Biden Unveils New Details On Plan B For Student Loan Forgiveness

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President Joe Biden said he would pursue a new path for student loan forgiveness using the Department of Education, and unveiled a new program aimed at easing repayment for borrowers, after the Supreme Court struck down his student debt forgiveness program Friday.

President Joe Biden called the Supreme Court’s decision to strike down his student debt relief … [+] program a “mistake.”

Key Facts

Biden said he was “discouraged” and “angry” after the Supreme Court struck down his student loan forgiveness plan in a 6-3 vote, ending a months-long legal battle over the plan, which would have forgiven $10,000 in federal student loan debt for borrowers who earn less than $125,000, and up to $20,000 for borrowers who received the Pell Grant.

In a speech at the White House Friday afternoon, Biden said his administration will pursue another attempt at forgiveness through the so-called Higher Education Act, using the authority of the Department of Education rather than presidential authority — a move that Democrats have called on the White House to execute for months in the face of pressure from Republicans.

While details on the new plan were scarce, the Biden administration will also create a “temporary 12-month on-ramp repayment program” starting on October 1 and aimed at easing pressure on borrowers who were protected by a three-year Covid-era student loan pause—that pause is set to expire at the end of the summer, meaning borrowers will be required to make debt payments in October.

Under the program, Biden said the Department of Education will not refer borrowers who miss monthly payments to credit agencies for 12 months, removing the threat of default, though payments will still be due and interest will accrue.

The White House said in a statement the Department of Education also finalized a repayment option that would eliminate the need for monthly payments from many borrowers.

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Specifically, the so-called Saving on a Valuable Education (SAVE) plan will cut in half the amount that borrowers have to pay per month, from 10% to 5% of their discretionary income. The plan also raises the amount of income considered non-discretionary, which is not considered for repayment, to ensure borrowers earning less than $15 per hour will not need to make monthly payments. It additionally decreases the repayment sunset for borrowers with loans of less than $12,000 from 20 years to 10, meaning those borrowers’ loan balances will be forgiven after 10 years.

Chief Critic

Biden called the court’s decision “disappointing” in a statement on Friday, claiming nearly 90% of the relief from his student loan forgiveness plan would have benefitted students making under $75,000 a year, while vowing to “continue to work to bring the promise of higher education to every American.” The court ruled Biden overstepped his presidential authority in making the plan, though administration had argued the president had the authority to create the forgiveness plan under the HEROES Act, arguing the Covid-19 pandemic constituted a national emergency giving the Secretary of Education permission to cancel student debt.

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