Just hours after the Supreme Court of the United States (SCOTUS) struck down President Joe Biden’s plan announced last August, to forgive US$430 million in student debt held by some 40 million Americans, the president spoke to the nation explaining his plans going forward.
The six Republican-appointed justices ruled that the centrepiece of Biden’s plan, forgiving US$10,000 for people earning less than US$125,000 (US$250,000 for married couples) and up to US$20,000 for former Pell Grant recipients, the nation’s poorest students, was unconstitutional.
The Higher Education Relief Opportunities for Students (HEROES) Act did not give the president the power to extinguish student debt, the court said.
However, the SCOTUS left in place the Public Service Loan Forgiveness (PSLF) program and the Income-Driven Repayment (IDR) Plan.
Under the PSLF, individuals who work in the public service and who have been making loan repayments for 10 years, will see the remainder of their student loan debt erased. The IDR Plan caps payments at, typically, 5% for individuals whose gross income is greater than US$33,000; if an individual’s income is less, they make no payments.
The president began by slamming the ‘hypocrisy’ of the Republicans in Congress who supported the Paycheck Protection Program, “which was designed to help business owners who lost money because of the pandemic. It was a worthy program.
“But let’s be clear, some of the same elected Republican members of Congress [eg congressional firebrands Matt Gaetz, Marjorie Taylor Greene and Lauren Boebert] who strongly opposed aid to students got hundreds of thousands of dollars themselves because of the businesses they were able to keep open.
“Several members of Congress got over a million dollars of all those loans forgiven,” he said.
After saying that he “believes that the court’s decision to strike down my student debt relief program was mistaken and wrong” and promising that he will “not stop fighting to deliver borrowers what they need, particularly those at the bottom end of the economic scale”, Biden explained that Secretary of Education Miguel Cardona had already taken the first steps toward re-establishing the plan under the Higher Education Act.
“This new path is legally sound. It’s going to take longer, and in my view is the best path that remains to provide as many borrowers as possible with debt relief,” the president said.
For the tens of millions of borrowers who in October, when the last pause in collections caused by the COVID crisis expires, would find their monthly budgets stretched by hundreds of dollars in payments, Biden announced a “temporary 12 month . . . on ramp”, before payments must commence; during this period “bills will not go out”.
To remove the threat of default during this period, the Department of Education “won’t refer borrowers who missed payments to credit agencies for 12 months to give him a chance to get back up and running”.
Although Dr Alí Bustamante, deputy director of the New York-based Roosevelt Institute’s Worker Power and Economic Security Program, welcomed Biden’s announcement, he is expecting legal pushback by the opponents of Biden’s debt relief plan.
“In terms of whether the Supreme Court would find for refounding the debt relief plan under the Higher Education Act, I think that the obstacle is still very much the same,” he said.
“The main issue is hanging on the phrase in the Act ‘comprise, waive, release loans’ under certain circumstances. Accordingly, they could use the same reasoning they did in this case to strike down Biden’s plan even when founded under the Higher Education Act.”
However, after noting that there are more than 40 million people affected by the Supreme Court’s decision, Bustamante also said that he hopes Biden rallies his supporters and campaigns on the issue in the 2024 election.