After the Supreme Court struck down President Joe Biden’s mass student loan forgiveness plan, he quickly announced that the administration would move to develop a backup student debt relief program. But the scope and timing of that new initiative remain a bit murky, and borrowers will not receive instant relief.
This week, the Education Department published updated guidance to answer some common questions from student loan borrowers about Biden’s new student loan forgiveness plan. Here’s what we know.
Biden’s Original Student Loan Loan Forgiveness Plan Is Over
The Supreme Court effectively ended Biden’s original one-time student loan forgiveness plan on Friday, when the 6-3 conservative majority ruled that the plan was not authorized by Congress. Biden’s initiative would have cancelled up to $20,000 in federal student loans for over 30 million borrowers, providing $400 billion in unprecedented student debt relief.
To establish the program, the Biden administration had relied on the HEROES Act, a 2003 statute that provides authority to the Education Department to waive or modify federal student loan programs to address the economic impacts of a national emergency. Officials had argued that the plain language of the statute authorizes sweeping student debt relief.
But the Supreme Court disagreed. Applying the controversial “Major Questions Doctrine,” the Court’s conservative majority concluded that the words “waive” or “modify” generally mean minor tweaks to existing programs. The Court found that the administration’s student loan forgiveness plan essentially was an entirely new program, which was not authorized by the statute.
“Under the court’s ruling, the U.S. Department of Education has been prohibited from implementing the Biden-Harris Administration’s one-time debt relief program,” said the Education Department in its updated guidance.
“We believe the Supreme Court got it wrong,” said Education Secretary Miguel Cardona.
Biden Immediately Announces New Student Loan Forgiveness Route
Hours after the Supreme Court’s decision, President Biden announced that he would work to create a new student loan forgiveness plan under a different statute called the Higher Education Act. This federal law includes a provision that authorizes the Education Department to “compromise” or “waive” federal student loan obligations.
Advocates for borrowers have long pointed to this provision as a potentially sound alternative basis to provide student debt relief, and praised the administration for quickly moving forward with a new plan.
“Today, the Supreme Court reminded us that they will stop at nothing to upend the rule of law and rob hard-working people of relief,” said Student Borrower Protection Center Executive Director Mike Pierce in a statement. “Hours later, President Biden refused to let a captured, right-wing Court have the last word and announced plans to cancel student debt using the Higher Education Act. Fast action in the face of such a lawless and brazen decision sends an important signal to families with student debt across the country: President Biden understands the stakes for working families and is willing to deliver.”
Student Loan Forgiveness Through The Higher Education Act
The Biden administration originally chose to establish student debt relief through the HEROES Act because student loan forgiveness could be issued to borrowers quickly. Since the statute provides for emergency relief, it allows the administration to bypass what can be a tedious and lengthy bureaucratic process required in most other situations to establish new federal regulations.
But to create a new student debt relief plan under the Higher Education Act, the administration must enact new regulations through a process called negotiated rulemaking.
“The Secretary has begun a new rulemaking process to consider other ways to provide debt relief to as many working and middle-class borrowers as possible,” says the Education Department guidance. “By law, regulations related to federal financial aid must go through a negotiated rulemaking process that involves extensive public input. They start with public hearings and convenings of non-federal experts to discuss ideas.”
The process involves hearings and a public comment period, during which key stakeholders and individuals can provide information about how they think the new program should function. The first hearing to discuss the rulemaking agenda will be on July 18.
Beyond that, little is known so far about the scope and timeline of the new loan forgiveness program, because the regulations governing the plan have yet to be drafted. “The Department will work to complete and implement the new rules as quickly as possible,” says Department guidance. “The Secretary has directed his staff to explore policy options for debt relief that will help as many people as possible.”
But the process will likely take months. “The rulemaking process takes time, but we are going to work as fast as possible to get this done,” says the department.
What Borrowers Should Know While Waiting For New Information On Student Debt Relief
Unfortunately for borrowers, with mass student loan forgiveness off the table for now while a new program is developed, the student loan pause is ending. A federal spending bill President Biden signed last month prevents him from extending the student loan pause again. Interest will start accruing in September, with the first payments due in October.
On Friday, Biden announced there would be a 12-month transitionary period after the student loan pause ends. During that period, borrowers will not be penalized for missing payments. However, payments will still be due, and interest will start accruing again.
In the meantime, other Biden administration student debt relief initiatives remain intact. This includes Public Service Loan Forgiveness, and the sweeping IDR Account Adjustment initiative, which may start providing student loan forgiveness to borrowers as soon as August.
Further Student Loan Forgiveness Reading
4 Big Student Loan Updates When Payments Resume (And They Resume Soon)
Student Loan Pause Extended? 7 Takeaways On Biden’s Updated Student Debt Relief
6 Key Student Loan Forgiveness And Repayment Dates To Write Down Now
30 Million Borrowers May Face New Problems As Student Loan Pause Ends
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