On Wednesday, US President Joe Biden unveiled another round of federal student debt forgiveness as borrowers brace for the resumption of payments after a three-year hiatus due to the Covid-19 pandemic.
Biden has pledged to explore fresh initiatives aimed at providing student loan relief to Americans, following the Supreme Court’s rejection of his plan to cancel hundreds of billions of dollars in debt.
“This kind of relief is life changing for individuals and their families. But it’s good for our economy as a whole as well,” he told reporters. He also assured the student population publicly that his administration is doing everything that it can to deliver student debt relief to as many as possible and as fast as they can.
Why was the student debt notion rejected by Supreme Court?
On June 30, 2023, the Supreme Court ruled that the Biden administration had violated its jurisdiction with its proposal to wipe off more than $400 billion in student debt, destroying the aspirations of tens of millions of borrowers and imposing new constraints on presidential power.
It was a crushing defeat for President Biden, who had promised to assist debtors in “crawling out from under that mountain of debt.” One of the most costly executive acts in US history would have been the proposed debt forgiveness.
In response to the ruling, President Biden remarked that this decision has closed one avenue, but he has directed the Secretary of Education to explore alternative legal avenues for debt forgiveness.
The Biden administration had asserted that their plan, which aimed to address the ongoing impact of the coronavirus pandemic, was based on the Higher Education Relief Opportunities for Students Act of 2003, commonly known as the HEROES Act.
Chief Justice Roberts, in his written opinion, emphasised the immense economic and political significance of the student loan program. He described the Secretary’s actions as significant from any perspective. Additionally, Chief Justice Roberts cited a budget projection from the Wharton School at the University of Pennsylvania, estimating that the program’s potential cost to taxpayers could reach as high as $519 billion.
Details of the announcement-
The initial significant wave of relief through the automatic account adjustment commenced in August, resulting in the cancellation of $39 billion in debt for 804,000 borrowers.
Following a three-and-a-half-year pause due to the pandemic, borrowers with remaining debt have recently started making payments. Additionally, the Biden administration introduced a new income-driven repayment program known as “Saving on A Valuable Education (SAVE),” which is anticipated to reduce student loan payments and hasten debt forgiveness for borrowers holding less than $12,000 in debt.
Wednesday’s announcement signifies that the Biden-Harris Administration has now approved a cumulative debt cancellation of $127 billion for nearly 3.6 million Americans.
The Biden-Harris Administration’s latest approvals encompass:
- An additional $5.2 billion in debt relief for 53,000 borrowers benefiting from Public Service Loan Forgiveness programs.
- Approximately $2.8 billion in fresh debt relief for almost 51,000 borrowers through improvements to income-driven repayment. These are borrowers who diligently made payments for 20 years or more but never received the relief they were entitled to.
- $1.2 billion designated for nearly 22,000 borrowers with total or permanent disabilities, identified and approved for discharge through data matching with the Social Security Administration.
