Biden reveals Plan B for student debt forgiveness

The Supreme Court on Friday dealt a fatal blow to President Joe Biden’s plan to cancel student debt for tens of millions of Americans.

But Biden student debt relief isn’t dead yet.

Just hours after the court’s conservative majority rejected his loan forgiveness program as a drastic overreach of executive authority, Biden moved swiftly to resuscitate his efforts to cancel debt by invoking a different legal authority.

“Today’s decision has closed one path,” he said. “Now we’re going to pursue another.”

While vowing to abide by the court’s ruling, Biden struck a defiant tone, saying he wouldn’t be deterred from delivering on a key policy priority that progressives have long sought, and many Democrats say is important to animate their voters.

“I’m not going to stop fighting to deliver borrowers what they need, particularly those at the bottom end of the economic scale,” he said.

But Biden’s second attempt will face a range of major challenges, both practical and legal, as he embarks on what’s going to be a lengthy regulatory process that’s likely to stretch well into next year ahead of the presidential election.

For starters, the White House is barreling toward a deadline this fall as it prepares to resume collecting monthly payments from tens of millions of borrowers who have had their debt frozen since March 2020.

Education Secretary Miguel Cardona announced Friday that student loan repayment would continue as planned this fall. But he said the administration was taking new steps to ease the resumption of payments, which will include the tens of millions of Americans who were promised relief under the now-defunct program.

The Education Department said it would create an “on-ramp” 12-month transition period in which borrowers won’t get dinged on their credit reports for missing payments, though interest will continue to accrue. Department officials had earlier this month told loan servicers to develop an initial 90-day period of what they internally call a “safety net” period and to be prepared for subsequent extensions.

The administration also announced their final new income-driven repayment plan that’s aimed at lowering monthly payments for borrowers, which Education Secretary Miguel Cardona called “the most affordable repayment plan in history.”

Biden administration officials acknowledged Friday that their Plan B option — the Higher Education Act path — would involve far more bureaucratic hoops and regulatory minutia than the administration’s first plan, which was quickly implemented once Biden announced it last August.

“This new path is legally sound,” Biden said. “It’s going to take longer, but, in my view, it’s the best path that remains to providing for as many borrowers as possible with debt relief.

To start, the Education Department will hold public hearings and convene a negotiated rulemaking panel that will debate and discuss potential options for canceling student debt.

White House officials said Friday they didn’t yet have more details about how the new program would be structured, nor did they say precisely when it might be available.

“It’s going to be months,” said Bharat Ramamurti, deputy director for the National Economic Council. “We are aiming to do it as quickly as possible.”

But major legal obstacles also lie ahead. Some legal observers viewed the 6-3 decision on Friday as sharply limiting the administration’s options.

Jed Shugerman, a professor of law at Boston University, who supports cancelling student debt, said he thought the breadth of Friday’s ruling foreclosed the possibility of Biden using the Higher Education Act to develop another sweeping debt cancellation program.

The majority decision by Chief Justice John Roberts “is written in a very broad and aggressive way for limited agency power,” he said, saying the court expressed new, more expansive skepticism of executive branch policies under the “major questions doctrine.”

Shugerman said he viewed Biden’s options as limited to canceling student debt on a case-by-case basis under existing federal regulations governing cancellation — not creating new ones.

“It's either got to be new legislation, or it's got to be old regulations,” Shugerman said of the Biden administration’s options for moving forward with debt cancellation. “The Roberts Court is not going to allow new regulations or new statutory interpretations from how I'm reading what they did today.”

Biden administration officials have been preparing for months for the possibility — which seemed likely after oral arguments in February — that the conservative majority on the Supreme Court would reject its student debt relief plan.

But officials have privately weighed backup options even as they’ve touted publicly their confidence in their original legal rationale. Indeed, the Education Department’s regulatory notice describing the new Higher Education Act plan was finalized Thursday night before the court’s decision was announced, according to the data associated with the document.

Progressive lawmakers and advocates for student debt relief have for months said that the Biden administration should swiftly switch to a new legal rationale if its student debt cancellation plan using emergency powers tied to the Covid-19 pandemic were to go down.

Advocates for student debt relief, after meeting with White House chief of staff Jeff Zients in May, sent a detailed legal memorandum for the administration to move quickly on canceling debt if the court strikes down the program.

In the legal memo, which was obtained by POLITICO, the student debt relief advocates propose a wide range of options for the administration.

They include ways to rely on existing Education Department rules under the Higher Education Act as well as the Federal Claims Collections Standards to deliver on debt cancellation more quickly than the traditional rulemaking process. Other options in the memo include issuing interim final rules and waiving some of the typical bureaucratic obstacles to enacting new regulations.

The calls from the left for Biden to swiftly switch to a plan B for canceling student debt grew louder and more pointed in the hours after the court’s ruling on Friday.

“Despite this legally unsound Supreme Court decision, the President has the clear authority under the Higher Education Act of 1965 to cancel student debt,” Sen. Bernie Sanders (I-Vt.) said in a statement. “He must use this authority immediately.”

“President Biden and Secretary Cardona have got to deliver relief to the coalition that delivered this White House,” said Rep. Ayanna Pressley (D-Mass.), who has negotiated student debt relief with the White House. “A promise is a promise.”

But some progressives were already saying that the administration didn’t go far enough after Biden's first remarks on his Plan B strategy on Friday.

“POTUS must invoke HEA to pause interest & collections until the debt is forgiven,” Rep. Ro Khanna (D-Calif.) said on Twitter.

Lisa Kashinsky contributed to this report.