The first is a great move, but the second is nonsensical. If we’re out of the government-back student loan business, any loans are up to the terms that private lenders are willing to offer.
nasfaa.com
By Megan Walter, Senior Policy Analyst
1/2025
A Look at The Biden Administration’s student financing
The Biden administration has made student loan debt relief a focus of its education policy agenda, seeking to ease the financial burden of student loan debt for millions of borrowers. From an ambitious plan for large-scale debt cancellation to targeted relief programs like the SAVE plan, President Joe Biden has attempted to overhaul a system that has disproportionately impacted low- and middle-income Americans.
His efforts have faced staunch legal opposition, with one plan ultimately struck down by the Supreme Court in June, 2023. Now, new challenges have emerged as political opponents and interest groups seek to block the administration’s latest rulemaking efforts focused on student loan debt relief.
As the legal battles continue, the fate of Biden’s student debt relief policies remains uncertain, with significant implications for millions of borrowers, as well as leaving financial aid offices scrambling in their attempt to counsel students without clear answers.
One-Time Student Loan Debt Cancellation Plan by Executive Order
In August 2022, the Biden administration unveiled their initial debt cancellation plan, proposing to forgive up to $20,000 for eligible borrowers who met specific income thresholds. On behalf of the administration, the Department of Education (ED) launched an application for borrowers to apply for this initiative, and within weeks, more than 26 million borrowers applied, and nearly 16 million borrowers were approved before the legal challenges halted the process.
A lawsuit filed by six Republican-led states — Nebraska, Missouri, Arkansas, Iowa, Kansas, South Carolina — alleged that the President had overstepped his executive authority by using the Higher Education Relief Opportunities for Students (HEROES) Act of 2003 as his basis for his authority to provide this forgiveness, and that this form of debt cancellation would harm state revenues, particularly from loan servicers in those states. Lower courts subsequently issued rulings that blocked the loan forgiveness plan from progressing, and after an Eighth Circuit Court of Appeals ruling against the President, the administration decided to take the case to the Supreme Court.
In June 2023, the Supreme Court ruled against the administration, voting 6-3, and ultimately putting a definitive stop to the administration’s plan. The Chief Justice said the Biden administration “lacked the authority under the HEROES to unilaterally cancel debt and that such sweeping policy changes needed explicit Congressional approval.”
The final ruling was issued shortly before the expiration of the student loan payment pause and the resumption of repayment for millions of borrowers who had their loans paused for over 3.5 years during the COVID-19 pandemic. The decision also reignited debates over the extent of presidential power and forced the President to turn to new avenues to pursue debt relief.
The SAVE (Saving on a Valuable Education) Plan
Within hours of the Supreme Court ending the administration’s pursuit for broad student debt cancellation, the President through ED announced the finalization of its new income-driven repayment (IDR) plan, Saving on a Valuable Education (SAVE), which replaced the Revised Pay As You Earn (REPAYE) plan. This program was developed over the course of negotiated rulemaking sessions held in late 2021.
Features of the new SAVE plan included higher income protection, lower assessment of discretionary income for undergraduate borrowers, elimination of negative amortization, and early loan forgiveness for low-balance borrowers, with phased early implementation for some provisions and full implementation set for July 1, 2024.
In October 2023, prior to the start of repayment after the COVID-19 pause, borrowers who were previously in REPAYE had the higher income protection provision of the SAVE plan automatically applied to their loans. In January 2024, a provision of the SAVE plan, that cancels debt for low-balance borrowers, took effect, and by February ED had canceled nearly $1.2 billion dollars in student loan debt.
In March 2024, two lawsuits from attorneys general in Kansas and Missouri were filed, and sought to prohibit ED from implementing any more provisions of the SAVE plan. The lawsuits were upheld and temporary injunctions were placed in June against the portions of the plan that had not yet been implemented. This caused ED to react quickly and remove the online application to apply for IDR plans from the website, as they didn’t know the future of the SAVE plan, or the effects these lawsuits would have on the other IDR plans. ED still allowed borrowers to apply for IDR plans by paper applications, though the processing of these forms is currently on hold by federal loan servicers, per ED’s instructions. Subsequently, ED also placed all borrowers enrolled in the SAVE plan into an interest-free administrative forbearance. While the forbearance does not require borrowers to make payments, it also does not allow the time in forbearance beyond a 60-day processing forbearance to be counted towards time-based forgiveness or public service loan forgiveness.
In response to the lawsuits, ED, represented by the Department of Justice (DOJ), appealed to the Supreme Court to vacate the injunction blocking all SAVE plan student loan relief during litigation. The Supreme Court denied the request, and the case was handed back to the Eighth Circuit Court. ED asked them to consider and decide on their appeal on an expedited basis, which would allow the Supreme Court to hear any further appeal in this upcoming term — by June 2025 — if necessary. Currently, there are oral arguments for the Eighth Circuit Court set for October 24, 2024.
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