Supreme Court blocks student loan forgiveness: What should borrowers do now?
30 June 2023
(The Hill) – On Friday, President Biden announced the next actions his administration intends to take to protect student loan borrowers following the Supreme Court ruling that struck down his student debt relief plan.
On Friday, Biden announced two prongs of the White House’s next tactics for student debt, which include 1) a new approach of forgiveness under the Higher Education Act and 2) the creation of a temporary 12-month On-Ramp Repayment Program.
While details are slim so far, Biden explained that approaching student debt relief under the umbrella of the Higher Education Act will allow U.S. Secretary of Education Miguel Cardona to forgive “compromise, waive or release” certain student loans. Biden said that while this path will take much longer, the administration is “moving on it.”
This path will require a public comment and notice period before it could go into effect.
Biden did not offer further details about who would qualify or how much debt relief borrowers would receive under his new plan to use the HEA, but said Education Secretary Miguel Cardona has taken steps to initiate the rulemaking process.
The department sent out a notice Friday, the first step in the “negotiated rulemaking” process. The first public hearing on the matter will happen July 18 to get input from stakeholders. The process could go well to the end of 2023, but the administration said it will try to move “as quickly as possible.”
“This student debt relief is not being implemented automatically. This is a hot mess. This will be a bureaucratic nightmare,” Braxton Brewington, press secretary for Debt Collective, said in response to the announcement.
Meanwhile, Biden said the On-Ramp Repayment Program will not work the same as the pandemic repayment pause, saying “Monthly payments will be due. If you can pay, you should.”
What’s different with the On-Ramp program, according to Biden, is that those Americans who aren’t able to make their monthly payments will not face the threat of default and credit score impact as a result for 12 months.
The president reiterated to student loan borrowers that blame for “snatching away hope” lies with Republicans.
“The hypocrisy of Republican elected officials is stunning. They had no problem with billions in pandemic-related loans to businesses — including hundreds of thousands and in some cases millions of dollars for their own businesses. And those loans were forgiven,” he said in an earlier statement, which he echoed Friday afternoon. “But when it came to providing relief to millions of hard-working Americans, they did everything in their power to stop it.”
The Supreme Court decision stopped more than 40 million borrowers from receiving loan forgiveness and delivered a major defeat to one of the president’s key campaign promises. Although the decision was expected from the conservative-majority court, the White House has shied away from announcing a Plan B if the program is struck down.
The program, announced in August, would have canceled up to $20,000 in loans for Pell Grant recipients and $10,000 for other borrowers, if the individual’s income is less than $125,000.
The president announced it amid mounting pressure from progressives to act on student debt. While some had pushed for up to $50,000 in relief, they saw his program as a positive first step.
The decision on Friday limits Biden’s options to deliver on his 2020 campaign promise to forgive student loans.
The administration had tied the student debt relief plan — struck down by the Supreme Court — to the national emergency established during the COVID-19 public health crisis, citing the Higher Education Relief Opportunities for Students (HEROES) Act. Chief Justice John Roberts wrote in the court’s majority opinion, issued Friday morning, that the HEROES Act does not grant the authority.
During Friday’s press conference, Biden further admonished the Supreme Court and Republicans for the decision. Biden said the belief by some that debt forgiveness would be “a giveaway to the privileged” is not based in reality.
“I know who student loan borrowers are in this country. So do all of you,” said the president.
This story was updated at 4:10 p.m. ET