Joe Biden announces new plan to forgive student loans following Supreme Court ruling

President Joe Biden, whose $400 billion student loan forgiveness plan was struck down by the Supreme Court Friday, said his administration would pursue other measures to ease college debt.

The White House is offering a year-long grace period for people who miss payments and is working on another pathway for relief under the Higher Education Act, a different law than the one Biden had the Secretary of Education used for the initial plan.

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“I’m not going to stop fighting to deliver borrowers what they need, particularly those at the bottom end of the economic scale,” Biden said from the White House. “So we need to find a new way. And we’re moving as fast as we can.”

Biden had proposed to relieve up to $20,000 for student loan borrowers who received a Pell Grant and up to $10,000 for others depending on their income. The Court ruled 6-3 that the president exceeded his authority.

Federal student loan repayments will resume in October after being repeatedly halted during the coronavirus pandemic, the U.S. Education Department said. Interest will start to accrue again on Sept. 1. Congress prevented further pauses on repayment as part of the agreement to lift the debt ceiling, which was signed into law this month.

Biden said Friday that there would be an “on ramp” for borrowers through September 2024. People who miss monthly payments during this time won’t be considered delinquent and won’t face default or harm to their credit.

Additionally, the administration finalized an income-driven repayment program Friday to halve borrowers’ monthly payments. Biden said the Saving on a Valuable Education (SAVE) plan would help a typical borrower save more than $1,000 a year.

All borrowers who are repaying are eligible to enroll later this summer, the White House said. Those who sign up or are already signed for the current Revised Pay as You Earn plan will be automatically enrolled in SAVE.

According to the White House, the repayment plan would:

• Cut in half the amount that undergraduate borrowers have to pay each month from 10% to 5% of discretionary income.

• Raise the amount of income considered non-discretionary, protecting it from being used in calculating how much a borrower must pay. It means a borrower who is single and making the annual equivalent of a minimum wage does not need to make a monthly payment.

• Forgive debt after 10 years of payments, instead of 20, for borrowers who had original loan balances of $12,000 or less.

• Not charge borrowers with unpaid monthly interest so their loan balance will not grow as long as they make their monthly payments. This includes those who are eligible for $0 monthly payments.

Biden said Friday that the Court “misinterpreted the Constitution” in striking down his initial plan.

The court said that Biden’s initial plan was not authorized under the 2003 Higher Education Relief Opportunities for Students Act, which allows the government to grant waivers for financial aid in national emergencies.

Invoking the act, the Biden administration had promised to forgive more than $400 billion in debt to alleviate financial distress caused by the pandemic.

About 26 million borrowers applied or were deemed eligible for that forgiveness, including more than 2.3 million Californians, before lawsuits stunted the program, according to the White House.

Federal loans account for more than two-thirds of student borrowing in the U.S, according to the Public Policy Institute of California (PPIC). About 3.8 million Californians are responsible for more than $142 billion of the nation’s student borrowing. The total national balance comes to about $1.6 trillion.

The Biden administration has forgiven at least $66 billion for nearly 2.2 million borrowers, including people in public service or who attended certain for-profit colleges, recent Education Department data shows. Biden encouraged borrowers to check the Education Department’s website to see what other forms of relief they are eligible for.

“It matters,” he said.