President Joe Biden vowed to not stop fighting to provide some student loan borrowers with relief following a blow from the U.S. Supreme Court on Friday.
The conservative-led court voted to overturn the Biden administration's student debt cancellation plan after Republican-led states sued the White House over its push to forgive up to $10,000 in debt for borrowers making less than $125,000 a year. Pell Grant recipients, a need-based program of the Department of Education (DOE), could have received up to $20,000 of debt relief in Biden's plan.
In a speech hours later, Biden promised that he would not "stop fighting to deliver borrowers what they need" despite the high court's ruling, and announced new ways that his administration hopes to offer debt relief "as fast as we can." The plan includes steps taken by DOE Secretary Miguel Cardona to initiate a rule-making committee intended to propose new regulations for student loan programs.
"This new path is legally sound," Biden said from the White House Friday afternoon. "It's going to take longer, but, in my view, it's the best path that remains to providing for as many borrowers as possible with debt relief."
Biden cited the DOE's authority to make new regulations under a provision in the 1965 Higher Education Act, which gives the education secretary the power to "compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption."
The president also announced that, starting in the fall when the pause on student loan payments comes to an end, borrowers will be given a 12-month "on ramp" program to restart their payment plans. This means that the DOE will not inform credit bureaus of borrowers who miss their monthly payments from October 1, 2023, to September 30, 2024.
"During this period, if you can pay your monthly bills, you should," the president said Friday. "But if you cannot, if you miss payments, this on-ramp will temporarily remove the threat of default or having your credit harmed, which can hurt borrowers for years to come."
The White House also announced Friday that Cardona had finalized the Saving on a Valuable Education (SAVE) Act, which the administration deemed "the most affordable repayment plan ever created." Under the new repayment option, the number of monthly payments for undergraduate loan borrowers will be cut from 10 percent of discretionary income to 5 percent, which, the White House said, will save borrowers "at least $1,000 a year" in payments.
Other steps under the SAVE Act include raising the threshold for what is considered non-discretionary income. This means that any borrower whose salary falls under 225 percent of the federal poverty level—the equivalent of the federal minimum wage at $15 an hour—will not be required to make monthly payments. Undergraduate loan balances of initially $12,000 or less will also be forgiven after 10 years of payments, cutting the timeline in half.
"Hope on the horizon thanks to the relief that I planned last year—today's court decision snatched it away from [borrowers]," Biden said as he concluded his speech. "I get it ... and I'm concerned about it."
"But today's decision has closed one path. Now we're going to pursue another," the president continued. "I'm never going to stop fighting for you. We'll use every tool at our disposal to get you the student debt relief you need and reach your dreams."
Republican-led states had argued in their lawsuit filed in the fall that the president lacked the legal authority to pursue his student loan relief plan without the approval of Congress, which legislates government spending. Other lawmakers had argued against providing relief to only college-educated Americans, pointing out that citizens who did not pursue higher education would not benefit.
In total, Biden's original plan would have cost $400 billion.
Newsweek has reached out to Missouri Attorney General Andrew Bailey, who led the lawsuit against Biden's cancellation plan, via email for comment Friday evening.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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Kaitlin Lewis is a Newsweek reporter on the Night Team based in Boston, Massachusetts. Her focus is reporting on national ... Read more
