Biden's Plan B on student loan forgiveness relies on Higher Education Act: What to know

President Joe Biden is launching another effort to forgive at least some federal student loan debt after the Supreme Court last week struck down his initial proposal to wipe away as much as $20,000 for borrowers.

The White House's new approach is based on the Higher Education Act (HEA) of 1965, which provides government-backed student loans and grants the U.S. Education Department the ability to "compromise, waive or release loans."

Further details will be revealed during a rulemaking process: Implementing any changes will take multiple steps over months, the National Economic Council's deputy director, Bharat Ramamurti, told reporters on Friday.

It's unclear if any debt cancellation offered through HEA would be of a similar scope and scale as Biden's first program, which the White House said covered 43 million borrowers -- with 20 million expected to see their student loans entirely erased.

Conservatives had sharply criticized that loan forgiveness as a misuse of tax dollars and an excessive and unconstitutional "scam," with some saying it didn't address underlying cost problems in education.

Ramamurti said on Friday that "even a typical rulemaking process can take some amount of time. You have to do a proposal, it has to receive comments, it has to be finalized and so on."

A negotiated rulemaking process is "even more complicated," Ramamurti said, and will involve public hearings. The Education Department will hold one virtually on July 18.

"One of the things about the rulemaking process is that we can't actually prejudge its outcome. Part of how we do this process is how we initiate it, we put a proposal on the table, we work with stakeholders to get their input. That ends up shaping the scope of the proposal. ... You'll hear more about that as we get to each state to the process going forward," Ramamurti said.

The initial debt cancellation plan the Supreme Court rejected 6-3 as presidential overreach was based on the post-9/11 Higher Education Relief Opportunities For Students (HEROES) Act, which enabled the education secretary to "waive or modify any statutory or regulatory provision" and was later altered to include people affected by "a war or other military operation or national emergency." The White House argued the COVID-19 pandemic qualified as such an emergency.

However, progressive Democratic lawmakers like Sen. Elizabeth Warren of Massachusetts and Rep. Alexandria Ocasio-Cortez of New York repeatedly called on the Biden administration to use the HEA rather than the HEROES Act in pursuing debt forgiveness.

Regardless of how much student loan debt Biden intends to cancel under his backup plan and whether there is an income cap for those whose debts get wiped away, his proposal is likely to face legal challenges, too -- sparking questions over how big the White House will go and whether a Supreme Court that already overturned his first plan would be more amenable to an alternate strategy.

"My view is that the HEA's settlement authorities are potentially quite broad, and so using them to forgive a lot of student debt is entirely legally defensible," said Luke Herrine, an assistant law professor at the University of Alabama. "This would be their broadest use ever -- many experts think it's entirely justified, but the viability question is more a question of whether the administration can either convince a hostile court or avoid that court."

"I expect the administration is likely seeing the previously enacted plan as a ceiling, so the most they'd do is just try to do the same thing again," said Herrine, who also was a legal director of The Debt Collective, a debtors' union. "But that's not because of built-in limits to the statutory authority in question -- it's a combination of what they think is fair, politically viable and relatively likely to win in a skeptical court."

Activists hope that Biden will go broader the second time around, noting that the HEA is not tied to a national emergency the way the HEROES Act was, suggesting the scope of the debt forgiven can now be larger.

"I think that the administration liked the idea that they were tying relief to the pandemic, they were saying very clearly to the public, 'This is a onetime thing. Don't worry, we're not getting too out of hand with this debt relief stuff.' But you know, both are totally legal, legitimate authorities. And in fact, the HEROES Act was sort of tailor-made for what we were in, which is a national emergency," said Debt Collective co-founder Astra Taylor.

"So, I understand in a sense why they used it. But the Higher Education Act is broader, and the Debt Collective's position has always been that it should be used to cancel all student debt," she added. "Legally, they can wipe out every penny."

Taylor also urged the administration to move swiftly, given that the White House has made a commitment to wiping out some debt.

"It would show that the Biden administration is serious. Sixteen million people got notifications from the federal government saying their applications were approved, 25-odd million people applied. People changed the course of their financial lives thinking, 'Hey, the government has communicated with me this is something I can plan around.' So, I think speed is really important on a practical level to honor that commitment," she said.

Others, however, expressed caution at such a broad proposal, insisting that using the HEA could pass muster with the Supreme Court but with limits.

"Will this new Plan B, will it really be about the administration just waiving as much student loan debt as possible? Or will it be about it really looking at individual files or individual schools that have engaged in fraud or whatever it may be and setting income thresholds and debt relief thresholds that really are achieving the goals of the statute? If so, I think that survives," said Derek Black, a professor at the University of South Carolina's School of Law.

"I think the cost of higher education is astronomical, and I think a lot of people are making a lot of money off loans. But is it the case that all people making less than $120,000 are struggling to pay their student loans? That's a tough case to make," Black said. "The more nuanced it gets, the more survivable it is, whereas the prior iteration was not that case-specific. It wasn't that nuanced to individual circumstances."

Still, despite confidence from experts and activists that some debt forgiveness is legal under the HEA, it's unclear how the court would rule on the issue a second time around.

"This court is deeply skeptical of broad interpretations of administrative authorities, of actions that improve the prospects of their political opponents and of legal interpretations that involve fiscal decisions that make working class folks' lives better -- let alone all three combined," Herrine said. "So that's a steep hill to climb."

ABC News' Anne Flaherty, Justin Gomez and Cheyenne Haslett contributed to this report.