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A New Path for Student Debt Relief


In the aftermath of the Supreme Court’s rejection of President Joe Biden’s plan to cancel a portion of student debt for numerous borrowers, the President is determined to find an alternative solution. Standing alongside Secretary of Education Miguel Cardona, Biden expressed his disagreement with the court’s decision, calling it an error. He firmly stated, “I’m not going to stop fighting to deliver borrowers what they need, particularly those at the bottom end of the economic scale. So, we need to find a new way. And we’re moving as fast as we can.”

Elizabeth Warren’s Proposal

The Biden administration’s initial plan to cancel up to $20,000 in student debt for a wide swath of borrowers relied on the HEROES Act, a 2003 law that grants the Secretary of Education the power to “waive” or “modify” student loans during national emergencies. Specifically, this measure was aimed at addressing the financial repercussions of the COVID-19 pandemic. Officials justified the need for debt cancellation by highlighting the risks borrowers face once the pandemic-era freeze on student loan payments is lifted. Evidence from previous limited pauses and data from the Consumer Financial Protection Bureau showed that borrowers were falling behind on their other debts. By canceling some student debt upon resumption of payments, officials hoped to alleviate these challenges.

How long will it take for borrowers to see relief through this new effort?

President Biden cautioned borrowers that the implementation of this new approach will take longer. Unlike the HEROES Act, which does not require a specific process, the student loan program’s regulations under the Higher Education Act must undergo negotiated rulemaking. This means that it will take months for the regulations to be developed and finalized. However, the administration is committed to expediting this process as much as possible. In summary, borrowers should not expect any debt relief for at least a year when factoring in potential legal hurdles.

Department of Education to Develop Proposed Rules on Student Loan Relief

Rebecca S. Natow, an assistant professor of educational leadership and policy at Hofstra University, has confirmed the typical timeline for these negotiations. If the negotiators achieve a consensus on a proposed regulation, then that would become the Department’s chosen path. However, if no agreement is reached, the agency will proceed to create its own proposed regulation. In such a scenario, public comments will be invited and reviewed before the final regulation is published.

Potential for Litigation

Due to the contentious nature of this policy, it is highly likely that there will be legal challenges against the new debt-relief plan. However, until the negotiated rulemaking process concludes, it is improbable that any court will entertain such challenges.

Supreme Court’s Decision on Standing

Unanimously, the justices decided that two borrowers who were not eligible for the full benefits of the plan did not have the right to sue. However, the court’s conservative majority acknowledged that six states led by Republicans did have the right to sue.

The basis for this determination was primarily rooted in Missouri’s connection to MOHELA, a student-loan servicer chartered by the state itself. Legal principles rather than factual considerations formed the crux of their analysis, according to David Rubenstein, a professor at Washburn University School of Law. Consequently, even if new facts concerning this relationship emerge, they are unlikely to alter the court’s perspective.

Rubenstein remarked, “It’s reasonable to assume that there will be standing on similar grounds.”

Will the Supreme Court Approach a Lawsuit on the New Plan Similarly?

It remains challenging to predict how the court will ultimately decide on such matters beforehand. There are various factors that might indicate whether the court will strike down mass-debt relief once again or adopt a distinct standpoint when it comes to the new plan.

Chief Justice John Roberts penned the majority opinion for the court, which specifically addressed whether the HEROES Act grants the Secretary of Education the power to cancel student debt en masse.

The HEROES Act and Student Loan Forgiveness

To further solidify their case for student loan forgiveness, the Biden administration can take advantage of the negotiated rulemaking process. This process allows them to thoroughly examine their position while also creating a detailed record of policymaking that surpasses what was available during their initial attempt at loan forgiveness.

The Question of Student-Debt Forgiveness: Examining the Impact and Future Plans

“It’s hard to see why it would not be deemed a major question under the Higher Education Act if it was deemed a major question under the HEROES Act,” expressed an expert in the field. The determination of whether a policy falls under the major questions doctrine is based on its political and economic significance, rather than the statutory text, according to the same expert.

What is at Stake: Student-Debt Forgiveness and its Effects

The Biden administration aims to provide relief to “as many borrowers as possible,” although the specifics of the new debt-cancellation plan have not been disclosed. The plan that was invalidated by the Supreme Court offered up to $10,000 in relief for borrowers with student debts of up to $125,000. Additionally, those who qualified under this criterion and received Pell grants (financial aid for low-income college students) would have been eligible for up to $20,000 forgiveness.

According to Emerson, a renowned commentator, it is unlikely that the exact same plan will be implemented. He suggests that the administration will take into account the specific purposes outlined in the Higher Education Act, indicating some modifications are expected.

During a recent discussion with reporters, Ramamurti mentioned that it is too early to predict whether the new plan will be narrower in scope compared to the one struck down by the court. However, he emphasized that both the President and Secretary have made it clear that their objective is to provide relief to as many borrowers as possible through this process.

The Future of Student Loan Borrowers: What You Need to Know

As the future of student loan repayment hangs in the balance, borrowers are left wondering what steps they can take to prepare for the inevitable. With recent court rulings and potential policy changes, it’s essential to stay informed and plan accordingly.

How Does the Size of the Plan Impact its Viability?

One crucial factor that may determine the fate of the new plan is its scope. If the plan encompasses fewer borrowers than the one previously struck down by the court, it may be seen as a less significant issue. According to legal expert Emerson, the threshold for determining “majorness” depends on the sheer breadth of the policy. However, it remains unclear how much smaller the plan must be to avoid this accusation.

The Cost of Limiting the Policy

While constraining the policy may appease the courts, it comes with its own set of costs. Restricting the plan’s reach risks dissatisfaction from constituents and poses political and economic challenges for the Biden administration. Rubenstein highlights the dilemma faced by policymakers: the more people benefit from the plan, the more politically and economically significant it becomes under the major questions doctrine.

Preparing for Repayment: What to Expect

While borrowers anxiously await the resolution of these issues, it’s essential to be ready for student loan payments to resume this fall after a three-year hiatus. President Biden announced that the Department of Education will offer protection for borrowers who face difficulties during the first 12 months of payment resumption. Additionally, sweeping changes to student loan repayment will take effect upon resumption.

How Can Borrowers Prepare?

Stay informed and proactive to navigate the evolving landscape of student loan repayment.


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