In response to the Supreme Court’s ruling against his student loan relief program, President Biden has outlined a new approach to pursue debt forgiveness that is legally sound. The court’s 6-3 decision overturned the president’s plan to forgive up to $20,000 in federal student loan debt, a key campaign promise. Despite the setback, President Biden emphasized that he did not offer false hope to borrowers and instead blamed Republicans for suing over the program and voting against it in Congress.
President Biden’s initial plan, announced last August, aimed to forgive $10,000 in student loans for individuals earning less than $125,000 annually, and an additional $10,000 for those who attended college on Pell Grants. However, the promise of relief faced legal challenges and was ultimately struck down by the Supreme Court.
In a statement from the White House, President Biden assured borrowers that he remains committed to addressing student debt. He directed Education Secretary Miguel Cardona to initiate a process under the Higher Education Act, which would allow for the compromise, waiver, or release of loans under specific circumstances. The administration will also implement a 12-month “on-ramp repayment program” when student loan payments resume in the fall. During this period, the Department of Education will not report missed payments to credit agencies or consider them delinquent.
To provide debt relief, President Biden announced the introduction of the “Saving on a Valuable Education” (SAVE) plan. This income-based repayment program limits monthly payments for undergraduate loans to 5% of income, a reduction from the current 10% level. Additionally, the time required to forgive loans under $12,000 will be shortened to 10 years instead of 20 years.
The new path outlined by President Biden aims to ground the approach in the Higher Education Act, providing debt relief to as many borrowers as possible. The administration acknowledges that the process may take longer but believes it represents the best remaining option.
While the Supreme Court’s decision presents a setback for student loan holders, it also impacts President Biden’s reelection efforts. His campaign promise to cancel student loan debt was not fulfilled, and the ruling underscores the challenges he faces in this regard.
According to the White House, the now-defeated plan would have primarily benefited borrowers earning less than $75,000 per year, with no relief provided to those earning over $125,000. The estimated cost of the plan was approximately $430 billion.
Overall, President Biden remains determined to pursue student loan relief, utilizing alternative avenues to achieve this goal and support borrowers in their pursuit of financial stability.