Supreme Court Said No, But Biden Found Another Way: The Ongoing Saga of Student Debt Cancellation

President Biden unveiled a new student debt relief initiative on Wednesday following the Supreme Court’s rejection of his administration’s previous, more expansive proposal. This recent move is part of a series of measures that leverage existing government programs to provide debt relief to specific groups of borrowers. This is distinct from the administration’s earlier effort to forgive up to $20,000 of student debt for individuals earning under $125,000 annually, which was halted by the Supreme Court in June.

During his announcement, Biden emphasized the urgency of his mission, stating his aim to provide student debt relief “to as many as we can, as fast as we can.” This recent declaration will cancel $9 billion in student loans for 125,000 individuals. The relief, while significant, represents only a fraction of the over 40 million Americans burdened with student debt. The latest round of cancellations focuses on those enrolled in public service, income-driven repayment plans, and borrowers with disabilities.

This follows a July decision that cleared the debts of 800,000 lower-income borrowers through a one-off adjustment to their repayment plans.
This latest wave of debt relief coincides with the resumption of loan repayments, put on hold since March 2020 due to the Covid-19 outbreak.

Since his inauguration, Biden has revamped existing programs that offer debt relief in exchange for extended, reduced payments. The administration has criticized the prior execution of these longstanding programs, noting that many eligible borrowers did not receive the intended benefits.

However, Republican leaders contend that the administration lacks the legal mandate for such widespread adjustments. Sen. Bill Cassidy of Louisiana remarked, “This is part of a pattern of the Biden administration illegally acting without congressional approval, costing the American people hundreds of billions of dollars.”

The administration’s incremental approach to debt relief has led to the cancellation of $127 billion in student loans. This is roughly a third of the cost of the previously proposed mass-cancellation initiative.
Additionally, borrowers have saved a substantial amount during the loan payment and interest freeze that lasted over three years, starting with the pandemic’s onset.

The Education Department revealed that about half of the beneficiaries from Wednesday’s announcement had been making payments under income-driven plans for two decades or more. They were not able to receive the relief they were expecting due to administrative oversight. These plans typically base monthly payments on family size and income, forgiving any outstanding amounts after 20 or 25 years. The administration has enhanced these plans by reducing required payments and offering additional benefits to those with minimal debts.

In a separate move, the Education Department is revisiting the idea of widespread debt relief through a more defined regulatory approach. Department hearings will involve stakeholders, including borrowers and loan service providers. This initiative is also anticipated to face legal challenges.