, Massachusetts, Connecticut, Delaware, Hawaii, Illinois, Maryland, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Vermont, Virginia, Washington, Wisconsin and the District of Columbia.

Student debt policy has also been top of mind for law school graduates, who in 2016 averaged cumulative debt of $145,500, according to data from the National Center for Education Statistics, marking a 77% increase since 2000.
 
The American Bar Association is set to vote on Feb. 22 on a pair of resolutions that would give the organization the go-ahead to lobby for reforms to mitigate the student debt crisis.

The ABA proposal seek to give the organization the authority to push for Congress and the federal government to act on policies that would make it easier for individuals to discharge student loans in bankruptcy proceedings and adjust criteria to qualify for federal loan programs. It would also allow the ABA to file amicus briefs in legal disputes dealing with student debt-related issues.

--Additional reporting by Justin Wise. Editing by Emily Kokoll.

For a reprint of this article, please contact reprints@law360.com.

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