Washington- The Biden administration announced on Friday that it would write off $39 billion in student debt for more than 800,000 borrowers, a relief that comes weeks after the Supreme Court struck down a separate and broader effort by President Biden to settle the student loan debt.
Unlike the broad pardon that Mr. Biden initially tried to provide, the upcoming debt forgiveness by the Department of Education are narrower, stemming from “fixes” announced by the administration in April 2022 to ensure that borrowers enrolled in income-driven repayment plans have an accurate count of the number of monthly payments which go to the shed.
The new student debt plan also relies on a different law than the one that was struck down by the Supreme Court. Under the Higher Education Act of 1965 and federal regulations, a borrower is eligible for loan forgiveness after making 240 or 300 qualifying monthly payments – approximately 20 or 25 years of payments – on a repayment plan based on income or a standard repayment plan. The administration said “inaccurate payment accounts” caused borrowers to lose “hard-earned progress” toward canceling their loans, which it has sought to remedy.
Loans covered include Direct Loans or Federal Family Education Loans held by the Department of Education, including Parent PLUS Loans.
The Supreme Court’s decision on student loans
The latest announcement from the Department of Education is part of the Biden administration’s effort to relieve Americans in debt through student loans, and is different from the program struck down by the Supreme Court late last month.
Under the plan, which the court’s conservative majority ruled illegal, eligibility was dependent on income. Borrowers earning up to $125,000 a year could see up to $10,000 in student debt forgiven. Eligible Pell Grant recipients, students with the greatest financial need, who met the income threshold could have received additional relief of up to $10,000.
This Biden administration plan was far more sweeping, with about 40 million Americans eligible for aid, 20 million of whom would have had their loan balances wiped out.
The program also relied on a different law – the HEROES Act – than the loan discharges announced on Friday. The HEROES Act authorizes the Secretary of Education to “cancel or modify” student financial aid programs for borrowers “in connection” with a national emergency, such as the pandemic.
But the Supreme Court disagreed, finding the administration overstepped its authority with its plan to erase $430 billion in student debt.
The court also invoked the so-called “major issues” doctrine in part of its ruling, a legal theory that there must be clear authorization from Congress for an executive branch agency to decide a “major issues” issue. ‘great economic or political importance’.
“The economic and political significance” of the loan cancellation plan, Roberts wrote, “is staggering in every way.” The court ruled that the education secretary could amend “existing statutory or regulatory provisions” under the Education Act, but “not rewrite that act from scratch.”
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