Biden outlines 'new path' to provide student loan relief after Supreme Court rejection

Biden said the plan is "legally sound" but cautioned it will take longer.

June 30, 2023, 4:38 PM

President Joe Biden said Friday his administration is moving forward with a new student loan relief plan after the Supreme Court struck down his original program to wipe out $430 billion in debt.

Biden detailed the next steps in remarks delivered at the White House, where he was joined by Education Secretary Miguel Cardona.

"This new path is legally sound," the president said. "It's going to take longer. And in my view, it's the best path that remains to student debt relief to as many borrowers as possible as quickly as possible."

Under the alternative strategy, Biden said the administration will invoke the 1965 Higher Education Act to allow Secretary Cardona to "compromise, waive or release loans under certain circumstances."

In the meantime, Biden said they also have a plan to help alleviate the financial stress as loan payments restart in October after a three-year pause.

The administration will create a temporary, 12-month "on-ramp repayment program" that will remove the threat of default for borrowers who are unable to pay their bills. The Department of Education will not refer borrowers who miss payments to credit agencies for a year as they readjust to making payments again.

"Today's decision has closed one path, now we're going to pursue another," Biden said. "I'm never going to stop fighting for you. I will use every tool at our disposal to get you the student debt relief you need and reach your dreams. It's good for the economy and good for the country and can be good for you."

Biden also noted other work by administration to provide relief, including modifications to the income-driven repayment plan to cut down the amount that borrowers have to make on their monthly payments by half -- from 10% of their discretionary income to 5%. Biden said the change will save the average borrower $1,000 a year.

"It's now the most generous repayment program ever," he said.

President Joe Biden speaks about his plans for continued student debt relief after a U.S. Supreme Court decision blocking his plan to cancel $430 billion in student loan debt, at the White House, June 30, 2023.
Leah Millis/Reuters

In a 6-3 decision earlier Friday, the Supreme Court's conservative majority said the administration overstepped its authority when it unilaterally moved to waive billions in debt for eligible Americans.

Biden said he thought the court "misinterpreted the Constitution" in its ruling.

Biden's federal student loan program would have forgiven up to $10,000 in debt for borrowers making less than $125,000 a year. Borrowers who took out Pell grants to pay for college could have had up to $20,000 canceled.

Forty-three million Americans would have qualified for the program, and the Education Department had already approved applications for 16 million borrowers before it was put on halt last fall due to legal challenges.

Biden on Friday hit Republicans for opposing his plan, painting them as hypocritical for opposing relief for borrowers while some had their own business-related loans provided by the government during the pandemic forgiven.

"The money was literally about to go out the door," he said of his original plan. "And then Republican elected officials and special interests stepped in and said no, literally snatching from the hands of millions of Americans thousands of dollars in student debt relief that was about to change their lives."

President Joe Biden speaks in the Roosevelt Room of the White House, June 30, 2023.
Evan Vucci/AP

Biden's loan forgiveness program was rooted in the 2003 HEROES Act, a law passed in the wake of the Sept. 11, 2001 terrorist attacks that gave the president authority to waive or modify loans in national emergencies.

Chief Justice John Roberts said the text of HEROES Act didn't authorize the program, and the court's precedent "requires that Congress speak clearly before a department secretary can unilaterally alter large sections of the American economy."

Biden pushed back after a reporter asked him why he gave Americans "false hope" on this issue.

"What I did I thought was appropriate and was able to be done and would get done," he said. "I didn't give borrowers false hope but the Republican snatched away the hope that they were given and it's real, real hope."