Just hours after the Supreme Court threw out the student loan forgiveness plan, Joe Biden has announced a new plan is in the works to get around the ruling.
The Supreme Court ruled 6-3 on Friday that Biden’s proposal for student debt forgiveness was unconstitutional.
“I believe the court’s decision to strike down my student debt relief program today was a mistake, was wrong,” Biden said after the ruling.
“I’m not going to stop fighting to deliver borrowers what they need, particularly those at the bottom end of the economic scale,” he said.
“So we need to find a new way. And we’re moving as fast as we can.”
“Today’s decision has closed one path; now we’re going to pursue another,” Biden said.
Last year, Biden called for student loan forgiveness relief of up to $20,000 for those who met specific qualifications.
According to documents released Friday, Plan B is still on the drawing board.
“The Secretary of Education initiated a rulemaking process aimed at opening an alternative path to debt relief for as many working and middle-class borrowers as possible, using the Secretary’s authority under the Higher Education Act,” a White House fact sheet said.
The 1965 law granted the education secretary authority to “compromise, waive or release” student loans.
Former Trump official Michael Brickman said the process for using the law would take about a year, AP reports.
A 2021 memo from a former education lawyer in the Obama administration, Charlie Rose, said, “The more persuasive analyses tend to support the conclusion that the Executive Branch likely does not have the unilateral authority to engage in mass student debt cancellation.”
The memo added that the education secretary’s authority is “limited to case-by-case review and, in some cases, only to nonperforming loans.”
“The Supreme Court has told them no, and yet they’re undeterred,” Brickman said.
“I’m sure there’s a population out there that really admires that. But at some point, the Constitution is the Constitution, and you have to just kind of accept that.”
The White House fact sheet said Plan B has two other pieces.
“The Department of Education … finalized the most affordable repayment plan ever created, ensuring that borrowers will be able to take advantage of this plan this summer — before loan payments are due,” it said.
“Many borrowers will not have to make monthly payments under this plan. Those that do will save more than $1,000 a year,” the fact sheet said, noting that “no borrower earning under 225% of the federal poverty level — about the annual equivalent of a $15 minimum wage for a single borrower — will have to make a monthly payment under this plan.”
“All student borrowers in repayment will be eligible to enroll in the SAVE plan,” it said, referring to the Saving on a Valuable Education plan. “They will be able to enroll later this summer before any monthly payments are due.”
The fact sheet said the Education Department “is instituting a 12-month ‘on-ramp’ to repayment, running from October 1, 2023, to September 30, 2024, so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.”
Caleb Kruckenberg warned in an Op-Ed Monday in the New York Post that the administration’s alternative plan is even worse than the original one.
Kruckenberg said an “income-driven repayment” rule being developed “proposes to dramatically reduce the monthly payments of most borrowers, with millions looking at payments of $0, while also reducing the time to forgiveness to as short as 10 years.”
“In other words, while styled as a rule that simply tinkers with the details of existing income-based repayment programs, it effectively does the same work as the cancellation effort: It writes off the debts of millions of college-educated borrowers. And it does so permanently — applying to future borrowers,” he wrote.
Kruckenberg wrote that the rule’s estimated cost is at least $138 billion.
“The Penn Wharton Budget Model estimated that the actual program costs between $333 billion and $361 billion over 10 years. Estimates that account for tuition inflation and future borrowing costs put government expenditures as high as $1 trillion,” he said.
“[I]f the Education Department truly has the power to set any terms for repayment it sees fit, even if it means spending a trillion dollars of taxpayer money, then Congress has unlawfully given away its legislative power and allowed spending without proper appropriations,” Kruckenberg wrote.
“As we celebrate the death of formal debt cancellation and a win for checks and balances, we need to get ready for an even more critical fight over IDR,” he wrote.
“Without judicial intervention, not only is the soundness of the entire student-loan system in jeopardy, but the very structure of the Constitution is, once again, under attack.”