President Joe Biden’s recent comments have set off a firestorm of rumors and speculation about whether he will forgive student loans. With a decision expected in a matter of weeks, here are the key questions to help get you caught up and better understand what might happen next:

• What authority does the president have to forgive student loans without Congress? Advocates for debt forgiveness point to the Secretary of Education’s broad (but vague and generally untested) authority to “enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand.” Does this law (or the Constitution) allow a presidential appointee to burden taxpayers with tens or hundreds of billions of dollars without congressional action? That’s unclear to say the least. When asked, Speaker Nancy Pelosi said definitively that “[President Biden] does not” have this power.
• If the president issues an order forgiving loans, can it be stopped? Assuming Congress does not block the move, the big question is whether anyone would have standing to sue the government and prevent the discharge of these loans. Issuing an executive order is one thing, but actually zeroing out loan accounts will involve a massive undertaking by loan servicers and Federal Student Aid. Students’ loan payments are still paused as a result of COVID relief measures and so most borrowers remain in limbo. This state of affairs could continue for months or years if the issue ends up in court.
• Will graduate and parent debt be included? Some of the largest loan balances are held by graduate students and parents who have borrowed on behalf of their children. A decision on whether these programs will be included will greatly impact the price tag and the demographics of who gets loan relief.
• Can forgiveness be means tested? Many are assuming that relief would be based on some measure of household income, but is this fair? There are many complicating factors, including the nature of a spouse’s earnings and debt, but one of the biggest issues may be age, which is closely correlated with earnings. As a result, relief is disproportionately more likely to go to younger borrowers with more debt than to older borrowers who have already paid down much of their debt. Many of these younger borrowers may have taken out significant debt to put themselves on a high-earning career path (for example: a pricey MBA, engineering, or law degree). These borrowers may never struggle to pay their loans, but the simple fact that they have not yet hit their top earning years may make them among the biggest winners.
• What are the political implications of major forgiveness? The polling on the subject is mixed, but any numbers should be taken with a grain of salt. Even borrowers skeptical of relief may turn enthusiastic once their debt disappears. On the other hand, most Americans do not have a college degree or outstanding loan debt. But the fact that degree holders earn more on average points to wealth distribution from lower earners to higher earners. The political implications of this, and the way more government spending could impact other major midterm issues like inflation, remain to be seen.

Finally, many are wondering what will happen with student borrowing in the future. The Biden administration will likely point to their ongoing negotiated rulemaking (mostly targeting for-profit schools) as evidence that they are getting serious about accountability, but college will not be free and students will keep borrowing under a very similar-looking system. Without meaningful skin in the game for colleges and other measures to curb costs, there is not much of an argument to be made that we won’t find ourselves in this same position again.

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