Biden unveils new student loan forgiveness plan after Supreme Court defeat

WASHINGTON − President Joe Biden said Friday that he will pursue canceling student loan debt through an alternative legal authority after the Supreme Court blocked his signature program to eliminate up to $20,000 in student loan debt for millions of Americans.

Biden said his administration will work to forgive student loan debt through the Higher Education Act of 1965, which authorizes the education secretary to modify, waive or compromise federal student loan under certain circumstances.

“In my view, it’s the best path that remains to provide as many borrowers as possible with debt relief,” he said in remarks from the White House after the court ruled his original plan exceeded executive authority.

“This new path is legally sound,” Biden said, however, “it’s going to take longer.”

Biden said he directed his administration to “move as quickly as possible under the law.”

Just hours after the court’s ruling, Education Secretary Miguel Cardona initiated the rulemaking regulatory process through the Higher Education Act.

Biden was under pressure to take swift action following the court’s 6-3 decision along ideological lines − which dashed the hopes of 26 million people who applied for student loan cancellation since Biden took the action last August.

“Student loan relief is a promise from President Biden to more than 40 million families. It is our chance for dignity,” said Melissa Byrne, executive director of We The 45 Million, a coalition that pushed for student loan cancellation. “Failure to deliver student loan relief is not an option.”

For months, the White House publicly resisted calls from liberal constituency groups to come up with a Plan B for student loan debt in anticipation of the conservative-majority court striking down Biden’s action on student loans.

Even when a majority of Supreme Court justices expressed deep skepticism over Biden’s plan during oral arguments in February − signaling they would rule against the president − the White House refused to discuss a potential alternative.

Then came the announcement Friday afternoon.

“I believe the court’s decision to strike down my student debt relief program was a mistake, was wrong,” Biden said. “But I’m not going to stop fighting to deliver borrowers what they need, particularly those at the bottom end of the economic scale.”

Sweeping loan forgiveness plan guttedSupreme Court strikes down Biden proposal to forgive debt for millions of borrowers

How far will the new plan go?

All the details of Biden’s alternative route and how far it could go aren’t clear.

Biden’s original action sought to forgive $10,000 for all borrowers federal student loan borrowers and up to $20,000 in debt relief for low-income Pell Grant recipients. The debt cancellation was only available to borrowers with annual incomes less than $125,000 or from households earning $250,000 or less.

The Education Department generally uses the negotiated rulemaking process to develop policies that affect how the government distributes money meant for financial aid. The government holds a series of meetings with key stakeholders, which could include university leaders, loan servicers, students or others who might be impacted by the decision. That group will attempt to reach a common agreement on the new rules.

If they do, the government will adopt their guidance. If not, the department will decide if it should move forward with the new policy or could draft its own rule. It will give the public an opportunity to comment before the rules become final.

Relying on the Higher Education Act is not a new idea; some plaintiffs in the case had raised it at the Supreme Court. Two borrowers who sued Biden over student loans claimed in a brief that the only reason the administration avoided relying on it was because of the “lengthy negotiated rulemaking and notice-and-comment” that would be required. In other words, they said, it would take longer.

Cardona said the administration chose the HEROES Act as its initial path because it offered a “quicker” pathway. White House officials stressed the new alternative route could take “months” to roll out following the federal review process and periods for public comments.

Some borrower advocacy groups were skeptical of the president’s new plan to deliver student loan relief saying he isn’t leveraging every tool he has, and the fresh proposal will take far too long. Others warned that the court’s decision, while a setback for loan borrowers, will serve as motivation for young voters to come out for Democrats in the 2024 election.

“President’s Biden plan was a historic action that would have provided life-changing relief to young people,” said Tzintzún Ramirez, president of NextGen America, a progressive advocacy group for young voters. “Instead, Republican and partisan forces worked to obstruct this relief – and we know that young voters will remember this come 2024.”

Another reprieve for borrowers on payments

In addition to starting over on student loan forgiveness, Cardona said borrowers who can’t make payments when the pause on student loan bills ends in October will have a one-year reprieve on the consequences that come along with missed payments.

Loan forgiveness takes many forms.Only one is blocked.

While interest will begin to accrue on those loans during what the department called an “on-ramp” period from October 1, 2023, to September 30, 2024, borrowers who don’t make payments won’t be reported to credit agencies or have their loans referred to collection agencies.The original pause on payments, first instituted under former President Donald Trump at the outset of the COVID-19 pandemic, also directed that servicers stop their collection attempts.

Does Biden have other options?

Another way legally to achieve the same goal – forgiving up to $20,000 in student loan debt for low- and middle-income households – would be for Congress to act. But Biden lacks the votes for legislative action.

Both bodies of Congress − including the Democratic-controlled Senate − voted to repeal Biden’s student loan forgiveness action, forcing the veto pen of Biden to keep his plan alive before the court’s decision.

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Biden unveils new student loan forgiveness plan after Supreme Court defeat

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