What Biden's new student debt relief plan is all about
And how it differs from the one the Supreme Court struck down last year
If you, like me, have college-age kids, the student loan forgiveness debacles can be confusing and frustrating. Biden had a large-scale plan, but the Supreme Court struck it down. The Biden Administration has since offered a handful of smaller, targeted relief plans based on a different federal statute than the one that formed the basis of the $400 billion plan that the Supreme Court struck down.
The Biden Administration’s new big-scale plan is called the Saving on a Valuable Education (SAVE) plan, which has been open for borrowers since August and already has over 8 million enrollees. It is an income-driven plan, meaning only people who qualify under certain criteria related to income and household size are eligible.
In two separate lawsuits, eighteen Republican-led states have already sued to block the plan.
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What does Biden’s new plan do?
This is pretty complicated stuff, and there are a variety of distinctions on the kinds of loan programs as well as eligibility criteria, so this is far from comprehensive. Here’s the link to the application page, which has more information.
Overall, the SAVE plan, among other things, does the following:
Reduces payments on undergraduate loans to 5 percent of a borrower’s discretionary income.
After 20 years of repayment (25 for graduate school), debt is cancelled.
Shortens the repayment term for people who initially borrowed $12,000 or less to 10 years, at which point any remaining debt is canceled.
Changes the the payment formula so more income is protected for a borrower’s basic needs. Borrowers who earn less than 225 percent of the federal poverty guideline — equivalent to what a $15-an-hour worker earns annually, or $32,800 or less for a single person — have no monthly payment.
Forgives excessive interest if it has accumulated to exceed the original loan balance.
Gives relief to people who are repaying loan for “low-financial-value programs”—which include for-profit schools with a record of poor student outcomes.
How is this different from Biden’s 2022 plan?
In 2022, the Biden administration announced a sweeping $400 billion student debt relief program that would have relieved up to $20,000 of debt for about 43 million Americans. Biden relied on the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, which allowed the Secretary of Education to “alleviate the hardship that federal student loan recipients may suffer as a result of national emergencies.” Biden contended that the 2020 COVID-19 pandemic created an economic hardship for millions of American borrowers and thus justified this vast amount of loan forgiveness.
What happened to the 2022 plan?
Last summer, in a case called Biden v. Nebraska, the conservative majority of the Supreme Court applied what’s known as “the major questions doctrine” to strike down the plan. The doctrine says that courts can reject congressional legislation it thinks is insufficiently precise, on the rationale that agencies need clear directives from Congress if the subject matter is “major.” In this case, the Court said that although the HEROES Act’s use of the word “waive” could mean “cancel,” Congress needed to be more explicit for the agency’s action to stand.
More than 16 million borrowers were already approved for loan relief when the plan was put on hold; 43 million were eligible to participate.
If the Supreme Court struck down the 2022 plan, how can Biden do this now?
The Biden administration is justifying the new plan by relying on the 1965 High Education Act—a different law than the HEROES Act, which it used for the 2022 plan—which permits the Secretary of Education to compromise, waive, or release loans under certain circumstances. Notably, in the Court’s opinion last year striking down Biden’s 2022 plan, Chief Justice John Roberts wrote that the Act could be used to cancel student debt in “certain limited circumstances.”
The High Education Act, in my view, does provide firmer ground than the HEROES Act—which frankly could have easily gone the other way at the Supreme Court. In that case, the plaintiff’s standing to sue was a huge problem and the Court pretty much glossed over it, suggesting the majority wanted to find a way to hear the case to halt the debt relief program. Who knows how the conservative justices will feel about the SAVE plan this round.
How do Americans feel about loan forgiveness?
Student loan forgiveness is a hotly debated topic and a key issue in the 2024 presidential election. 73% of voters believe that the government should do something about student loan debt, with about 50% supporting partial or total loan forgiveness.
Will this plan actually relieve debt this time?
Biden’s new plan will undoubtedly face a variety of legal challenges, especially because this is an election year. Right after the plan was announced, Missouri Attorney General Andrew Bailey wrote on X that he would see Biden in court, and he filed a lawsuit this month with 6 other states seeing to block the SAVE plan, arguing it’s an overreach of the president’s authority. It comes on the heels of a challenge filed by 11 other states, led by Kansas, last month. The Biden administration has said it will move as quickly as possible to secure relief, but the uncertainty of how the presidential election will play out in November puts the fate of the plan in jeopardy.
Follow the facts,
KW
Education is key to protecting democracy.
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