July 24, 2023
Millions of student loan debtors have been put through the wringer these last few weeks. The debt ceiling bill, passed in June, ended three and a half years of debt relief by prohibiting additional loan payment pauses. And now, with the Supreme Court’s ruling against Biden’s relief plan — after 16 million debtors had been approved for forgiveness so far out of the more than 25 million who’d applied — debtors can officially expect to see their first round of federal student loan bills return this fall.
“The High Court is asking people with student debt to pay the price for decades of government mismanagement and industry abuses across the student loan system,” said Mike Pierce, executive director of the Student Borrower Protection Center (SBPC), in a statement, “making it clear that, once again, the wealthy and powerful play by a different set of rules from the rest of us.”
But advocacy groups that have been leading on this issue — including the Student Debt Crisis Center, the American Federation of Teachers, the NAACP, and the Debt Collective — don’t intend to give up now. And within hours of the Supreme Court’s decision, Biden announced that the administration would pivot: An alternate relief plan is in the works and additional support for debtors will be rolled out in the interim.
Here’s what’s next in the fight for student debt relief.
What is the Biden administration’s Plan B on Debt Forgiveness?
In short, no one really knows yet. On June 30, the president announced that the administration is planning to introduce a second forgiveness plan, but there has been no public mention yet of any details or qualifications, or how similar or different it might be from Biden’s original plan. What we do know is that this time, the administration will ground its legal argument in the Higher Education Act of 1965 (HEA), which was passed to bolster educational resources like libraries, and oversee federally provided financial assistance for students pursuing post-secondary degrees. Section 432 of HEA suggests the Education Department secretary can “enforce, pay, compromise, waive, or release” federal student loans.
How does the HEROES Act compare to HEA?
The HEROES Act (Higher Education Relief Opportunities for Students), passed in 2003, allows the secretary of the Department of Education to “waive or modify” federal debt for debtors impacted by a national emergency. In its initial relief plan, the Biden administration argued that the COVID-19 pandemic was exactly that kind of national emergency, warranting mass debt forgiveness. Some legal experts and debt cancellation advocates have argued that the HEROES Act doesn’t provide a strong enough legal footing for the administration’s claims, preferring the Higher Education Act of 1965 instead.
As Jed Shugerman, a law professor at Boston University Law School and author of The People’s Courts, says to Teen Vogue, President Biden said the pandemic was over in September 2022 just weeks before releasing the debt relief plan, and went on to officially declare the end of the national emergency in April, seven months later. Some proponents argue that mass cancellation should be based on a broad critique of debt-financed higher education, rather than an emergency like the pandemic. But the Supreme Court’s decision to overturn debt relief was also rooted in one other crucial legal argument.
Much of the Court’s reasoning, as outlined in Chief Justice John Roberts’s majority opinion, rests on a legal theory called the “major questions doctrine,” which seeks to limit the ways federal agencies can interpret legislation. When Congress passes laws to be carried out or enforced by federal agencies, it’s not uncommon for them to be open-ended and to use generalized language to account for the possibility of unexpected circumstances in the future in which the law might apply. The major questions doctrine, however, says that whenever an agency enacts a policy that stands to have a major political or economic impact on the country — i.e. a “major question” — Congress needs to have explicitly outlined that permission already. It’s the same theory the Supreme Court used to limit the Environmental Protection Agency’s (EPA) attempt to use the Clean Air Act to fight the climate crisis.
“This is not really about the Court protecting Congress's power because Congress delegated this power to the president in the Higher Education Act,” Shugerman says. “This is really about the Court arrogating power to itself. It's the Court saying, we are the final word on the separation of powers and we're the final word on interpreting statutes, regardless of what Congress has done and regardless of what the president — elected by the nation — has done.”
How likely is it that HEA will work and when will student debtors know for sure?
Some legal experts remain optimistic about the administration’s chances of getting the legal green light using HEA, but Shugerman says that Roberts’s reliance on the major questions doctrine suggests that even HEA might be deemed insufficient legal footing for this Supreme Court, too.
“Basically, the message is Congress is the only body that can enable this major policy and it hasn't done so yet,” Shugerman explains. “And that is not only a barrier to President Biden using the HEROES Act, it's also a pretty clear statement, ironically enough, that the Roberts Court is stating the Biden administration can't use the Higher Education Act of 1965, either.”
And even if HEA does work, he cautions that we’re likely looking at a much longer timeline. Unlike HEA, the HEROES Act doesn’t include a lengthy procedural step called “negotiated rulemaking,” which Shugerman says takes at least a year to complete. In fact, he adds, that’s probably one of the reasons the administration chose that legal route in the first place. Whatever the Department of Education’s new plan entails, it won’t be released until next summer at the earliest, he says, and then it will undoubtedly face lawsuits with months of legal maneuvering attached. That pushes student debt relief into the next administration — and that’s only if Biden is elected to a second term.
“It's not so easy to win reelection and, nevertheless, it would still be easier for Biden to count on winning reelection than getting the new program under the Higher Education Act past the Roberts Court,” says Shugerman.
What’s happening with student loan repayments in the meantime?
Before the Supreme Court’s opinion dropped, the 43.6 million federal student loan debtors holding $1.64 trillion in student debt were in the midst of Biden’s sixth payment pause extension (the ninth since the moratorium began in 2020). On July 14, the administration also announced it would be automatically canceling $39 billion in student loan debt (just over 2% of the total federal student debt burden) for 804,000 debtors, thanks to “fixes” made to existing Income-Driven Repayment (IDR) plans. As it stands now for everyone else, the moratorium and the pause on interest accrual will conclude at the end of August, with student loan bills being issued in September and the first round of due dates coming in October.
In the meantime, the Department of Education is offering a yearlong repayment “on-ramp” for debtors from October 1, 2023, to September 30, 2024. During that period, interest will still accrue on outstanding loans, but debtors who are unable to make monthly payments won’t have those missed bills “considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.”
To encourage debtors into repayment, the Department has also finalized the Saving on a Valuable Education (SAVE) plan, a new IDR plan the White House calls “the most affordable repayment plan ever created.” SAVE was actually proposed as part of the original debt relief plan announced back in November. Under SAVE, monthly payments for undergraduate loans will be calculated at 5% of discretionary income instead of 10%. For debtors who originally took out less than $12,000 in loans, their entire balance will be forgiven after 10 years of payments instead of the 20-year requirement in other IDR plans. The government will also cover or cancel all surplus unpaid monthly interest above monthly payment amounts, as long as debtors make payments on time, even if the monthly payment is $0.
What other avenues exist for borrowers?
The Debt Collective has renewed its call for a debt strike, inviting debtors to join their debtors' union and instructing debtors on how to go “on strike” by reaching “non-payment” without undermining personal financial and credit standing. A group of advocates has also launched Protect Borrowers Action, a national nonprofit building targeted campaigns to unseat 13 key Congressional Republicans in the House who have repeatedly fought against debt relief.