Jul 6, 2023
Student loan borrowers are preparing to resume repayments this October after the Supreme Court struck down President Biden’s hotly contested plan for relief — but it seems all hope is not lost just yet.
“The same Supreme Court that overturned Roe now refuses to follow the plain language of the law on student loan cancellation,” tweeted Massachusetts Democratic senator Elizabeth Warren in response to the ruling.
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“This fight is not over. The president has more tools to cancel student debt — and he must use them.”
The White House does in fact have an alternative solution to providing relief for student borrowers, and here’s what it proposes.
Warren says The White House must take action
Biden’s sweeping student loan forgiveness program would have benefited over 40 million student borrowers across the U.S. who owe about $1.6 trillion in outstanding loans.
His administration argued the effects of the COVID-19 pandemic on borrowers warranted forgiveness under the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) act in order to prevent a historic rise in delinquencies and defaults.
But the Supreme Court voted 6-3 last week, siding with six Republican-led states that sued to challenge the program’s legitimacy.
Warren, who’s been a long-time proponent of student debt forgiveness, called for immediate action in a webinar just last week.
She said a borrower today could pay up to 200% more in tuition than their parents did and “that's just fundamentally wrong.”
Warren’s not mistaken — the costs of attending college have significantly escalated thanks to rising demand and reduced state funding. She still expects Biden to follow through on his presidential campaign promises, despite the recent setback.
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“More than 40 million hard working Americans are waiting for the help that President Biden promised them, and they expect this administration to throw everything they’ve got into the fight until they make good on this commitment,” Warren said.
Read more: Millions of Americans are in massive debt in the face of rising rates. Here's how to get your head above water ASAP
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Biden’s next move for student aid
Just hours after the Supreme Court rejected Biden’s student loan forgiveness plan, the White House retaliated by announcing the president’s next move to provide relief and support for borrowers.
Under the Higher Education Act of 1965, the education secretary would be allowed to waive, reduce or release loans under certain circumstances. However, this must still go through the negotiated rulemaking process, which includes public hearings and soliciting comments from stakeholders, and could persist for months.
In the meanwhile, the Department of Education is imposing a 12-month “on-ramp” for repayments from Oct. 1, 2023 to Sep. 30, 2024 — so that borrowers who cannot immediately repay their debts are not reported to credit bureaus or considered in default.
That said, interest on loans will still accrue during this time, so borrowers should make payments if they can.
The Biden administration also finalized the Saving on a Valuable Education (SAVE) plan, which slashes monthly payments in half and forgives original loan balances of $12,000 or less after 10 years instead of 20. The income-driven repayment plan saves most borrowers at least $1,000 per year, while those who earn less than $15 an hour won’t have to make any repayments.
Unlike other plans, it won’t charge unpaid monthly interest either.
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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
