Biden pivots to plan B on student debt
Biden pivots to plan B on student debt
The alternative pathway may take longer to deliver relief, but the White House thinks it’s the best option to bypass the Supreme Court’s rejection of his original proposal.
Hours after the Supreme Court overturned his student debt relief plan, President Joe Biden 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.
The president directed Education Secretary Miguel Cardona to initiate a rulemaking process to open an alternative path to debt relief for working and middle-class borrowers. The administration will take these new regulatory steps under the Higher Education Act, a law several progressive Democrats pressed the White House to turn to if the high court blocked relief under the HEROES Act.
Secretary Cardona said the administration went with the HEROES Act first because it was quicker. But Bharat Ramamurti, White House Deputy Director of the National Economic Council, said the alternative regulatory process is expected to take several months and require the administration to create a proposal, work with stakeholders, and receive their input, which will shape the scope of the proposal.
The first hearing for the new program is in July. Following the hearing, the Education Department will finalize the issues addressed through rulemaking and begin negotiating the terms of the proposed rule with affected interest groups during sessions this fall.
Ramamurti added that the alternative path got the green light from attorneys at the Justice Department, Education Department, and White House who all believe it is a valid pathway to providing debt relief for as many borrowers as possible. (For what it’s worth, the administration said the same thing about the first plan and here we are.)
But the White House is also unable to estimate if the same 40 million borrowers who would have received relief under the original program will benefit from the new one until later in the process.
The administration also created a temporary on-ramp to protect borrowers from dings to their credit or collection fees for late, missed, or partial payments for up to 12 months.
“What I want to tell borrowers is this on-ramp is intended to support you make it back to repayment with dignity and back on your feet,” Cardona said. “We want to prevent delinquencies. We want to prevent defaults. That's why we did this targeted loan forgiveness in the first place.”
Cardona clarified that the on-ramp is not a loan pause. Payments are still due and interest will accrue during this period. But it won’t capitalize at the end of the on-ramp period.
Finally, the president introduced the Saving on a Valuable Education plan, which the White House bills as the most affordable repayment ever created.
The plan will cut the amount that borrowers have to pay each month from 10 percent to five percent of discretionary income for undergraduate loans. It will also raise the amount of income that is considered non-discretionary income and protected from repayment.
After 10 years of payments, borrowers with original loan balances of $12,000 will have their tabs forgiven. (The previous threshold was 20 years.) This reform alone is expected to allow nearly all community college borrowers to be debt-free within a decade, according to the Education Department.
All in all, the administration says the SAVE plan will cut borrowers’ monthly payments in half, allow many borrowers to make $0 monthly payments, and save all other borrowers at least $1,000 per year.
“This plan will stop runaway interest and it’s not going to require you to pay more than you can afford,” Cardona said.
And in case you’re anxious the SAVE plan will face the same fate as the program the Supreme Court just blocked, Ramamurti said the administration’s authority is crystal clear in this instance.
“There’s a specific statute allowing [Secretary Cardona] to design these income-based repayment programs,” he added. “And the specific details of this income-based repayment program are clearly within what’s permitted under the statute there. I would be surprised, frankly, if there was a legal challenge to that proposal.”
All student borrowers in repayment will be eligible to enroll in the SAVE plan later this summer before any monthly payments are due.
As President Biden announced these new actions, he didn’t hide his frustration from the court’s decision.
“Today’s decision has closed one path. Now we’re going to pursue another,” he said. “We’ll use every tool at our disposal to get you the student debt relief you need to reach your dreams.”
And both the president and Cardona took shots at congressional Republicans for supporting loan forgiveness under the Payment Protection Program while opposing student debt relief:
Sen. Markwayne Mullin from Oklahoma had more than $1.4 million in pandemic loans forgiven. He represents 489,000 eligible borrowers that were turned down today.
Rep. Brett Guthrie from Kentucky had more than $4.4 million forgiven. He represents more than 90,000 eligible borrowers who are turned down today.
Rep. Marjorie Taylor Greene from Georgia had more than $180,000 forgiven. She represents more than 91,800 eligible borrowers who were turned down today.
“You can’t help a family making 75 grand a year, but you can help a millionaire and you have your debt forgiven?” Biden asked.
But the president seemed to have no regrets despite the court’s decision and disputed a reporter’s suggestion that he gave millions of Americans false hope.
“What I did, I thought was appropriate and was able to be done and would get done. I didn’t give borrowers false hope,” Biden said. “But the Republicans snatched away the hope that they were given.”