If Student Loan Cancellation Fails, Biden White House Has No Alternative in Place — What Others Are Proposing

Joe Biden at National Action Network's MLK Jr. Day Breakfast in Washington - 16 Jan 2023
Michael Brochstein / SOPA Images / Shutterstock.com

While the U.S. Supreme Court weighs the legal merits of the Biden administration’s federal student loan forgiveness plan, borrowers might wonder what alternative plans are in place in case that one is struck down. The short answer is “none” — at least in terms of formal alternatives ready to hit the ground running.

The White House has been so sure that President Joe Biden’s forgiveness plan will survive that it is not considering a formal backup plan, Business Insider reported earlier this year. That’s the case even though the original plan has been stifled by legal challenges almost since the day it was announced last August.

Currently, the Supreme Court is weighing lawsuits that call the plan “unconstitutional” and allege that the HEROES Act — enacted in the wake of the Sept. 11 attacks — does not provide authority to grant relief from student loans. Six Republican-led states claim the enactment of Biden’s program would harm them financially.

But administration officials — who have tied the COVID-19 pandemic to the HEROES Act to justify canceled student debt — are confident enough in the legal merits of the loan-forgiveness plan that they don’t have an alternative in place should SCOTUS rule against them.

“We feel confident in our authority under the HEROES Act to take the action that we have taken,” Bharat Ramamurti, deputy director of the National Economic Council, said in a press conference several weeks ago. “Obviously, the Supreme Court will weigh in on that soon. But we are not deliberating or considering any other kind of alternative approach. We’re fully committed to the approach that the Secretary of Education used in this case, and we’re confident in our legal authority.”

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As previously reported by GOBankingRates, the Biden administration does have options at its disposal in the event that the forgiveness plan is struck down. But none of these represent a formal backup plan.

For example, the administration could extend the student loan pause yet again, which would mark the eighth time it has been extended since it first went into effect in March 2020. The most recent extension is set to expire 60 days after either June 30 or whenever the Supreme Court decides on the loan forgiveness plan.

The White House also could turn its focus to other forgiveness options, such as income-driven repayment plans (IDRs). In January, the administration proposed new regulations to reduce federal student loan payments — especially for lower income and middle-income borrowers.

Biden might also decide to reissue the loan forgiveness plan under a different legal authority. Borrower advocates and some student loan legal scholars have encouraged the administration to restart the program under a provision of the Higher Education Act (HEA), which also governs the federal student loan system.

The HEA gives broad authority to the U.S. Secretary of Education to “compromise, waive, or release any right, title, claim, lien, or demand” associated with federal student loans. One advantage of this option is that its legal authority doesn’t rely on a national emergency such as a pandemic.

As Business Insider noted, Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Elizabeth Warren (D-Mass.) pushed for taking the HEA a couple of years ago. But the White House seems to be betting heavy on the HEROES Act.

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“We’re confident the (Education) Department has the authority to ensure the financial impacts of the pandemic do not set borrowers up for failure when payments resume,” Jordan Matsudaira, deputy under secretary and chief economist at the Education Department, told reporters recently. “And when we hopefully prevail, the Biden-Harris team will do everything it takes to make sure every borrower who qualifies for debt relief is able to get it.”

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