Biden Under Pressure on Student Loans After Wolfson Bankruptcy Climbdown
President Joe Biden's administration is facing renewed pressure to act on student loan debt after the Department of Education on Friday announced it would drop an appeal in a high-profile bankruptcy case involving student debt.
Though the move has been welcomed, advocates have long called on President Biden to do more and some senior Democrats argue he has the power to cancel up to $50,000 in student debt per borrower by executive action.
A Delaware bankruptcy judge discharged almost $100,000 in student loan debt held by Ryan Wolfson, an epileptic 35-year-old graduate of Penn State, in a ruling on January 14.
Judge Laurie Selber Silverstein ruled that the debt imposed an "undue hardship" on Wolfson.
In order to discharge student debt as part of a bankruptcy proceeding, the borrower must engage in an "adversary proceeding" against their student loan lenders and show that repayment imposes an "undue hardship" on them.
On January 28, the Department of Justice filed notice of appeal on behalf of Secretary of Education Miguel Cardona.
Following media coverage and some degree of public outcry, the department announced on Friday that it would withdraw the appeal and carry out a review of its bankruptcy policies.
A spokesperson for the Department of Education said in a statement to Newsweek: "Since Day One, the Biden-Harris Administration has been hard at work delivering meaningful relief to student loan borrowers."
"These targeted steps have provided roughly $15 billion in discharges to over 675,000 borrowers, plus tens of billions more saved by the 41 million borrowers who have benefited from the extended student loan payment pause," the spokesperson said.
"While we continue to deliver immediate relief for borrowers struggling with debt we are also making permanent changes that reduce indebtedness and make college more affordable," the statement went on.
"This January 28 notice of appeal will soon be withdrawn. The Department of Education has indicated publicly that it is reviewing current bankruptcy policies, a process which remains ongoing. While the student loan payment pause remains in effect, any borrower in an adversary bankruptcy proceeding can request and receive a stay on their proceedings," the spokesperson concluded.
The department pointed to a submission then acting Solicitor General Elizabeth Prelogar gave to the Supreme Court in May 2021 saying that "the Department of Education is currently considering this issue" of "undue hardship" as it relates to student loans.
Dan Zibel, vice president and co-founder of Student Defense, a students' rights organization, welcomed the Department of Education's decision in a statement to Newsweek.
"Obviously, this is welcome news for one borrower, and we are glad to see the Department taking this step," Zibel said.
"But this situation highlights how the Department must review its practices and positions with respect to bankruptcy in student loan cases. The Department must immediately review all pending cases, including all positions taken under Secretary Cardona's watch," Zibel added.
The Wolfson case has once again highlighted the Biden administration's difficulties on student debt. On the campaign trail in 2020, Biden committed to cancelling up to $10,000 of student loan debt, but he has since expressed doubts that he has the power to cancel up to $50,000 in debt per borrower by executive action.
The president asked the Department of Education to prepare a memo on the matter in April 2021, but it has never been released in unredacted form.
The Department of Education's climbdown on the Wolfson appeal came less than two weeks after Senate Majority Leader Chuck Schumer (D-NY), Senator Elizabeth Warren (D-MA) and other Democrats sent a letter to Biden asking him to release the memo.
The issue of student loan debt has dogged Biden throughout his first year in office and with members of his own party pressing the matter, the administration is facing high expectations ahead of the crucial 2022 midterm elections.
