Biden Tried at student loan cancellation

President Joe Biden is giving student loan cancellation another go, aiming to make good on a major campaign pledge he's yet to achieve.

During a stop in Wisconsin on Monday, Biden unveiled a plan aimed at wiping out some level of debt for over 30 million Americans. This move comes after the Supreme Court shot down his initial attempt at widespread debt cancellation.

Biden labeled the court's rejection a "mistake" but directed the Education Department to develop an alternative strategy under a different legal basis. This new approach is more narrowly focused, aiming to alleviate the burden for those most impacted by student loans.

President Biden on Monday announced new plans to cancel student debt for millions of borrowers, his broadest student loan forgiveness attempt since the U.S. Supreme Court struck down his more sweeping plan.@DaniDougPost joins @LisaDNews to discuss. https://t.co/c5GgsxXEgU

— PBS NewsHour (@NewsHour) April 9, 2024

Source: Twitter/NewsHour

HOW DOES IT DIFFER FROM BIDEN’S ORIGINAL STRATEGY?

Biden’s initial student loan forgiveness effort planned to eliminate $10,000 of debt for individuals earning up to $125,000 annually, with an extra $10,000 forgiveness for recipients of federal Pell grants aimed at low-income students. This plan, projected to cost $400 billion, would have reduced at least some debt for over 40 million borrowers.

The Supreme Court turned down Biden's original plan last year, ruling that he exceeded his powers.

Now, Biden's introducing a new strategy under the Higher Education Act, which gives the education secretary the power to cancel student loans in specific situations. The Education Department is currently defining the conditions under which this authority can be used through a federal rule-making process.

This revamped plan concentrates on five groups of borrowers, especially those deemed most in need of support. It's expected to benefit around 30 million borrowers, though the cost of this new initiative hasn't been disclosed yet.

Joe Biden is trying to unabashedly eclipse the Constitution with his attempt to “cancel” student loan debt.

The rule of law means something in this country, @POTUS.

See you in court.

— Attorney General Andrew Bailey (@AGAndrewBailey) April 8, 2024

Source: Twitter/AGAndrewBailey

WHO’S ELIGIBLE?

Biden's latest proposal sets out to wipe out student debt for five specific groups of borrowers.

The plan with the broadest impact aims to zero out the loan balances for folks whose debt has ballooned due to accruing interest. It promises to forgive up to $20,000 in interest for borrowers who now owe more on their loans than what they initially took out.

This forgiveness doesn't have a cap for people making under $120,000 a year or couples earning less than $240,000, provided they're on an income-driven repayment plan. According to the Education Department, about 25 million people could benefit from this, with 23 million potentially having all their owed interest wiped clean.

Additionally, borrowers who qualify for other federal forgiveness schemes but haven't yet applied could see their loans forgiven under this new plan. This includes those eligible for the Public Service Loan Forgiveness program and various income-driven repayment plans. This move is designed to assist those who've missed out on forgiveness due to complicated forms, poor advice, or other hurdles, helping an estimated 2 million borrowers.

The proposal also includes complete Student loan cancellation for individuals who have been paying off their undergraduate loans for 20 years or more, or 25 years for graduate school loans. The administration estimates this would clear the slate for over 2 million people.

Borrowers who attended colleges that offered programs with little economic value or schools that have been stripped of federal funding for defrauding students would also see their debt canceled. This includes graduates from programs that leave students with poor earnings in comparison to their debt.

Lastly, a specific provision aims to forgive loans for Americans struggling with hardships that make loan repayment impractical. This part of the plan would empower the Education Department to cancel debt for those at high risk of defaulting and create a system for individuals to report various kinds of financial distress.

DO I NEED TO APPLY?

For most borrowers, no application would be necessary as the student loan cancellation process would be automatic. This applies to interest cancellation, borrowers with older loans, individuals who attended low-value programs, and those eligible for other cancellation programs.

There is one exception: Borrowers seeking relief based on hardship would need to submit individual applications to make their case.

WHEN WILL I GET RELIEF?

According to the Biden administration, some debt could be canceled as early as this fall, including accrued interest on borrowers' loans.

However, this timeline depends on several factors. The Education Department intends to unveil a formal proposal in the coming months, followed by a 60-day public comment period. If the rule is finalized by November 1, it typically takes effect the following July, in this case, July 2025.

Nevertheless, the Higher Education Act allows the education secretary to expedite rules for "early implementation" under certain circumstances. Recently, the Biden administration utilized this authority to accelerate student loan cancellation through a new federal repayment plan. By invoking this power, Biden could potentially begin canceling debt later this year.

IS THIS A SURE THING?

Far from it. While the Biden administration asserts that the plan aligns with the Higher Education Act, widespread loan cancellation of this nature presents uncharted territory. Conservative opponents are expected to challenge Biden's plan in court.

Republicans have consistently opposed Biden's student loan cancellation proposals, arguing that they unfairly benefit borrowers at the expense of taxpayers who either repaid their loans or did not attend college. Critics maintain that the Supreme Court has made it clear that widespread loan cancellation must originate from Congress.

In the event of a lawsuit, courts could issue injunctions halting cancellation until legal matters are resolved. Such a scenario might delay the plan beyond the November presidential election. Even if it withstands legal scrutiny, a victory for Donald Trump in the election would likely spell the end for Biden's plan.

CAN CANCELLATION BE REVERSED?

If Biden's plan is overturned after the administration begins canceling loans, it would pose a challenging question: Can forgiven student loans be reinstated?

While canceled student debt can technically be reinstated, doing so on a large scale could be complex and costly, requiring extensive efforts from loan servicers contracted by the Education Department.

Moreover, reinstating debt after forgiveness could be politically contentious. Ultimately, the courts may need to decide how to handle previously canceled debt.

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