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Student loans: Biden asks Congress to forgive $10,000 per borrower

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Yahoo Finance’s Rick Newman joins the Live show to discuss President Biden's plan for student loan forgiveness, whether Congress is likely to cancel $10,000 per borrower, and how it could affect Biden's approval rating.

Video Transcript

- The White House is denying reports that the administration has reached a final decision on student loan forgiveness. This comes after several reports that said the White House is leaning towards canceling $10,000 in student debt for certain borrowers. Let's bring in Yahoo Finance's Rick Newman, who is with us in studio.

RICK NEWMAN: What's up, guys? Hey.

- I feel like we've been talking about this for a very long time.

- Too long.

- What's the very latest from the administration, and what kind of window are we talking about?

RICK NEWMAN: So let's just go back to what Biden says he favors. He wants Congress to pass a law that would forgive up to $10,000. Now obviously, there are some Democrats who want a lot more forgiveness.

Bernie Sanders said forgive all student debt. Elizabeth Warren said up to $50,000. And Biden all along has said, no, that's too much.

And Congress is not going to pass a law. So there's this question of, can Biden do this through executive action? He could try, and then there might be legal challenges, though there probably is a good chance it would stick.

But we've been hearing rumors, I mean, really for weeks now that Biden is going to do this through executive action and now that he's not going to do it. There were rumors that he was planning to do it over the weekend except for the school shooting in Texas last week. So the timing seemed bad. I think the White House at this point, needs to either do it or say we're not going to do it because this drip, drip, drippiness is just starting to look bad for the White

- House why do you think this is as difficult a decision for the White House as it appears?

RICK NEWMAN: Because it's bad policy. This is fairly unambiguous. I mean, among policy experts, this is not even that controversial.

So the whole thing, if you forgave up to $10,000, let's say, that would cost around $230 billion, not in one year but over the life of those loans. That's revenue that the Treasury is not going to get. And if you had $230 billion to work with and you could do that for some kind of subsidy for something, you probably would not target it at people who went to college or who in most cases are college graduates.

You would target it lower down the income chain. I mean, so if you forgive student debt, there's no corresponding subsidy for people who just didn't go to college. They don't get anything.

There's no subsidy for people who paid off their loans. You know, and a lot of people struggle to pay for college as they go through. There's no subsidy for people who do it that way. Some people go for seven or eight years at night, and they work a job along the way. So--

- And that's the argument, right, is that if you go for full forgiveness here, it would help those who don't necessarily need it because those, to your point, who are more low income, who, number one, can't even go to college because of the cost too, I mean, what happens to that? How do you change the system? But what's the other side of this? I mean, if it was such an easy decision, we would have heard from the White House by now. What's the potential backlash if he says we're just not going to go down--

RICK NEWMAN: There are implications for the midterms.

- Oh yeah. I mean, so Biden did run on this as a policy. Now everybody forgets that Biden said Congress should do it. The president should not do it with the stroke of a pen.

Big downside for Biden if he does nothing is he's going to lose all support he has among young voters. This is a big deal among younger voters. He did get a reasonable portion of younger voters in 2020, and his approval rating right now among young people is lower than it is among his overall average.

- Is it a midterm issue, though--

RICK NEWMAN: Absolutely.

- --when you think about--

RICK NEWMAN: Absolutely.

- --the other issues--

RICK NEWMAN: Yeah.

- --on the table?

RICK NEWMAN: Yeah, it is. I mean, you know, Biden needs to show that Democrats can do something. I mean, the Democrats really haven't gotten anything done since the infrastructure bill. That was a major accomplishment, by the way.

But with Biden's approval rating in the low 40s, that looks terrible for-- that's very bad news for Democrats. So he wants to make it look like they're doing something. I'm not sure it would help in the midterm elections, though, because you're not trying to win over the most left, most liberal Democrats. You're trying to win-- you need centrists and independents who might otherwise vote for Republicans. And I'm not sure this issue will galvanize those people.

- Yeah, well, I mean, I guess the other point, on the low income it bit of things, I mean, there is research that shows that the people who are oftentimes the most saddled with student debt are those low income minorities--

RICK NEWMAN: Right.

- --who are trying to go to school to get elevated into the other class, though. So I mean, it is kind of looped together. But do you think the administration has just kind of fumbled the messaging on that front? I mean, to your point, it seems like it's not necessarily exactly clear who they're going for here.

RICK NEWMAN: Right. Oh, they're going for young voters for sure. And I don't want to pretend that this is not a problem for anybody. I mean, there certainly are people who have--

- Whole generations.

RICK NEWMAN: --who have a lot of debt. I mean, you know, this is the right kind of debt, to educate yourself. That's good debt.

But some people just have too much, and the people who are hurting the most are the people who took out the debt and never got the degree. You don't-- that's not forgiven because you didn't get the degree for whatever reason. You still have the debt without the thing that the debt was supposed to pay for.

- And the other argument, right, is that it's not just one generation. I mean, there's still people-- people forget. There's still people paying off their student debt in their--

RICK NEWMAN: I have heard from people who are in their 70s--

- --50s, in their 60s.

RICK NEWMAN: --who have student debt and are never, ever going to pay it off.

- It's a serious issue. It's saddling multi-generations down.

RICK NEWMAN: Yeah, but do--

- --just the solution to this is a lot.

RICK NEWMAN: And, again, if you do it on a one time basis, what then? Do people then start to take out debt because, oh, the next President will forgive my debt? So then-- I mean, that's the moral hazard argument. So it's a real problem that some people have too much debt, but this is a very ticklish problem.