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Does the President Have the Legal Authority to Cancel Student Loans by Executive Order?

One of the biggest issues faced by the Biden Administration is the nation’s student loan crisis. Congressional leaders and various organizations are calling on President Biden to cancel up to $50,000 in student loans per borrower by executive order. Biden supports the idea in principle but questions whether he has the legal authority to take executive action. Generally, Congress has authority pertaining to the approval of federal spending, the category under which student loans fall.

However, Senate Democratic Leader Chuck Schumer, Senator Elizabeth Warren and other senators have introduced a resolution outlining a way that the president could use his authority under the Higher Education Act of 1965 to cancel student loan debt and to ensure federal student loan borrowers do not incur tax liability as a result. A section of the act gives the Secretary of Education the power “to modify, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption.” The resolution seeks the sense of Congress that through the Secretary of Education, student loans can be cancelled by execution action.

Calls for federal student debt cancellation have also been lodged by more than 325 undersigned community, civil rights, climate, health, consumer, labor and student advocacy organizations.

With Congress embroiled in debate over the pending COVID-19 stimulus package, it is unlikely that legislative action on student debt will be taken soon. In the meantime, an automatic forbearance has been applied to federal student loans due to the pandemic. Debtors also may have other options for easing their financial burdens. These may include:

  • Refinancing — By combining federal or private student loans into a single loan, you may be able to lower your interest rate, which can help you pay off the debt faster.
  • Income-driven repayment plans — If your monthly payments are higher than you can afford, you can negotiate with the lender about entering into a repayment plan that suits your income level. Depending on your financial circumstances, you may be able to enroll in a plan that drastically lowers your monthly payments.
  • Forgiveness — You may be eligible for forgiveness, cancellation, or discharge of your student loans based on certain reasons, such as if you are totally and permanently disabled, are employed by a government or not-for-profit organization or have a history of working as a full-time teacher in a low-income elementary school, secondary school or educational service agency. A student loan may be discharged in bankruptcy if you can prove economic hardship.

If you’re faced with substantial student loan debt, it’s best to have the guidance of an experienced attorney who can effectively negotiate and work to secure relief on your behalf. Located in Fort Mitchell, Kentucky, Hemmer DeFrank Wessels, PLLC provides skilled counsel for banking and debtor/creditor matters. To schedule a consultation, call us at 859-344-1188 or contact us online.

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    Phone: 859-344-1188
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