As Trump Bolsters Predatory Lenders, Study Shows Benefits of Forgiving All Student Debt

As the Trump administration works diligently to exacerbate the nation’s student debt crisis—including efforts to insulate student loan debt collectors from regulations that aim to curtail abusive and predatory tactics—a new study out this month imagines a bold alternative that would wipe out all existing student debt in one fell swoop.

“To those who say we can’t afford to cancel this debt, the report poses a new and different question: Can we afford not to?”
—Richard Eskow, journalist

This week, both Bloomberg and NPR have reported on an internal Education Department memo, drafted under Secretary Betsy DeVos, which argues that student loan servicers and debt collectors should be exempt from state regulations and oversight, a position which industry groups have been lobbying for since President Donald Trump appointed DeVos.

The lobbying campaign has been rebuked by state officials, including 25 attorneys generals who last year sent a letter (pdf) to DeVos asserting that “these requests defy the well-established role of states in protecting their residents from fraudulent and abusive practices, plainly exceed the scope ofthe Department’s lawful administrative authority, and would needlessly harm the students and borrowers at the core of the Department’s mission.”

Christopher Peterson, a University of Utah law professor and former CFPB enforcement attorney, told NPR that the Education Department’s new perspective on state regulations, as outlined in the memo, “is a radical change.” Noting that under the Trump, the department has also halted an information-sharing initiative with the CFPB, he added, “It appears that the Trump administration doesn’t want anyone to focus on whether the debt collectors are treating student loan borrowers fairly.”

While various states have launched probes into lenders and passed measures aimed at protecting students and borrowers—and are now contending with the possibility that Trump’s Education Department may undermine those regulatory efforts—researchers at the Levy Economics Institute of Bard College recently explored an even more ambitious proposal for fixing the national crisis: a one-time federally funded cancellation of all student debt.

“Cancellation would have a meaningful stimulus effect, characterized by greater economic activity as measured by GDP and employment, with only moderate effects on the federal budget deficit, interest rates, and inflation (while state budgets improve).”
—Bard College researchers