Biden’s new student debt relief proposal aims to avoid Supreme Court fate

President Biden’s latest student loan forgiveness program is giving flashbacks to his 2022 universal relief plan that was struck down by the Supreme Court, but experts aren’t convinced this is going to be a redo of the past failure.

The Biden administration’s ability to learn from its past mistakes and the scope of borrowers the new plan affects could be crucial to beating legal challenges to it. However, fears that student debt relief will be dangled in front of voters only to be taken away before Election Day linger due to the timing of the plan.

“I think that’s the key difference is this sort of focus on the plan that could have forgiven entire debts in 2022 and this latest wave, where some individuals might get their full debt waived in some of the more targeted programs, but the widespread forgiveness program wouldn’t be wiping out entire balances,” said Katharine Meyer, a fellow for the Brown Center on Education Policy at the Brookings Institute.

Biden’s plan, proposed last Monday, would target certain groups of borrowers for relief: those on income-driven repayment (IDR) plans, people who have been paying on loans for more than 20 years, borrowers who went to low-financial-value institutions, people experiencing hardship, and those with unpaid interest growth.

The biggest of the groups is those with unpaid interest growth: About 25 million Americans would receive partial or full forgiveness on that portion of their loans.

The only group that may receive full forgiveness are those on IDR plans who qualify for relief but have hit red tape in receiving it.

“The Biden-Harris Administration plans to release proposed rules on these plans over the coming months. If these plans are finalized as proposed, this fall the Administration would begin canceling up to $20,000 in interest for millions of borrowers and full loan forgiveness for millions more,” the White House said in its announcement.

That time frame would echo the 2022 plan’s.

“I think when they first embarked on negotiated rulemaking, the sense was that it wouldn’t really go into effect until July 2025,” Meyer said, but she suspects the administration is going to “draw on this ‘good cause’ exemption in the administrative rulemaking provisions that allow some regulations to go into effect early.”

When Biden’s previous, universal forgiveness plan kicked off in October 2022, it only was an application that borrowers had to fill out, and the distribution of the relief was going to take longer.

Experts say if this relief is implemented quicker, the plan would be more effective. 

“I think one of the challenges with the way that the 2022 proposal rolled out is that it took a little while for relief to happen and, therefore, that gave time for lawsuits to come in,” Meyer said, adding it is “easier to launch a lawsuit” before forgiveness is given than afterward.  

“So I imagine the administration is ready to … go through with the process of forgiveness as much as possible, because then it becomes politically more challenging, and administratively more challenging” to go back on it, she continued. 

Biden has already given out $153 billion in student debt relief during his administration, largely going to those on IDR plans, borrowers with disabilities and people defrauded by their schools.

The most recent relief came Friday, when Biden said he would be forgiving about $7 billion in loans for around 277,000 on IDR plans.

Republicans have already been adamant the broader new proposal is just another scheme for the Biden administration to get votes. They say it is unfair to those who have paid off their debts or never went to school.

“We know that instead of doing its job the administration focused time, energy, and resources on its illegal student loan scheme. And that has been frustrating, especially since it has jeopardized the academic journey of millions of students,” said Rep. Virginia Foxx (R-N.C.), chair of the Education and the Workforce Committee, referring to the botched Free Application for the Federal Student Aid rollout.  

The White House is already expecting court challenges from Republicans, but is projecting confidence they will fail this time around.

“We know what Republicans are going to do; we can’t stop them from that. But it’s also not going to stop the president from acting and taking action, like he is today,” White House press secretary Karine Jean-Pierre said.

And the law upon which the White House is basing its new plan could offer it more solid footing.

In 2022, the administration tried to use emergency powers given to the Education secretary during the pandemic to provide relief. This time, Biden is making use of the Higher Education Act (HEA).

The current plan uses “authority that the U.S. Department of Education has to both fix current glitches in the student loan system” and “to initiate the SAVE plan which replaces an existing plan,” said Skye Perryman, president and CEO of Democracy Forward. 

The SAVE plan is a new IDR plan the administration launched last year that stops the growth of unpaid interest and cuts payments from 10 percent down to 5 percent of discretionary income. While two cases led by Republican states have recently been introduced to stop the SAVE plan, Biden has not been ordered to pause it.

“The mechanisms by which the administration is utilizing the Department of Education’s authority here” differ than during the pandemic, Perryman said. “And so I think that there is an incredibly strong … it’s on solid legal basis.”

In the end, this plan could affect 30 million borrowers, out of the more than 40 million Americans that have student loan debt.

“The scale is it’s not small by any means. … But all of the pathways are legally sound ones that Biden administration has pursued through the regulatory process, including negotiated rulemaking, which included stakeholder meetings and public input over the course of the fall, and there will be further opportunities for public input. So they are following the letter of the law in developing and executing these regulations,” said Sara Partridge, senior policy analyst for the Center for American Progress.