President Joe Biden announced Friday that he plans to pursue new avenues to forgive student debt after the Supreme Court blocked the relief plan he had announced last year to eliminate up to $20,000 in loans for borrowers earning under $125,000 annually.
First, Biden said, his administration will use the 1965 Higher Education Act to enable Education Secretary Miguel Cardona to waive, release or otherwise adjust loan debt for borrowers in certain circumstances.
Although the new path is legally sound, Biden said, it will take longer to provide relief. He said that Cardona has already initiated a regulatory process to alleviate debt using the new approach.
Secondly, the president said, while monthly payments would still resume, there would be a one-year suspension of punitive action for borrowers who fall behind on payments. Biden offered potential relief for cash-strapped borrowers in danger of becoming delinquent or defaulting on payments..
“We’re creating a temporary 12-month — what we’re calling on-ramp repayment program,” Biden said. “Monthly payments will be due. Bills will now go out and interest will be accruing. And during this period, if you can pay monthly bills you should.”
However, borrowers who miss payments or make late or partial payments will “avoid the “harshest consequences,” such as negative credit reports for falling behind, as the Education Department won’t refer them to collection agencies during this 12-month transitional period, which is set to run from October 1 to September 30, 2024.
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On top of those two measures, in a statement, Cardona noted that the Education Department had also finalized its new income-driven repayment plan, Saving on A Valuable Education (SAVE). It “will be the most affordable repayment plan in history,” he said. “It will cut monthly payments to zero dollars for millions of low-income borrowers, save all other borrowers at least $1,000 per year, and stop runaway interest that leaves borrowers owing more than their initial loan.”
Biden criticized Republicans and the Supreme Court for rejecting the student loan relief his administration announced in August. He noted how the Paycheck Protection Program for business owners who lost money during the pandemic received bipartisan support, but that Republicans did not support student debt forgiveness.
“Let’s be clear,” he said. “Some of the same elected Republicans, members of Congress who strongly oppose giving relief to students, got hundreds of thousands of dollars themselves in relief. …And several members of Congress got over $1 million.”
The Paycheck Protection Program cost $760 billion, which he said was $360 billion more than the student debt relief program he proposed.
“My plan would not only have been life-changing for millions of Americans, it would have been good for the American economy.”