President Joe Biden reacted swiftly to the U.S. Supreme Court’s decision to invalidate his plan to forgive many student loans by announcing new measures to provide relief to borrowers.
Biden made a televised statement on June 30, within hours of the court decision, promising to provide debt relief for some borrowers and a temporary measure to ease the transition back to loan repayment after a pause of over three years.
Biden had unveiled the original loan-forgiveness plan in August 2022. At the time, some critics charged that the move was intended to boost the chances of Democratic candidates in the midterm election. Others denounced it as unfair to Americans who had repaid their college loans and as an illegal usurpation of congressional authority.
The Congressional Budget Office said the plan could cost about $400 billion. The Wharton School estimated that it could exceed $1 trillion.
The high court ruled on June 30 that Biden’s plan violated the HEROES Act, which he had used as a legal authority for taking the action.
Plan 1.0
About 26 million people applied for loan forgiveness through the Biden plan, which would have provided up to $10,000 in debt relief for many borrowers and up to $20,000 for those who had received a Pell Grant. Pell Grants are intended for low-income students.
About 16 million people were approved for loan forgiveness through the plan, which was never implemented.
President Donald Trump paused student loan payments in March 2020 due to the pandemic. The pause has been extended several times by Biden, but payments are scheduled to resume in October.
Now critics say that many Americans already facing financial hardship will be hard hit when loan payments resume rather than disappear.
“Some of these borrowers went to for-profit schools that exploited lax lending rules and left them with no marketable skills. Others went to legitimate schools but dropped out when a parent got sick or lost their job,” Johnson Tyler, a consumer attorney at Legal Services NYC, said in a June 30 statement.
“They will face decades of collection activity, including the reduction of their Social Security when they retire or become disabled, and will forever be burdened by a debt they cannot repay due to steep interest rates and complicated repayment structures.”
Plan 2.0
Biden said he had identified a “new path” consistent with the Supreme Court ruling that would allow U.S. Secretary of Education Miguel Cardona to compromise, waive, or release loans under certain circumstances.
