Biden Takes First Step To Create New Student Loan Forgiveness Plan

The Biden administation has just taken the first step to create a new student loan forgiveness plan in the wake of last week’s Supreme Court ruling.

President Biden had pledged to move as quickly as possible to establish a new student debt relief plan after his earlier initiative was struck down by the Court. That program could have benefited nearly 40 million borrowers.

Here’s the latest.

Supreme Court Struck Down Biden’s First Student Loan Forgiveness Plan

In a landmark and controversial decision last Friday, the Supreme Court ruled against Biden’s sweeping student loan forgiveness program. The 6-3 conservative majority concluded that Biden’s plan, which would have wiped out $10,000 or $20,000 in government-held student debt for millions of Americans, was not authorized by the HEROES Act. That 2003 statute provides authority to the Education Department to “waive” or “modify” federal student loan programs in response to national emergencies.

Citing the lasting economic impacts of the Covid-19 pandemic, the Biden administration argued that mass student loan forgiveness was essential before borrowers could return to repayment after a three-year pause. But the Supreme Court ruled that Congress, in drafting the HEROES Act, had not explicitly authorized the type of debt relief that Biden had created.

The three liberal justices on the Court strongly dissented, suggesting that the majority — led by Chief Justice John Roberts — ignored constitutional provisions regarding standing, and had abandoned the textualist approach that several of the conservative justices claim to adhere to.

Biden’s Backup Student Loan Forgiveness Route

At a press conference shortly after the Supreme Court released its decision, President Biden told reporters that he would establish a new student loan forgiveness plan using a different legal authority. The Higher Education Act — a completely separate statute from the HEROES Act — has a provision that similarly allows the government to “compromise” or “waive” federal student loan obligations. The Education Department has relied on this authority to cancel student debt in the past, most recently to enact $6 billion in student loan forgiveness as part of the Sweet v. Cardona settlement agreement.

But the process to create a new student loan forgiveness plan under the Higher Education Act is different from the HEROES Act. One of the main reasons the Biden administration had selected the HEROES Act as the basis for debt relief is because the emergency authority provided under that statute allowed the Education Department to bypass the normal rulemaking process, which can be tedious and lengthy. Regulations enacted under the Higher Education Act typically must go through a more rigorous process called “negotiated rulemaking.” That process involves rounds of public hearings and comment periods that require “extensive public input,” according to the department.

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Education Department Announces First Step In Creating New Student Loan Forgiveness Plan

On Wednesday, the Education Department formally announced the beginning of the negotiated rulemaking process for the establishment of a new student loan forgiveness plan.

“We announce our intention to establish a negotiated rulemaking committee to prepare proposed regulations for the Federal Student Aid programs authorized under title IV of the Higher Education Act of 1965, as amended (HEA),” reads a formal announcement. “We intend to convene a committee to develop proposed regulations pertaining to topics in the title IV, HEA programs. Those topics are the authorities granted to the Secretary in HEA Section 432(a), which relate to the modification, waiver, or compromise of Federal student loans.”

The department will be convening a committee to discuss the possible parameters of a new student debt relief plan. “The committee will include representatives of organizations or groups with interests that are significantly affected by the subject matter of the proposed regulations,” reads the announcement. The department will start accepting public comments, and will convene its first formal negotiated rulemaking meeting on July 18.

Next Steps For Biden’s New Student Loan Forgiveness Plan

The Biden administration “will work to complete and implement the new rules as quickly as possible,” said the Education Department in guidance released in the wake of last week’s Supreme Court decision. Education Secretary Miguel Cardona “has directed his staff to explore policy options for debt relief that will help as many people as possible.”

But even an expedited negotiated rulemaking process is going to take awhile. “It’s going to be months … We are aiming to do it as quickly as possible,” said a top Biden administration official last week.

Further Student Loan Forgiveness Reading

Here’s When Student Loan Payments Resume, And What Borrowers Should Do Now

Student Loan Forgiveness Update: What We Know About Biden’s Newest Plan

4 Big Student Loan Updates When Payments Resume (And They Resume Soon)

6 Key Student Loan Forgiveness And Repayment Dates To Write Down Now