President Joe Biden, under pressure from his political left, on Friday launched a new effort to salvage his plan to offer student loan relief to millions of borrowers after the Supreme Court struck down his first attempt.
Biden’s Plan B relies on the Higher Education Act of 1965 as a mechanism to allow the Department of Education to “compromise, waive or release loans under certain circumstances,” he said during a late-afternoon speech.
“Today’s decision has closed one path,” he said. “Now we’re going to pursue another [option]. … We’ll use every tool at our disposal to get you the student debt relief you need.”
The president said his administration is “moving as fast as we can,” but administration officials who briefed reporters following his remarks said the Plan B approach will take much longer than the one the high court nixed. To that end, they could not say how many people would be eligible nor how long it would take to design and fully implement.
Progressive lawmakers and activists have long encouraged Biden to use the nearly 60-year-old Higher Education Act as a way to waive debt. Unlike the 2003 HEROES Act, which was the basis of Biden’s initial plan, the Higher Education Act does not require a national emergency such as the COVID-19 pandemic.
Under the Higher Education Act, Secretary of Education Miguel Cardona is empowered to develop rules for loan relief. This approach was championed by Sen. Elizabeth Warren and Rep. Ayanna S. Pressley, both Democrats from Massachusetts, among others.
Biden blamed Republican officials for the failure of his plan — from the state officials who brought a lawsuit challenging his legal authority to waive the debt to members of Congress who supported legislation undermining the plan to the GOP-appointed justices on the Supreme Court.
“This new path is legally sound,” he said. “It’s going to take longer, but in my view, it’s the best path … to [provide] for as many borrowers as possible.”
Biden noted that 16 million borrowers had already been approved for debt relief. “The money was literally about to go out the door,” he said. “And then Republican elected officials and special interests stepped in … literally snatching from the hands of millions of Americans thousands of dollars in student debt relief that was about to change their lives.”
Biden also said the Education Department would not refer borrowers who fall behind on loan payments to credit agencies for 12 months, providing a financial buffer once the pandemic-related pause ends. Interest is slated to resume in September and payments will be due in October.
Though interest would accrue on loans during that yearlong “off-ramp,” as the president dubbed it, payments would not be required. Still, Biden said if borrowers can afford to make them, they should pay up.
Signaling that he intends to campaign on the issue, Biden said his plan would have not only helped individual borrowers, it would have bolstered the economy. “More homes would have been bought, more businesses would have been started, more couples would have had the confidence to support a family,” he said. “Republicans blocked all that.”
Biden’s initial student loan relief plan, which would have canceled up to $20,000 in federal student loan debt for borrowers earning up to $125,000 per year, formed a key part of his economic agenda. He announced it last August, fulfilling a campaign promise and winning applause from progressives, some of whom had sought a far higher debt relief threshold. The White House said the proposal would have provided relief to more than 40 million borrowers.
Friday’s ruling dashed those hopes, with some activists turning their initial anger toward the White House, not the court. “Young people, in particular, are really frustrated,” said Braxton Brewington, spokesperson for the Debt Collective, a national union of debtors.
The Debt Collective was among the activist groups supporting the use of the Higher Education Act. But on Twitter, the group said requiring borrowers to apply for relief — instead of making the process automatic — is a “fatal flaw” of Biden’s plan.
Advocates say the drive to provide federal student loan relief will help shape the 2024 campaign cycle. Women, Black and Latino borrowers — key members of the Democratic Party’s base — are more likely to hold educational debt.
“Student debt relief brought out young voters in such a way that it literally stemmed the tide of the red wave in 2022,” Brewington said. “I think you can make a really strong argument that if you … deliver this relief, it’s really going to help Democrats in 2024, especially. … The political ramifications are large, especially with young voters of color.”
Loan payments, which were paused at the start of the pandemic in March 2020 by former President Donald Trump, are set to resume just as Biden’s 2024 reelection campaign intensifies. The Democratic president has been touting his economic record, which he says is built on a philosophy of strengthening the middle class.
Biden’s economic message may be undercut by the loan payments restart, with millions of borrowers facing a financial squeeze. “That is going to hit people hard … in a way that might be more tangible than inflation,” Brewington said. “It’s going to have huge consequences.”
For Republicans, the issue offers an opportunity to solidify support among working-class voters without college degrees, even though that group that includes millions of lower-income Americans who took on college debt even though they did not receive their degrees.
Rep. Virginia Foxx, a Republican from North Carolina who leads the Committee on Education and the Workforce, cheered the high court’s ruling. “With today’s ruling, hardworking taxpayers, including the 87 percent of Americans who hold no federal student debt, won’t be forced to foot the cost for Biden’s $315 billion boondoggle,” she said in a statement. “Simply put, it’s time for individual responsibility, not more government dependence.”
Senate Minority Leader Mitch McConnell struck a similar theme, saying federal student loan relief would benefit wealthy college graduates “and make suckers out of working families who choose not to take on student debt.”
Biden responded tersely when a reporter asked if he gave borrowers “false hope” that their debt would be forgiven. “The Republicans snatched away the hope they were given,” he shot back.
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