THE LEGAL AUTHORITY: WSJ: "Mr. Biden's plan will test the legal limits of the federal government's authority to cancel student debt. Its success could depend on how courts would interpret the education secretary's powers under the 1965 Higher Education Act, which allows the secretary to 'consent to modification' of loans, and 'compromise, waive, or release' unspecified amounts of student debt. "Advocates for broad cancellation say the lack of explicit constraints in the law is deliberate, giving the executive branch flexibility with its 'compromise authority' to manage its relationship with borrowers. They note that presidents of both parties have used the law to forgive debt on a more-limited scale." — Flashback #1: "I don't think I have the authority to do it by signing the pen," – President JOE BIDEN, February 16, 2021 NYT: "Because Mr. Biden used executive action, rather than legislation, to forgive the loans, legal challenges are expected. It is unclear, however, who would have the standing to press their case in court. A recent Virginia Law Review article argued that the answer might be no one: States, for example, have little say in the operation of a federal loan system." — Flashback #2: "People think that the president of the United States has the power for debt forgiveness. He does not. He can postpone, he can delay, but he does not have that power. That has to be an act of Congress." – House Speaker NANCY PELOSI , July 28, 2021 WaPo: "The executive order will probably face legal opposition, said LANAE ERICKSON , who heads social policy at Third Way, a centrist Democratic think tank. She suspects the policy could be challenged on the same grounds as the West Virginia v. Environmental Protection Agency case, in which the Supreme Court ruled the federal government can't act on policy with broad economic significance without clear congressional authorization. … "'Advocates and policymakers who pushed to take this unprecedented step are responsible for also communicating to borrowers that there is a strong chance it will never come to fruition,' Erickson said. 'Given that the application may not be available until the end of the year, the strong likelihood is that courts will enjoin this action before it gets started — leaving borrowers in limbo.'" — Flashback #3: "If the issue is litigated, the more persuasive analyses tend to support the conclusion that the Executive Branch likely does not have the unilateral authority to engage in mass student debt cancellation." – Former Obama Education Department legal counsel CHARLIE ROSE in a private memo obtained by the WSJ earlier this year. The Biden administration released two memos making their legal case, one from the Department of Education and one from the Department of Justice. THE ECONOMIC FALLOUT: WSJ's Andrew Restuccia and Gabriel T. Rubin : "Economists say that a tailored debt cancellation plan is unlikely to exacerbate short-term inflationary pressures, but could add to them in the long term, especially if universities continue to raise tuition because students might expect their loans to eventually be canceled. "Even some economists usually aligned with the White House, including former Clinton administration Treasury Secretary LARRY SUMMERS and former Obama administration economist JASON FURMAN, have criticized the cost of a potential student debt cancellation and warn that it could force future spending cuts or tax increases." Furman: "Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse." Summers: "Every dollar spent on student loan relief is a dollar that could have gone to support those who don't get the opportunity to go to college. … Student loan debt relief is spending that raises demand and increases inflation. … It will also tend to be inflationary by raising tuitions." CRFB: "Debt cancellation would boost near-term inflation far more than the IRA will lower it." Senior Biden administration official: "So, on the inflation question, our view is that … the combination of restarting those … loan payments — and providing targeted debt relief per the President's plan at roughly the same time will largely offset each other. … "Frankly, with certain fairly reasonable assumptions … the joint impact of those two actions could well be neutral or deflationary. And I would just note that a number of independent experts have echoed this point. … Moody's, Roosevelt, EPI, Center for American Progress, others who have discussed … a combination of restarting student loan payments and providing targeted debt relief have come to the same conclusion." THE POLITICAL FALLOUT: While some Democrats in tough races, such as Sen. MARK KELLY (D-Ariz.), embraced the Biden plan, there was a backlash from many others: Sen. CATHERINE CORTEZ MASTO (D-Ariz.): "I don't agree with today's executive action because it doesn't address the root problems that make college unaffordable. We should be focusing on passing my legislation to expand Pell Grants for lower income students, target loan forgiveness to those in need, and actually make college more affordable for working families." Rep. JARED GOLDEN (D-Maine): "This decision by the president is out of touch with what the majority of the American people want from the White House, which is leadership to address the most immediate challenges the country is facing." Rep. CHRIS PAPPAS (D-N.H.): "[T]his announcement by President Biden is no way to make policy and sidesteps Congress and our oversight and fiscal responsibilities. Any plan to address student debt should go through the legislative process, and it should be more targeted and paid for so it doesn't add to the deficit." Rep. SHARICE DAVIDS (D-Kan.): "It's not how I would have addressed the issue." Rep. TIM RYAN (D-Ohio): "While there's no doubt that a college education should be about opening opportunities, waiving debt for those already on a trajectory to financial security sends the wrong message to the millions of Ohioans without a degree working just as hard to make ends meet." Sen. MICHAEL BENNET (D-Colo.): "In my view, the administration should have further targeted the relief, and proposed a way to pay for this plan. While immediate relief to families is important, one-time debt cancellation does not solve the underlying problem." THE PALACE INTRIGUE: POLITICO : "Senate Majority Leader CHUCK SCHUMER, a leading proponent of canceling student debt, urged Biden to provide as much relief to borrowers as possible during a phone call with the president on Tuesday evening, according to a Democrat familiar with the discussion. The call followed a discussion that senior White House officials, including chief of staff RON KLAIN, had with Schumer and Sens. ELIZABETH WARREN (D-Mass.) and RAPHAEL WARNOCK (D-Ga.), the leaders of the effort to persuade Biden to cancel student loan debt ever since he took office." WSJ: "The announcement brings to a close a fierce debate within the administration over how to approach student loans. The president had long been skeptical of using his executive authority to forgive debt. He raised concerns in internal meetings that the measure could benefit wealthy people and instructed his staff to impose an income cap so the benefits didn't flow to individuals making lucrative salaries, according to administration officials and others familiar with the discussions. … "The president started warming to the prospect of using his authority to forgive some debt in recent months as senior aides, including White House chief of staff Ron Klain, made the case that it would be popular with young voters. Other Biden advisers argued that the move would help minority and low-income borrowers and be a legacy-defining moment for the president." THE EDITORIALS: WSJ: "The Half-Trillion-Dollar Student-Loan Executive Coup" WaPo: "Biden's student loan announcement is a regressive, expensive mistake" Good Thursday morning. Thanks for reading Playbook. Drop us a line: Rachael Bade, Eugene Daniels, Ryan Lizza. | 
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