Biden unveils student loan forgiveness plan post SCOTUS ruling.

President Biden’s Response to Student Loan Forgiveness Decision

President Joe Biden wasted no time in addressing the recent Supreme Court decision that invalidated his plan to forgive many student loans. In a televised statement on June 30, just hours after the court ruling, Biden announced new measures to provide relief to borrowers.

Biden’s original loan-forgiveness plan, unveiled in August 2022, faced criticism from some who believed it was a political move to benefit Democratic candidates in the midterm election. Others argued that it was unfair to those who had already repaid their college loans and an overreach of congressional authority.

The plan, which could cost up to $1 trillion according to estimates, was ruled to be in violation of the HEROES Act by the Supreme Court.

Plan 1.0: What Could Have Been

The Biden plan aimed to provide debt relief for millions of borrowers, offering up to $10,000 in forgiveness for many and up to $20,000 for those who had received a Pell Grant. However, despite 26 million applications and 16 million approvals, the plan was never implemented.

With loan payments set to resume in October, critics argue that many Americans already facing financial hardship will be further burdened.

Johnson Tyler, a consumer attorney at Legal Services NYC, expressed concern for borrowers who attended for-profit schools or had to drop out due to family emergencies. He warned of the long-lasting consequences, including reduced Social Security benefits and the inability to repay due to high interest rates and complex repayment structures.

Plan 2.0: A New Path

Biden assured the public that he had identified a “new path” in line with the Supreme Court ruling. U.S. Secretary of Education Miguel Cardona would have the authority to compromise, waive, or release loans under certain circumstances.

While details of the plan were not provided, Biden emphasized its legality based on the Higher Education Act. However, he acknowledged that implementation would take time.

Secretary Cardona, speaking at a White House press conference, promised to include as many borrowers as possible and implement the plan quickly, but did not offer specific details.

To ease the transition back to loan repayment, Biden introduced an “on-ramp repayment program.” He encouraged borrowers to make payments as scheduled but assured that the Department of Education would not report missed payments to credit agencies, temporarily removing the threat of default or credit damage.