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President Joe Biden speaks in the Eisenhower Executive Office Building in May.

President Joe Biden speaks in the Eisenhower Executive Office Building in May. (Oliver Contreras/The Washington Post)

WASHINGTON — The White House’s close allies are feuding over whether the administration should cancel up to $10,000 in student debt for millions of American borrowers, as President Joe Biden nears a decision that is expected to come on Wednesday.

With the Inflation Reduction Act now signed into law, White House officials have in recent days revived discussions over student debt cancellation. They face an Aug. 31 deadline, which is when loan payments are set to resume after a pandemic-driven pause. Internal White House discussions have centered on temporarily extending that pause and simultaneously canceling $10,000 per borrower for those below an income threshold, but the president has not yet communicated a decision, according to two people familiar with the matter, speaking on the condition of anonymity to reflect private conversations. Another person familiar with the talks said $10,000 is among the options being considered.

The White House is expected to release its plan on Wednesday, according to a fourth person familiar with the matter, who also spoke on the condition of anonymity to reflect private conversations.

The issue has divided Democratic lawmakers and policy experts influential with the administration, putting Biden in a spot in which he is guaranteed to antagonize some supporters. Advocates say the president should fulfill a campaign promise to alleviate the large debt burdens of millions of young Americans, and critics say that could exacerbate inflation while mostly benefiting high-income college graduates who do not need assistance. Administration officials must choose between canceling substantial debt — potentially giving Republicans a new talking point ahead of the midterm elections — and infuriating young voters and racial justice organizations whose support they also need at the polls.

Officials have studied for months whether canceling student loans could alienate voters who had already paid theirs off, and polling results have been mixed, said a third person familiar with the matter, who also spoke on the condition of anonymity to reflect private conversations. White House officials previously discussed limiting debt forgiveness to Americans who earned less than either $125,000 or $150,000 in the previous year, or less than $250,000 to $300,000 for married couples filing jointly. One person familiar with the matter said those thresholds had not changed, although implementing those caps in practice could prove complicated.

White House aides scrambled to prepare a student debt forgiveness policy in May. Those plans were put on hold amid negotiations over Democrats’ economic agenda with Sen. Joe Manchin, D-W.Va., and the repeated postponements have exasperated supporters of cancellation. The measure is expected to apply only to undergraduate debt, and Democratic officials have discussed further restricting eligibility to attendees of state schools.

Education Secretary Miguel Cardona told NBC News on Sunday that a decision on the repayment pause will come “within the next week or so.”

“It’s a deep political problem,” said Bill Galston, who served as a top policy aide in the Clinton White House. “The fact they have hesitated for so long to put their chips down on the table suggests they’re fully aware of the potential economic and political implications of taking a major step in this direction.”

As the president moves closer to a decision, both supporters and critics of canceling debt have made increasingly strident appeals for their side. On Friday, Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass. — two strong proponents of canceling student debt — spoke again with White House Chief of Staff Ron Klain, according to two other people aware of the private conversation. Schumer and Warren reiterated requests they’ve made over the past two years that significant amounts of debt be forgiven, the people said. The NAACP has also been adamant that the administration cancel as much as $50,000 in student loans per borrower, citing the higher loan burdens of Black Americans.

“$10,000 alone is meager, to say the least — it won’t address the magnitude of the problem,” said Derrick Johnson, president of the NAACP, in an interview.

But centrist Democrats have begun pushing back strongly. Lawrence Summers and Jason Furman — two prominent Democratic economists who served in prior administrations — have stepped up their case against broad loan forgiveness, arguing it would exacerbate inflation by increasing overall spending. Summers and Furman, critics of the president’s $1.9 trillion American Rescue Plan last year, were outspoken supporters of the Inflation Reduction Act negotiated with Manchin. But in a Twitter thread Monday, Summers argued that the administration should not contribute to inflation by offering “unreasonably generous student loan relief” or encourage colleges and universities to increase tuition.

Furman added in an interview: “This is redistribution, and there’s nothing wrong with redistribution — if it was from the middle to the bottom. Much of this is redistribution from the middle to the upper-middle.”

Canceling $10,000 in debt for everyone with federal student loans would settle the balances of roughly a third of borrowers and cut total debt by at least half for another 20 percent, according to the latest data from the Education Department. Borrowers are expected to resume payments Sept. 1, more than two years after the moratorium was first instituted in response to the economic upheaval caused by the pandemic. Extending the pause would mean roughly 41 million people would continue to spend the next few months without interest accruing on their debt and with more time to save money. By April 30, the moratorium had cost the federal government about $102 billion in interest payments borrowers didn’t have to make, according to the Government Accountability Office.

As of 2021, 37.9% of adults ages 25 and older have a bachelor’s degree, up from 30.4 percent in 2011, according to the Census Bureau. One in five Americans have student loans, according to a Federal Reserve study.

The Committee for a Responsible Federal Budget, a D.C.-based think tank that opposes loan forgiveness, has found that wiping out $10,000 of debt per borrower could cost roughly $230 billion. It also found that extending the moratorium would increase core inflation by 0.2 percentage points and wipe out most of the deficit reduction achieved in the first decade of the Inflation Reduction Act, according to Marc Goldwein, the organization’s senior vice president and senior policy director.

These claims have been strongly contested. The Roosevelt Institute, a left-leaning think tank, argued that canceling student debt would “increase wealth, not inflation.” The Roosevelt Institute paper found that inflation resulting from debt cancellation would be negligible and that ending the payment moratorium would more than outweigh that effect. Requiring borrowers to resume payments would reduce inflation by slowing consumer spending.

The political impact of the decision is also fiercely debated — even among Democrats. Galston, the former Clinton aide, predicted families who paid off their loans could sharply turn on Biden as Democrats appear to be rebounding in the polls. “If they get it wrong, they’re going to get a big backlash on their hands,” Galston said.

Bryce McKibben, a former senior policy adviser to Sen. Patty Murray, D-Wash., on the committee that oversees education, said the more complicated the cancellation plan gets, the less likely it is to help people — or Biden’s agenda.

“Every time you ask the borrower to take a step, you increase the chances that people fall through the cracks because the department doesn’t have contact information for a large number of people in the portfolio,” said McKibben, now senior director of policy and advocacy at the Hope Center for College, Community, and Justice at Temple University.

And Celinda Lake, a Democratic pollster who has worked for Biden, said the president could improve his polling numbers among young voters, who she said are primarily mobilized by three issues — climate, abortion rights and student debt — but only see the first two as a reason to turn out for Democrats.

“We have two of the legs — we need the third,” Lake said. “It’s important to do something for young voters who are not as mobilized to turn out to vote but are by far our best voting group.”


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