As President Biden Prepares To Extend Loan Repayment Pause, Governors Address Root Causes Of The Student Debt Crisis

While members of Congress are calling for the enactment of billions of dollars in broad student loan forgiveness and the White House is signaling the potential for executive action in that direction, governors continue to offer an alternative vision for education and labor policy reforms that will eliminate the need to rack up debt in order to qualify for well-paying jobs. Maryland Governor Larry Hogan (R), for example, on March 15 announced a new initiative to remove the four-year degree requirement for thousands of state government jobs.

“As a lifelong small businessman, I know that a growing economy goes hand-in-hand with a flourishing workforce, which is why we’re launching an effort to make Maryland the first state in the nation to eliminate the four year college degree requirement from thousands of state jobs,” Governor Hogan said of his decision.

“There are over 1 million Marylanders who do not have bachelor’s degrees, but do have skills for jobs that are in demand by both the State of Maryland and other employers,” said Byron Auguste, CEO and co-founder of Opportunity@Work, a nonprofit workforce development organization that will partner with the Maryland Department of Labor on Governor Hogan’s initiative to eliminate college requirements for thousands of jobs in a state whose government employs nearly 38,000 people.

The Biden White House and congressional Democrats, meanwhile, are more focused on cancelling student loans for millions of Americans, regardless of whether they are able to pay off their debt without taxpayer assistance. Many are waiting to see if President Joe Biden will extend the ongoing student loan repayment pause past the current May 1, 2022 expiration date. As was also the case with his extension of former President Donald Trump’s solar tariffs, there is a strong likelihood that President Biden will extend the student loan repayment pause instituted by Trump two years ago.

In fact, the Department of Education recently asked the loan service providers it contracts with to stop notifying borrowers about the resumption of loan repayment in May, which indicates the White House is planning to extend the repayment pause. The White House has signaled that additional executive action on student loan forgiveness could accompany the likely coming announcement of the loan repayment pause extension.

“Whether or not there is some executive action [on] student debt forgiveness when [student loan] payments resume is a decision we’re going to take before the payments resume,” said White House Chief of Staff Ronald Klain. Members of Congress are calling on Biden to extend the repayment pause and to find ways to enact loan forgiveness.

“Un­til we fix our stu­dent loan sys­tem, the stu­dent loan pay­ment pause must con­tinue to pro­vide bor­row­ers much-needed re­lief,” said Senate Health, Education, Labor, and Pensions Committee Chair Patty Murray (D-Wash.) on March 16, who has called for the forgiveness of “some debt for all borrowers.”

Just as progressives wanted Biden to extend the CDC’s eviction moratorium after it was clear that the votes were not there for Congress to do so, any effort to enact broad forgiveness of student loans is going to come in the form of executive action. And as with President Biden’s effort to have the CDC unilaterally extend the eviction moratorium without congressional approval, any executive action to forgive student loans is almost sure to be challenged in court.

“Without legislative action by Congress, the only way for Biden to establish some form of broad student loan forgiveness initiative would be through executive action — something that many student loan legal experts and advocacy organizations say is allowable under federal law,” noted Adam Minsky in a March 10 Forbes article. “But Biden and other key experts, as well as many congressional Republicans and some former Education Department officials, have expressed skepticism that sufficient legal authority exists under current federal law to allow a president to simply cancel student debt.”

Polling shows that broad student loan forgiveness would be a politically unpopular action for Democrats to back in an election year. Hank Naughton, a Democratic member of the Massachusetts House of Representatives for three decades, warns his fellow Democrats that “waiving college debt for millions of Americans with no regard for whether or not they deserve that forgiveness, would only further alienate the President from most Americans.”

However that’s what the Biden administration has already indicated it is looking to do. In fact, there is a concern that the White House now views an existing anti-fraud program as the vehicle through which billions of dollars in student loans can be discharged by the government. That program, the Borrower Defense To Repayment Program (BDTRP), provides financial relief to those defrauded by for-profit education providers.

Last November, a coalition of non-profit organizations warned Department of Education Secretary Miguel Cardona in a joint letter that abuse of the BDTRP “may be unfairly leaving taxpayers on the hook for billions of dollars in fraudulently forgiven student loans.” The joint letter to Secretary Cardona noted that the BDTRP has been abused for a while, but that it has gotten worse since President Joe Biden was sworn in. As of February, approximately $2 billion in loan forgiveness for more than 100,000 students had been approved through the BDTRP.

“While the BDTR provision is important for students who were genuinely defrauded by any higher education institution, what’s troubling is that the Biden administration has signaled it may eliminate any requirement of evidence that students were actually defrauded, and also that this approach will only apply to students of for-profit schools – ignoring concerns of those from traditional schools,” noted the joint letter sent in November. “This would lead to hundreds of thousands of students’ loans being forgiven simply because they filled out an online form.”

By accepting all fraudulence claims without verifying the evidence and extending the program to not-for-profit colleges, the BDTRP could be used to wipe out billions of dollars in student loans to Americans who were not defrauded, effectively turning the BDTRP into a broad loan forgiveness program, as opposed to one that is focused on combatting and compensating for actual fraud. If such use of the BDTRP were to become precedent, many expect there would be calls to expand such blanket and unquestioned forgiveness to those who attended traditional, non-profit universities.

The November coalition letter to Secretary Cardona explained that “the notion of the federal government just willy-nilly forgiving billions of dollars in student debt is bad policy. Yet, that is exactly what is happening as the Biden administration is seemingly embracing a policy that forgives student debt if that debt was accrued at a for-profit college, regardless of the quality of education that was provided.”

As with uncapping the state and local tax deduction, any mass student loan forgiveness program would disproportionately benefit those of above average income and means. According to the Urban Institute, nearly half of student loan debt is held by the top 25% of income-earning households. That is why any broad student loan forgiveness would disproportionately benefit the already well-to-do.

“This type of wholesale debt forgiveness is unfair to the millions of American families who scrimped and sacrificed to save up for their children’s educations,” added former Massachusetts Representative Naughton. “After all, were these parents naive for sacrificing meals out and vacations to build up college savings? Were students foolish for taking jobs to pay for their educations and avoid or lessen their debts?”

While the White House considers extending the student loan repayment pause and ponders ways to forgive more student loan debt without congressional approval, governors across the country are taking an alternative approach that gets at root causes of the student debt crisis and promotes alternatives to the four-year university route. In addition to enacting income tax cuts that make it easier for workers to pay back student loans, many governors and state legislators are also promoting apprenticeship programs and other alternatives to the traditional four-year college track.

“This year, Governors of both parties made clear that apprenticeship will play a prominent role in their efforts to strengthen the economy, improve economic mobility and create new and better career opportunities for residents in their states,” noted the National Governors Association on February 8. “This substantial, bipartisan support for apprenticeship has grown during a period in which the price of attaining a college degree has continuously increased and labor market outcomes for those who graduate remain uneven.”

Governor Hogan’s new initiative to reduce unnecessary credentialing in state government is, as Mr. Auguste notes, “a promising model for other states and employers to follow.” It could also be a model for the federal government, which employs 2.8 million people, to follow. As economist Tyler Cowen noted of Hogan’s initiative in a March 18 article, since two-thirds of Americans do not have a college degree, this reform “could make government more representative and less prone to mistrust and resentment.” It might even, added Cowen, “start a broader movement, including in the private sector.”