Biden to Pursue New Path on Student-Debt Relief After Ruling

Jennifer Jacobs and Akayla Gardner
·5 min read
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(Bloomberg) -- President Joe Biden announced he will try a new legal avenue to provide student-loan borrowers with relief after the Supreme Court struck down his initial plan to forgive billions of dollars in debt, undoing one of his signature initiatives.

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“Today’s decision has closed one path. Now we’re going to pursue another. 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,” Biden said Friday at the White House.

The Department of Education initiated a new regulatory process that hopes to provide relief under the Higher Education Act and created a 12-month “on-ramp repayment program” designed to help borrowers reduce the threat of default. But the debt forgiveness regulations will take months to finalize, and are certain to face legal challenges similar to the one that felled Biden’s inital attempt.

Education Secretary Miguel Cardona stressed that the so-called on ramp “is not a loan pause,” adding, “we’re encouraging payments to be made and interest will be accruing in the process.”

Friday’s decision was the latest blow from the conservative majority Supreme Court to Biden and progressive allies. The justices, in a 6-3 vote, sided with six Republican-led states that sued to challenge the program as exceeding the president’s authority.

Read more: Supreme Court Throws Out Biden’s Student-Loan Relief Plan

The ruling nixes a centerpiece of Biden’s agenda — one he campaigned on in 2020. The debt-relief program is broadly popular with progressives, young people and Black voters, and was seen as an unabashed attempt to woo those key voting blocs. Those voters helped Biden win the White House and are crucial to securing a second term with polls showing their support for the president has waned.

“I know there are millions of Americans, millions of Americans in this country who feel disappointed and discouraged or even a little bit angry about the court’s decision today on student debt. And I must admit, I do too,” Biden said.

The broader impact on the economy will come this summer, when more than 40 million Americans resume student-loan payments, following a three-year pause aimed at alleviating the weight of almost $1.8 trillion in student debt.

Biden argued Republicans are responsible for denying student-loan relief, even as they supported the Paycheck Protection Program to help businesses weather the Covid-19 pandemic.

“These Republican officials just couldn’t bear the thought of providing relief for working class, middle class Americans,” he said. “Some of the same elected Republicans, members of Congress, who strongly opposed debt relief for students got hundreds of thousands of dollars themselves.”

“The hypocrisy is stunning,” Biden added.

Republicans blasted the size and scope of Biden’s plan to forgive as much as $20,000 in federal loans for borrowers making less than $125,000 per year and $250,000 for households. The Congressional Budget Office estimated the cancellation would cost about $400 billion over 30 years.

Republican National Committee Chairwoman Ronna McDaniel said in a statement that Biden’s plan “unfairly punished Americans who already paid off their loans, saved for college, or made a different career choice.”

“Americans saw right through this desperate vote grab, and we are thankful that the Supreme Court did as well,” McDaniel added.

Progressive Pressure

Bloomberg News first reported that officials were being asked to reintroduce the plan under a different legal rationale using the Higher Education Act of 1965, which gives the Education secretary broad authority to manage the federal student-loan portfolio.

The new pathway puts the White House in line with initial calls from progressive lawmakers like Elizabeth Warren who argued that administration always had the authority to pursue forgiveness under the Higher Education Act. Cardona admitted the Heroes Act permitted a “quicker” regulatory process, given the law relies on the existence of a national emergency and does not require a comment period.

Read more: White House Under Pressure to Develop a ‘Plan B’ on Student Debt

Dozens of advocates marched in Washington on Friday in opposition to the court’s ruling and to push the president to use other tools to cancel debt, warning that doing so would be critical to turning out supporters for his reelection bid.

Legal watchers had expected the court to strike down the program after the conservative majority reacted skeptically during oral arguments in February to the administration’s citing of the Covid-19 pandemic and the use of a 2003 law known as the Heroes Act to enact the debt relief.

Read more: Student Loan Relief Advocates Pressure Biden to ‘Get It Done’

Asked whether the White House weighed lowering student loan interest rates, Bharat Ramamurti, deputy director of the National Economic Council, said they considered but ultimately decided against that idea.

“We looked at a number of possibilities — the president’s direction to us was to look at all available legal authorities to figure out what we can do to provide relief to borrowers,” he said at a White House briefing Friday. “The specific proposal that you discussed was not the one that we went with eventually.”

It’s unclear if the president’s new approach will stand up in courts, but Biden expressed confidence.

“This new path is legally sound. It’s going to take longer, and in my view is the best path that remains to providing as many borrowers as possible with debt relief,” he said. “We’re not going to waste any time on this. We’re getting moving on it. It’s going to take longer, but we’re getting at it right away.”

Biden was asked by a reporter if he had provided borrowers with “false hope.”

“I didn’t give borrowers false hope,” he responded. “The Republicans snatched away the hope that was — that they were given.”

--With assistance from Jordan Fabian.

(Updates to add Ramamurti remarks in paragraphs 19-21, additional Biden quote in paragraphs 24-25)

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