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Biden reveals ‘new path’ to student debt relief after Supreme Court strikes down president’s plan

The president slammed Republicans for having ‘snatched away the hope’ for student loan borrowers

Andrew Feinberg,Alex Woodward
Sunday 02 July 2023 07:50 BST
Biden says Supreme Court 'misinterpreted the constitution' on student loan debt ruling

After the US Supreme Court struck down his administration’s plan to cancel federal student loan debts for millions of Americans, President Joe Biden has unveiled a “new path” for relief, one that he assured is “legally sound” but will “take longer”.

In remarks from the White House on 30 June, the president hit out at Republican state officials and legislators who supported the lawsuit which enabled the nation’s highest court to strike down his student debt forgiveness initiative, accusing many of them of hypocrisy for taking money from pandemic-era relief programs while opposing relatively meager relief for student loan borrowers.

“Some of the same elected Republicans, members of Congress who strongly opposed relief for students, got hundreds of thousands of dollars themselves ... several members of Congress got over a million dollars — all those loans are forgiven,” he said.

“The hypocrisy is stunning,” he said.

Accompanied by Secretary of Education Miguel Cardona, Mr Biden opened his remarks by acknowledging that there are likely “millions of Americans” who now “feel disappointed and discouraged or even a little bit angry about the court’s decision today on student debt”.

“And I must admit, I do too,” he said.

Still, Mr Biden reminded Americans that his administration has previously taken actions to reform student loan repayment programs to make them easier to access, and to keep borrowers from spending more than five per cent of disposable income on monthly repayments, and to strengthen loan forgiveness options for borrowers who take public service jobs.

The president has directed Mr Cardona to “find a new way” to grant similar loan relief “as fast as we can” in a way that is “consistent” with the high court’s decision.

On Friday, the Education Department issued the first step in a regulatory process to rely on the Higher Education Act of 1965 to cancel student debt.

In the meantime, Mr Biden said his administration is creating a temporary year-long “on-ramp repayment programme” under which conditions will remain largely the same as they have during the three-year pandemic-era pause in payments which is set to expire this fall.

The department’s 12-month “on ramp” to begin repayments, from 1 October through 30 September, aims to prevent borrowers who miss repayments in that time period from delinquency, credit issues, default and referral to debt collection agencies.

“During this period if you can pay your monthly bills you should, but if you cannot, if you miss payments, this on-ramp temporarily removes the threat of default,” he said.

“Today’s decision closed one path. Now we’re going to pursue another — I’m never gonna stop fighting,” the president continued, adding that he will use “every tool” at his disposal to get Americans the student debt relief they need so they can “reach [their] dreams”.

“It’s good for the economy. It’s good for the country. It’s gonna be good for you,” he said.

Asked by reporters whether he’d given borrowers false hope by initiating the now-doomed forgiveness plan last year, Mr Biden angrily chided the GOP for having acted to take away the path to debt relief for millions.

“I didn’t give any false hope. The question was whether or not I would do even more than was requested. What I did I felt was appropriate and was able to be done and would get done. I didn’t give borrowers false hope. But the Republicans snatched away the hope that they were given and it’s real, real hope,” he said.

The Supreme Court’s 6-3 ruling from the conservative majority argues that the president does not have the authority to implement sweeping relief, and that Congress never authorised the administration to do so.

Under the plan unveiled by the Biden administration last year, millions of people who took out federally backed student loans would be eligible for up to $20,000 in relief.

Borrowers earning up to $125,000, or $250,000 for married couples, would be eligible for up to $10,000 of their federal student loans to be wiped out. Those borrowers would be eligible to receive up to $20,000 in relief if they received Pell Grants.

Roughly 43 million federal student loan borrowers would be eligible for that relief, including 20 million people who stand to have their debts cancelled completely, according to the White House.

Lawyers for the Biden administration contended that he has the authority to broadly cancel student loan debt under the Higher Education Relief Opportunities for Students Act of 2003, which allows the secretary of education to waive or modify loan provisions following a national emergency – in this case, Covid-19.

Since March 2020, with congressional passage of the Cares Act, monthly payments on student loan debt have been frozen with interest rates set at zero per cent.

That pandemic-era moratorium, first enacted under Donald Trump and extended several times, was paused a final time late last year.

Over the last decade, the student loan debt crisis has exploded to a balance of nearly $2 trillion, most of which is wrapped up in federal loans.

The amount of debt taken out to support student loans for higher education costs has surged alongside growing tuition costs, increased private university enrollment, stagnant wages and GOP-led governments stripping investments in higher education and aid, putting the burden of college costs largely on students and their families.

A short time later, a visibly angry Mr Cardona told reporters in the White House briefing room that the court’s decision represented a “setback” for the US “in terms of providing equity and access in higher education” by blocking the president’s debt relief plan, which he said would have provided 90 per cent of its benefits to borrowers who make less than $75,000 per year.

“We’re not talking about the millionaires who have benefited from the billions in tax giveaways a few years ago. We’re talking about low and middle-income families recovering from the worst pandemic in a century,” he said.

“I strongly disagree with the court’s decision here. So today, I want to assure our students or borrowers and families across America — our fight is not over,” he said.

Mr Cardona said he, Mr Biden and Vice President Kamala Harris have “put borrowers first from day one,” and vowed that they would “refuse to go back to the way things were before the pandemic, when a million borrowers defaulted each year and faced devastating financial consequences”

Like Mr Biden, the education secretary slammed GOP officials for having accepted aid for their own businesses while opposing student debt relief, and he slammed the Supreme Court for having stepped in to stop the relief initiative.

“Today, the court substituted itself for Congress. It’s outrageous to me that Republicans in Congress and state offices fought so hard against a programme that would have helped millions of their own constituents,” he said.

Mr Cardona called out several GOP figures, including Oklahoma Senator MarkWayne Mullen, who he said had been granted more than $1.4 million in Paycheck Protection Programme loans that were subsequently forgiven — while representing 489,000 borrowers whose loans won’t see any forgiveness under the now-defunct Biden administration programme.

He also named Kentucky Representative Brett Guthrie and noted that Mr Guthrie had taken $4.4 million in forgiven PPP loans while opposing student debt relief for the 90,000 eligible borrowers in his district.

The education secretary also pointed out that Georgia Republican Marjorie Taylor Greene had received $180,000 in forgiven PPP loans while representing 91,800 borrowers who won’t see any relief thanks to the lawsuit her party supported.

“They had no problem handing trillion dollar tax cuts to big corporations and the super wealthy and many had no problems accepting millions of dollars in forgiven pandemic loans,” he said.

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