AFR Statement: The Department of Education has the Authority to Cancel Federal Student Loans. It should.


Jan 14, 2020

Alexis Goldstein,

Today’s proposal that administrative authority be used to cancel student debt, and the affirmation of the legality of such a step by the Project on Predatory Student Lending at Harvard Law School are important positive possibilities for student borrowers and their families and communities.  AFR has long called on the Department of Education to use its existing legal authority to cancel the federal debts of wronged students of for-profit colleges without individual application – as have former Corinthian students, advocates, lawmakers, and law enforcement officials.  A group of thirteen Senators wrote a letter in 2014 calling on the Department to use its authority to discharge the debt of former students of the now-bankrupt Corinthian College, a chain of for-profit colleges with endemic fraud. This call was joined by Rep. Maxine Waters and the co-chairs of the Congressional Progressive Caucus in the House. In 2015, AFR together with dozens of other organizations filed a petition to the Department of Education led by the National Consumer Law Center outlined the Department’s legal authority to compromise and modify student loans.

This proposal comes at a crucial time: a recent AFR/CRL poll shows that bipartisan majorities view the $1.6 trillion and growing in student debt as a crisis. And while advocates have pushed the Department for years to use its authority to help defrauded students, under Secretary DeVos it has been held in contempt for not even taking the court-mandated step of suspending debt collection for Corinthian borrowers harmed by the company’s unlawful activities. While the Department slow-walks debt cancellation, former students continue to struggle with the nightmare of ever-accruing interest, bad credit, seized tax returns, and garnished wages.

Broad student debt cancellation through administrative action could boost GDP by as much as $108 billion per year, and create up to 1.5 million jobs annually, both over a 10-year period, according to a 2018 study by the Levy Institute.

Student debt has become a problem for the economy, including by dragging down the rates of home ownership among young adults, as noted by the New York Fed. The Department of Education should use all the tools and legal authority it has available to confront this urgent public problem.