In an indoor memo to former Secretary of Education Betsy DeVos reviewed by the Wall Street Journal, lawyers from the Trump administration said Tuesday that it might 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.”
In the non-binding memo, lawyers from the Department of Education argued instead that Congress would wish to pass a law authorizing the forgiveness of all or some federal student loan debt, the Wall Street Journal first reported.
Democrats don’t agree: in September, Senate legislator Chuck Schumer and Sen. Elizabeth Warren (D-Mass.) argued that the president does have authority under the upper Education Act to cancel student loans, and laid out an idea for the new administration to cancel up to $50,000 in debt for federal borrowers .
Sens. Schumer and Warren cited an analysis from Harvard school of law that concluded that the president is legally allowed to direct the Secretary of Education to cancel federal student loan debt without separate approval from Congress.
Higher education expert Mark Kantrowitz told CNBC last month that that approach won’t work: “using an executive order to forgive federal student loans will likely be met with a lawsuit and preliminary injunction, and eventually fail,” he said.
If Biden is unwilling or unable to use executive power to forgive federal student loans, he still features a path to student loan forgiveness through Congress that has become far more tenable after two Democratic victories in runoff elections in Georgia handed that party control of the Senate.
Trump Student Loan Forgiveness
Numerous student loan borrowers are questioning how Donald Trump’s methods for dealing with the student loan crisis will change them going forward. In addition, borrowers are also questioning how his decision for Secretary of Education, Betsy DeVos, will require to manage federal student loans in the prospect. While being an outspoken advocate in many areas of study, she has yet to speak the demanding issue of student loans.
Both of these are critical questions that may eventually be taking early answers. Sadly, those statements are scary for a huge number of student loan borrowers. Statements as of May 2017 are that Trump and DeVos’ initial education budget will seek to pass the Public Service Loan Forgiveness program which could require student loan borrowers billions of dollars. Trump and DeVos will be expected seek to eliminate over $700 million in Perkins Loans and massively decrease the amount of work-study programs.
How Trumps New Tax Cuts and Jobs Act Makes a Difference Students & Borrowers
On 12/22/2017, the Tax Cuts & Jobs Act was enacted into law. In the 429 page document, there are changes made to existing laws that would significantly change current students, those with student loans, along with parents who have dependents on their taxes currently in school.
Student Loan Discharges No Longer Taxable Income
Section 11031 of the Tax Cuts & Jobs Act fixed student loan discharges by total & permanent disability(TPD) from being added to the borrower’s gross income. Under the new rule, discharge student loans are no longer seen as taxable income if using for disability discharge. This is a hugely advantageous change for disabled borrowers who want to utilize for discharge on their federal student loans. Before many borrowers elected not to apply for discharge and remained in an income-based repayment plan.
Disabled borrowers were hesitant to have their student loans discharged since they would see a massive tax bill expected at the end of the year, which was in many cases uncontrollable. This move made by the Trump administration comes as a tremendous support to disabled federal student loan borrowers.
One big move done in the Tax Cuts & Jobs Act is that case deductions for student loans are exterminating starting in 2018. If you are making under $65,000/yr as a single, or $130,000/yr if you are married and filing combined, you are qualified for an interest deduction on your student loans of up to $2,500. IRS records reveal that in 2015 there were 13.4m people who insisted that deduction and the common deduction was $1,100. That would change to a decreased tax liability of $275, for someone in the 25% tax bracket. It’s not a large amount, but for a struggling person out of college working to make ends meet.