Two weeks after the U.S. Supreme Court struck down President Joe Biden's sweeping student loan forgiveness plan, the White House announced a more limited debt relief plan that will go forward as the administration seeks to retool and revive the initial broader policy.
The plan announced July 14 by the White House would affect a narrower category of borrowers — those the administration says have suffered from inaccurate accounting of their past payments. This plan would forgive $39 billion in debts accumulated by some 804,000 borrowers, the administration said. By contrast, the plan the justices struck down would have eliminated $400 billion in student loans for tens of millions of borrowers.
"I have long said that college should be a ticket to the middle class — not a burden that weighs down on families for decades," Biden said in a statement. "My administration is delivering on that commitment."
As a presidential candidate, Biden promised to forgive undergraduate tuition-related federal student debt for borrowers earning up to $125,000.
He announced a broad plan in August that would waive $10,000 of federal student loan debt for people earning less than $125,000 or couples earning less than $250,000. The plan extended an additional $10,000 in relief to those who met the earning requirements and had received federal Pell Grants, which are awarded to low-income Americans.
But opponents filed suit to block this effort, and on June 30, a 6-3 Supreme Court majority struck down Biden's plan for broad relief. The court said Biden's justification for the move — a post-9/11 law called the HEROES Act — provided an insufficient legal basis.
Biden said he would pursue a new approach for enacting the more sweeping forgiveness he'd promised, based on provisions of the Higher Education Act that allows the Education Department to "compromise, waive or release loans under certain circumstances."
In the interim, Biden proposed the more limited plan to aid borrowers whose payment records had been misrecorded to their detriment. These included mistakes related to uncounted payments and incomplete or misleading guidance about how to comply with loan procedures.
The Education Department said the loan forgiveness plan "would ensure all borrowers have an accurate count of the number of monthly payments that qualify toward forgiveness under income-driven repayment" plans.
Accounting mistakes for these plans and questionable guidance by servicers meant that qualifying payments by borrowers were not recorded, lengthening the time their loans would need to be paid off.
"The Biden administration has retroactively counted the number of qualifying payments, making some adjustments when it is not possible to precisely count the number of qualifying payments," said Mark Kantrowitz, an expert on student debt and author of the book "How to Appeal for More College Financial Aid." The administration is also making other adjustments, he said, such as those affecting the accounting of partial and late payments.
It's possible this more limited plan could be blocked in court, but Kantrowitz said "such a lawsuit is unlikely to be successful, since Congress previously authorized this forgiveness."
Even though Biden's new plan was announced soon after the Supreme Court decision, the two efforts actually run in parallel. Student loan experts said they don't expect the new, narrow plan to face the same types of legal hurdles that Biden's broad forgiveness plan did.
The new plan follows in the footsteps of more targeted loan forgiveness successfully pursued in the past by the Biden administration, including $45 billion in forgiveness to 653,800 public servants through the Public Service Loan Forgiveness program; $5 billion for 491,000 borrowers who have a permanent disability, and $22 billion for about 1.3 million borrowers who were cheated by their schools or saw their schools close.
The new proposal "is really part of that group of policies," said Sarah Sattelmeyer, project director for education, opportunity, and mobility at New America, a Washington, D.C.,-based think tank.
Biden's original, more sweeping plan has been rejected by the courts, but he's pledged to try again with a new approach. Meanwhile, continued progress on more targeted loan relief efforts, including the one for borrowers whose qualifying payments were missed, move this promise to In the Works.