Biden’s big student-debt relief rollout
The White House says the plan would impact up to 30 million borrowers but it could face legal challenges and a time crunch before the election. Plus: Four other things to keep your eye on this week.
President Joe Biden will travel to Wisconsin this afternoon to announce new plans that could cancel student debt for tens of millions of Americans to build on the nearly $150 billion in relief his administration has already approved for four million borrowers.
If implemented, these plans would:
Cancel up to $20,000 in unpaid excess interest for more than 25 million borrowers.
Automatically cancel debt for two million borrowers eligible for existing relief programs but not applied.
Cancel debt for more than 2.5 million borrowers who entered repayment 20 years ago for undergraduate loans and 25 years ago for 25 years ago if they have graduate loans.
Cancel debt for borrowers who attended institutions that closed and failed to provide sufficient value, including graduates with unaffordable loan payments or earnings no better than someone with a high school diploma.
Cancel debt for borrowers at high risk of defaulting on their student loans, who could be eligible for automatic relief or families burdened with other expenses like medical debt or child care who can apply for relief in the future.
“When I became Education Secretary a little over three years ago, President Biden looked at me and he said, ‘We’ve got a broken system and I need you to fix it,’” Miguel Cardona told reporters on Sunday evening. “I think this work is nothing short of transformative. That’s why we’ve been unapologetic about this fight. Student loan forgiveness isn’t only about relief for today’s borrowers. It’s about social mobility, economic prosperity and creating an America that lives up to its highest ideals.”
The Biden administration claims the plans would eliminate accrued interest for 23 million borrowers, cancel the total student debt for over 4 million borrowers, and provide more than 10 million borrowers with at least $5,000 in debt relief or more.
The plans the president will announce today would also provide targeted relief to Black, Latino and community college borrowers who carry a disproportionate debt burden.
"Growing student loan debt is holding back greater growth in our country, especially for communities of color,” Senate Majority Leader Chuck Schumer (D-N.Y.) said in a statement. “President Biden’s expected additional executive action will greatly reduce the burden of student loans for millions of Americans.”
The administration is expected to release proposed rules on these plans over the coming months. If finalized, they would enable it to begin canceling interest for millions of borrowers and zeroing total balances for millions more by early fall, ahead of the presidential election. The process will include a public comment period.
This is an aggressive timeline, but a senior administration official said it isn’t outside the norm for the administration's efforts to turn rules from draft to final by early fall.
The official added that the hope is for the vast majority of the relief to be automatic.
“Obviously, when you start talking about hardship, there are some things there that we’re looking to make as automatic as possible, but there may be details that we don’t have available to us,” they said. “But our goal is for the overwhelming majority of things like interest, loans that are older, borrowers who attended programs that didn't deliver financial value to do that automatically.”
While President Biden is in Wisconsin, Vice President Kamala Harris will travel to Philadelphia, Second Gentleman Doug Emhoff will travel to Phoenix, and Cardona will travel to New York City to highlight the plan and meet with borrowers who have benefitted from the administration’s debt relief actions.
The new plans follow the Supreme Court's decision last summer to strike down President Biden’s original plan to cancel up to $20,000 of student loan debt for eligible borrowers.
Under the plan—announced in August 2022—borrowers earning up to $125,000 would have received $10,000 in debt relief.
For recipients of Pell Grants, which help undergraduate students from low-income households pay for college, the program canceled an additional $10,000 in federal loan debt. At the time, President Biden also extended the pause on student payments through the end of the year.
An opinion written by Chief Justice John Roberts held that the Missouri Higher Education Loan Authority, also known as MOHELA, would suffer financial harm from being unable to collect interest on student loan debt.
The court also ruled that while the HEROES Act—a 2003 law the White House said it had the power to cancel student loan debt derived from—permits a modification to the law, the administration’s plan dramatically expands the law’s existing provisions beyond the executive branch’s authority.
A second senior official said the administration has studied the Supreme Court’s decision carefully and intends to pursue the regulations Biden will announce in a way that’s consistent with the ruling.
“The plans differ from the administration’s prior academic relief proposal in a number of significant ways. And the [Education] Department’s proceeding under different legal authority, which is long-standing, and the plans involve different considerations by providing targeted relief to borrowers with particular circumstances. so this isn't the same plan,” the official added. “We feel confident going forward.”
Following the Court’s decision, President Biden immediately announced a series of new steps to provide a portion of the relief borrowers would have received had the court’s conservative supermajority not struck it down.
As with the case brought by top Republican officials in six states, including Nebraska and Missouri, against Biden’s original plan, the administration is aware that today’s plans could be vulnerable to new GOP-led legal challenges.
“Some Republicans in Congress and some Republican attorneys general have opposed the administration's efforts to prevent millions of middle-class Americans from receiving student debt relief, and we know some of them have even challenged the president’s work to fix the administration of flawed programs that were originally established by Congress through bipartisan legislation—even where that work is clearly legal,” the second official said. “So it is unfortunate that Republican politicians have fought to deny breathing room to millions of working families who are struggling with student debt.”
Critics of the program will likely claim that the debt cancelation plans will add inflationary pressure on the economy, an argument the administration disputes.
“Student debt relief leads to economic mobility. We know it leads to people contributing to the economy, being in a better position to be able to, for example, take out mortgages to buy homes and loans to start businesses so we know what's good for people,” the official said. “We know it’s good for the economy. We’re not concerned about an inflationary effect based on the analysis the [Council of Economic Advisers] has done.”
The administration said it would share more details on the analysis soon.
As with the president’s original plan, it could be challenged in the courts and ultimately struck down, a reminder that without durable legislation, these executive actions could be as temporary as the last.
The second administration official declined to comment on whether the White House had been in talks with Congress on a legislative fix to the student debt crisis, adding that existing law empowers the president and Secretary Cardona to take additional actions beyond those the Supreme Court struck down.
“And so consistent with the president’s directive to his team to do as much as we can within the law, we are using that as the basis for the announcements that we’re making today.”
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