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Following the Supreme Court‘s decision to effectively kill Biden’s earlier student debt forgiveness proposal, the White House is trying again to ease the burden on those carrying student loans using a different legal approach.
Biden‘s original plan would have canceled up to $20,000 in federal student loans for 43 million people. Of those, 20 million would have had their remaining student debt erased completely.
With repayments set to begin in October, many borrowers are wondering if they still have to pay. Here’s what to know about where the new Biden plan stands.
Under the proposed approach, the White House is now planning to use the Higher Education Act of 1965 – a sweeping federal law that governs the student loan program – to bring about relief for student borrowers.
Biden said the authority of the act will provide “the best path that remains to provide as many borrowers as possible with debt relief.”
The law includes a provision giving the education secretary authority to “compromise, waive or release” student loans.
In its previous attempt to forgive student loans, Biden‘s White House appealed to a bipartisan 2003 law dealing with national emergencies, known as the HEROES Act, for the authority to cancel the debt. The court‘s 6-3 decision, with conservative justices in the majority, said the administration needed Congress’ endorsement before undertaking so costly a program.
So far, it remains unclear which loan holders will qualify and how much of their debt will be forgiven. To figure it out, the Education Department will go through a process known as negotiated rulemaking.
Hours after the Supreme Court decision, President Joe Biden announced a 12-month grace period to help borrowers who struggle after payments restart. Biden said borrowers can and should make payments during the first 12 months after payments resume, but, if they don’t, they won’t be at risk of default and it won’t hurt their credit scores. Interest will resume in September, however, and it will accrue whether borrowers make payments or not. Biden reiterated that it is not the same as the student loan pause, adding that “if you can pay your monthly bills, you should.
