A Brief History on Student Loan Debt

The cost of attending four-year private and public colleges have nearly tripled since 1980, even after accounting for inflation. This creates a burden on America’s middle class as the cumulative federal student loan debt reached $1.6 trillion and continues to rise as more than 45 million borrowers are forced to make high monthly payments. Understanding this, President Biden made a campaign promise in 2020 that he would forgive public colleges and universities student debt loans for low-income and middle class students.

Biden Administration’s Student Debt Relief Plan

Following up on his campaign promise, President Biden, in August of 2022, delivered a three-part plan that promised to cancel up to $20,000 of student debt for Pell Grant recipients and $10,000 for non-Pell Grant recipients. The three-part plan worked to provide low- and middle-income families with debt relief for up to 40 million people.

Legal Issues with Student Debt Relief Plan

However, Biden’s one-time student debt relief program was ruled upon by the Supreme Court in 2023 after the Biden v. Nebraska rose through the courts. In the Biden v. Nebraska case, six states came together and claimed that the forgiveness program violated the separation of powers and Administrative Procedure Act. These six states — Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina — argued that debt cancellation would negatively affect financial stability. Specifically, lenders’ financial stability is affected by their profit from student loan repayments and interest. Therefore, student debt relief harms the broader scope of the financial system. The petitioner, Biden, argued that under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) the Secretary of Education was given the authority to forgive student loans. Ultimately, the Supreme Court ruled to reject Biden’s plan by claiming that the Biden-Harris Administration overstepped its authority and that the HEROES Act does not grant the Secretary of Education authority to waive student loans. 

Plan B for Student Debt Relief

Despite this Supreme Court ruling, President Biden attempted to deliver on a key campaign promise and drafted another proposal less than a year after the Supreme Court ruling. On April 8th, 2024 in Wisconsin, the Biden-Harris Administration announced that there are new plans to provide debt relief to over 30 million Americans. Biden’s major push to fulfill the student debt campaign promise comes from the belief that following through with this plan will aid his standing amongst younger voters. 

With Wisconsin being seen as a toss up state in the upcoming presidential election, Biden campaigned hard to detail the new student debt initiative. It is reported by CNBC that around 70% of Gen Z voters agree that student debt cancellation is important to them in the 2024 election. One Gen Z student who is about to enter college wrote that “As a lower middle class American planning on attending college, I have found myself extremely stressed about the idea of having to go into debt to better my education”, showing how important student debt relief is to young voters.

Biden’s latest proposal takes on a more targeted approach by narrowing aid to specific groups of borrowers. These specific groups may include those experiencing financial hardship as well as those who have been repaying student debt for decades. Diving deeper into the differences between his initial student debt relief plan and the latest one, the White House states that Biden’s Plan B has a more limited scope. Even though the latest proposal is more tailored, the new student debt relief plan can still forgive up to an estimate of 30 million Americans. The paperwork filed by the Education Department for Plan B listed four categories of individuals who can gain relief. The first category allows borrowers who owe more than they originally borrowed to experience relief by eliminating up to $20,000 in interest. Those with annual incomes that are below $120,000 will be enrolled in income-driven repayment plans and will have all their interest erased. Additionally, individuals who have been paying undergraduate student loans for at least 20 years and those paying graduate loans at least 25 years will be a part of the debt relief group of borrowers. Individuals who attended colleges or programs with low financial value, earnings equal or below a high school diploma, and borrowers who are eligible for other forgiveness programs at the federal level would have their loans erased as well. In order to develop this proposal, several hearings under the federal rules process occurred through consulting outside experts, such as students, college officials, state officials, borrowers advocates, and loan services. In order to allow this new plan to legally stand strong, the White House argues the Higher Education Act rather than HEROES Act grants the Secretary of Education the power to waive student loans in specific cases, says Time Magazine. This new legal approach was pursued by the Department of Education who developed an alternative path for debt relief through negotiated rulemaking under the Higher Education Act.

Through more than 24 executive actions, the Biden-Harris Administration already approved $146 billion for the student debt relief plan which cancels the full amount for 4 million Americans as well as make millions of student loan payments easier through the Saving on a Valuable Education (SAVE) plan and expansion of the existing income-driven repayment (IDR) plans. 

This approval included fixing Public Service Loan Forgiveness as well as Income-Driven Repayment plans in order to give borrowers relief. Furthermore, this plan launches the SAVE plan, which is the most affordable student loan repayment program yet. Through SAVE, undergraduate loans are cut in half and unpaid interest that causes debt to grow is eliminated which helps millions’ of borrowers monthly payments go down to $0. To date, nearly 8 million borrowers have enrolled in SAVE, with 4.5 million paying a monthly payment of $0 and 1 million more paying a monthly payment below $100. Additionally, the Pell Grants had its largest increase in a decade, resulting in even more debt relief. Student debt relief efforts are helping millions by relieving individuals of having to choose between paying off loans and their livelihood. One such individual is a single mother who noted “My electricity was regularly shut off; I was evicted at one point,” and that “Biden’s forgiveness program would’ve felt like a ‘clean slate.” The Biden-Harris Administration has been moving towards fulfilling Biden’s 2020 campaign promise by holding colleges accountable for causing millions of borrowers to have significant debt without job securement. 

Federal Courts Work to Block Biden Administration Again 

CBS News reports that on June 25th, 2024, Biden’s new plan for student debt relief was again targeted by the Republican party. Two federal courts blocked his administration from forgiving debt and lowering monthly payments by arguing, once again, that the Biden administration was overstepping its authority and creating financial harm to lenders. Through judges in Missouri and Kansas ruling in favor of these arguments, aspects of the SAVE plan were halted. Specifically, the issued injunctions prevented the Biden-Harris Administration from lowering monthly payments from 10% to 5% of borrowers’ discretionary income and paused loan forgiveness until a final decision was reached. 

Biden’s student loan repayment plan resumed on July 1st, 2024 when the 10th Circuit Court of Appeals ruling granted the Biden Administration request to pause the decision made in the lower courts and allow them to continue with the SAVE plan. This ruling was a big win for Biden as the SAVE plan was one of the biggest accomplishments of his term. While the injunction from the federal judge in Kansas was quickly appealed by the Department of Justice and led to the appeals court allowing Biden to continue with lowering the monthly payments of borrowers, student loan forgiveness through SAVE is still on hold due to the second injunction by Missouri’s federal judge. This injunction resulted in the Biden administration not being able to forgive individual student debt under the SAVE plan. The Washington Post notes that the Department of Justice is expected to appeal Missouri’s decision soon. Many Republican-led states are arguing that the SAVE plan is Biden’s roundabout attempt to forgive student debt after the Supreme Court decision of Biden v. Nebraska struck his plan down last year. Despite the opposing parties’ best efforts, President Biden continues to fight for student debt relief. 

Links for Further Reading:

1. What to know about Biden’s latest attempt at student loan cancellation
2. Biden-Harris Administration Announces Additional $7.7 Billion in Approved Student Debt Relief for 160,000 Borrowers
3. President Biden’s Student Debt Relief Plan
4. The Biden-Harris Administration’s Student Debt Relief Plan Explained
5. President Joe Biden Outlines New Plans to Deliver Student Debt Relief to Over 30 Million Americans Under the Biden-⁠Harris Administration
6. Supreme Court strikes down Biden student-loan forgiveness program
7. Two courts just blocked parts of Biden’s SAVE student loan repayment plan. Here’s what to know.
8. 2020 presidential candidates on student loan debt
9. Biden administration will soon roll out a sweeping new student loan forgiveness plan
10. Biden student loan repayment plan to resume amid legal challenges, federal appeals court rules