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Trump Admin: Illegal to Forgive Student Debt

President Trump’s administration is claiming that it would be illegal for the executive branch to order the forgiveness of all or at least some of the student debt held by Americans.

In an internal memo to former Secretary of Education Betsy DeVos reviewed by the Wall Street Journal,”lawyers from the Trump administration said Tuesday that it would be illegal for a president to forgive student loan debt using executive powers—a move that top Democrats have argued that the incoming Biden administration should undertake immediately.

“We believe the Secretary does not have the statutory authority to cancel, compromise, discharge, or forgive, on a blanket or mass basis, principal balances of student loans, and/or to materially modify the repayment amounts or terms thereof,” stated Reed Rubinstein who is the principal deputy general counsel for the Department of Education.

Joe Biden’s team indicated last week that he plans on asking Congress to cancel $10,000 in debt for federal borrowers—a cornerstone of his campaign platform—when he takes office.

Mark Kantrowitz who is a higher Education expert told CNBC last month that that approach might not work: “using an executive order to forgive federal student loans will likely be met with a lawsuit and preliminary injunction, and eventually fail,” he stated.

Canceling that amount of debt could create a massive headache for the ten companies with contracts to collect student loan payments.

“Depending on how the federal government does the forgiveness, the servicers could also incur huge new costs in carrying this out, with the end result of having fewer accounts to work with,” said Brandon Barford in an email.

“There could also be legal liability, as I am sure the [Consumer Financial Protection Bureau] and Dept. of Ed will be watching like hawks to ensure that borrowers are not harmed in the process.”

While the Trump administration has placed all federal student loans in forbearance through Jan. 31 and waived interest on them since April, borrower advocates say forgiveness is still essential to a strong recovery.

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