What It Would Take for the Next President to Cancel All Student Debt

Last Wednesday, President Donald Trump issued an executive order intended to wipe out the student loans of around 25,000 permanently disabled veterans, a move that came after dozens of state attorneys general said that it was way too complicated for wounded veterans to get rid of their student debt. The move will supposedly save these veterans an average of $30,000, but it represents a tiny fraction of the $1.6 trillion in student debt that Americans collectively owe.

Disabled veterans aren't the only ones having difficulty navigating an extremely confusing loan forgiveness process, and though debates about what to do about the country's student loan crisis have emerged in the Democratic primary, Trump doesn't seem inclined to take the broader problem seriously. Last year, the highest-ranking federal official in charge of keeping lenders like Navient and Sallie Mae in line quit in protest of what he said were lax enforcement policies.

Trump's move to forgive the debt of some veterans showcases that the president seemingly has the capacity to do much more. So could a different president go much further and cancel everyone's student debt without even getting Congress to pass a bill?

According to Mark Kantrowitz, one of the country's leading experts on student debt policy, Trump's executive order wasn't as radical as it seems. He was able to cancel the loans because of a 2008 amendment to the Higher Education Act aimed at forgiving the debt of severely injured veterans. Such veterans who are unable to work are sent an application they can fill out to have their debts erased.

But requiring veterans to fill out forms created a barrier for some who were eligible under the program. "Many didn't because they didn't believe the paperwork was legit or because they were so severely disabled that they weren't able to," Kantrowitz said. "So tens of thousands of disabled American veterans were having their Social Security disability and retirement benefits offset to repay their student loan debt, even though the Department of Education knew that they were eligible for a discharge."

Trump's executive order made approval automatic. Kantrowitz says that Trump couldn't cancel all the student loan debt in the country because there's no similar program under the law for non-veterans. Traditionally, the president can't spend money that hasn't been appropriated by Congress, which is what en-masse loan forgiveness might amount to, and laws, primarily the Anti-Deficiency Act (ADA), prevent rogue spending.

But Alan Collinge, a writer and higher-education reform activist, said he believes that the president could erase the balances of all direct federal loans, which are the ones held by the government itself, and which account for about 70 percent of student loans in the U.S. "The money for this was already appropriated when the loans were made," he said.

It's unclear whether a Democratic president would buy Collinge's argument. Bernie Sanders and Elizabeth Warren, the two most prominent 2020 contenders who have called for student-loan forgiveness, have said they want to do so through legislation. But if such legislation stalled thanks to Republican opposition in Congress, it's at least conceivable that one of them could simply sign an executive order and battle the lawsuits that would inevitably challenge that use of presidential power.

Even if Collinge is right and a progressive president went through with it, 30 percent of student loans are merely guaranteed by the government and held by private companies like Sallie Mae. Collinge concedes that cancelling those would require a bill to be passed. Wiping clean federal loans would just involve the Department of Education erasing them; cancelling private loans would involve paying those companies full or nearly full value for them.

Collinge also admits that any sort of large-scale debt cancelation by a sitting president would be an extremely controversial action. Even if it was found by the courts not to violate the Anti-Deficiency Act, Congress would probably not be inclined to appropriate more lending funds afterward, which would mean the suspension of the student-lending program altogether. But he thinks that there's a chance such an aggressive move could work.

"Anyone telling you that the president absolutely could not cancel student loans, or any government-held loans, because of the ADA is being disingenuous," he said. "They know as well as I do that this would likely wind up being a matter for the courts to decide. It could go either way. Don't let the swamp people snow you."

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