With 40 million Americans and $400 billion on the line, the Supreme Court struck down President Joe Biden’s proposal to relieve ten- to twenty-thousand dollars worth of student debt per loan holder. However, his administration has quickly supplied several new measures to assist Americans bogged by excessive student loans.
“President Biden will not let Republican elected officials succeed in denying hardworking Americans the relief they need,” read a U.S. Department of Education press release.
Leveraging the Higher Education Act for student debt relief measures
The Department of Education has issued a notice of its plans to initiate a rule-making process utilizing the Secretary of Education’s authority to open an alternative path to debt relief. Title IV of the Higher Education Act of 1965 gives the Secretary the power.
But student loan advocates are concerned about how long the process will take, especially considering that repayments will resume in September, with interest accruing in October.
“According to some of the legal experts we work with, [Biden] has the option to make a preliminary rule that would allow them to start canceling the debt for folks who had their applications approved while they create a final rule through this process,” said Cody Hounanian, executive director at the Student Debt Crisis Center (SDCC), according to The Hill.
Saving on a Valuable Education (SAVE) plan
While the timeline on Biden’s alternative measure to relieve student debt is up in the air, the Department of Education is set to finalize a new affordable repayment plan, which the Department touts as the most affordable ever created. Specifically, the amount borrowers repay monthly will be reduced to just 5% of their discretionary income. Additionally, the feds will forgive student loans after 10 years of payments instead of 20 years, with original loan balances of $12,000 or less.
The Department asserts that this will save borrowers more than $1,000 annually. The press release indicated that only undergraduate students would be part of this plan.
“On ramp” repayment program
While interest accrual will begin again in October, the Department will provide borrowers a 12-month grace period for their accounts not to be forwarded to credit bureaus, placed in default, or referred to debt collection agencies.
Still, the administration is facing backlash from both sides of the aisle. Specifically, Democrats, such as New York Rep. Alexandria Ocasio-Cortez, criticize the measure for allowing interest payments to resume in the first place. Republicans, such as Workforce Committee Chairwoman Virginia Foxx, said the pause on consequences for missing payments is a “violation of the debt ceiling agreement,” according to The Hill.
A silver lining for student debt relief
Despite the Supreme Court striking down Biden’s student debt proposal and criticism he’s faced for his contingency plans, his administration has made the Public Service Loan Forgiveness program more accessible for Americans. Consequently, they have already canceled a record $66 billion in student loan debt for nearly 2.2 million borrowers, according to CNN.