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How Elizabeth Warren's student loan plan would actually work

Since the beginning of her campaign, Massachusetts Sen. Elizabeth Warren has said she would erase student loan debt for millions of Americans if she's elected president. But recently, she announced that she wouldn't wait around for Congress — and that Warren would cancel student loan debt on the very first day of her presidency via executive action. It's a bold statement that could excite many potential voters, but when it comes to how (and if) it would work, experts aren't in agreement.

In her plan to cancel student loan debt on Day 1, Warren wrote that "the Department of Education already has broad legal authority to cancel student debt, and we can’t afford to wait for Congress to act." Citing the Higher Education Act, she said that the department has the "ability to modify, compromise, waive, or release student loans," and therefore can use that broad authority to "wipe away loans even when they do not meet the eligibility criteria for more specific cancellation programs."

Warren said that as president, she would direct the secretary of education to begin modifying federal student loans according to her initial plan. That plan would cancel up to $50,000 in student loan debt, based on income. Anyone who makes under $100,000 would get the full $50,000 in cancellation, and for every $3 above $100,000 that a person makes, they get $1 less in cancellation, capping out at an income of $250,000.

"The prospect of canceling student debt by executive action is very exciting and definitely doable," says Ashley Harrington, senior policy counsel at the Center for Responsible Lending. "It's more expedient than waiting for Congress, and could be very beneficial to a lot of people," she notes, particularly students of color and low-income people.

There's actually some precedent for this, Harrington notes. In August, President Trump announced executive action to cancel student loan debt for more than 20,000 disabled veterans under the "Total and Permanent Disability" discharge program. That process was briefly delayed because of regulatory concerns from lawyers in the Trump administration, but then resumed.

The Department of Education does already forgive loans in cases like disability, death, and in the case of a closed school, as well as under the Public Service Loan Forgiveness program. However, those programs have all been criticized for being confusing to apply for and difficult to actually receive forgiveness.

But the key part of these programs is that they are based on specifically laid out reasons for forgiveness, and the authority for the Department of Education to cancel that debt is granted by Congress. And considering how much Warren's plan would cost (an estimated $640 billion), Mark Kantrowitz, publisher and VP of research at savingforcollege.com, doesn't think a president can just cancel that debt. It's an "incredibly big stretch to say the secretary of education has authority to spend hundreds of billions of dollars without any congressional approval," he tells Mic.

"You can’t wait for Congress? Yes, you can," Kantrowitz adds.

Both Kantrowitz and Harrington agree there would potentially be legal challenges if Warren is elected president and uses executive action to cancel so much student loan debt. Kantrowitz says he doesn't think it would "pass muster with internal legal staff" at the Department of Education, and Harrington notes that student loans are a big and profitable business, so Warren might see pushback from firms "concerned about their bottom line."

Say it does happen, though. Say Warren is elected president and on Day 1 signs an executive order directing the secretary of education to begin canceling thousands of dollars of student loan debt for more than 40 million Americans. How long would it take before borrowers actually see a difference in their debt? It's difficult to say.

"It depends on really how much of a priority it is, if the groundwork is being laid ensuring everyone understands what they are doing and how cancellation would work," Harrington says. There are so many players in the game (borrowers, the government, loan servicers, collectors) and so many pieces (a massive debt portfolio, people in different kinds of repayment, people in default) that it would be a complicated process no matter how Warren would go about it.

But Kantrowitz and Harrington want people to know that there are other solutions, too. Kantrowitz says he would like to see bankruptcy reform to make it easier for borrowers to discharge their student loans when they declare bankruptcy. Harrington points to a Center for Responsible Lending report that showed that even just $10,000 in debt cancellation would be life-changing for many people, particularly people of color, and says that income-based repayment should be streamlined and improved with shorter forgiveness periods.

"The program is complicated, the problem is big," Harrington says, "but it’s not insurmountable."