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higher education act
One Year After Supreme Court Ripped Away Student Debt Relief, Borrowers Still Waiting for Promised Relief
The clock is ticking. Young borrowers must not lose out on urgently-needed debt relief should November bring a new administration.
Jun 30, 2024
Exactly one year ago, President Joe Biden stood before the American people after the politicized U.S. Supreme Court ripped away critical student debt relief from 40 million borrowers. The President reaffirmed his commitment to cancel student debt and pledged to use different authority under the Higher Education Act. Since then, President Biden has worked arduously to deliver debt relief to nearly 5 million student loan borrowers by making critical fixes to loan relief programs. But now, in nearly identically timed releases, federal judges in Kansas and Missouri issued a pair of injunctions blocking portions of the new Saving on a Valuable Education repayment plan (the SAVE plan)—making President Biden’s promise of relief more critical than ever.
Biden’s fixes to Public Service Loan Forgiveness and the Income-Driven Repayment Account Adjustment gave millions of borrowers the relief they should have received all along. And this cancellation has been life-changing for the borrowers who have been trapped in the broken student loan system for decades. But one fix that still remains elusive is the crushing burden that student loan debt is putting on our nation's youngest borrowers.
If this rule is pushed to the next Administration, young borrowers may be cut out of relief entirely.
Young people have not had decades to experience runaway interest or pay into the wrong payment plan, but they are being devastated by the student loan crisis nonetheless. For borrowers who are just starting out in their careers, their student debt is inhibiting their ability to start a family, buy a home, save for retirement, or start a business. Student debt is exacerbating racial and economic inequities and widening the racial wealth gap, worsening economic insecurity for people with disabilities, and increasing health disparities and the mental health crisis. And after this week’s rulings, these young borrowers may not even have the benefit of affordable payments and the guarantee of a light at the end of the tunnel.
A recent poll found that at least two-thirds of the youngest voters consider cancelling student loan debt to be an important issue in the upcoming election. It is no wonder why. In fact, younger voters are also far more likely to connect student debt relief with a stronger U.S. economy no matter their political affiliation—even Gen Z and Millennial Republican voters believe action to cancel student debt will help the economy by a 2:1 margin.
And yet, these are the last borrowers to see relief. Earlier this year, a U.S. Department of Education committee held a series of meetings to create a hardship rule for student debt relief. The committee came to consensus on a proposal to provide the Secretary with broad authority and flexibility to cancel debt for borrowers most likely to face difficulties repaying their student loans. It would allow the Secretary to consider a wide-ranging list of factors when considering whether a borrower is experiencing hardship. If enacted, this rule has the potential to unlock economic mobility for millions of young borrowers, workers, and families.
Despite the fact that the committee reached consensus in February, the Administration has yet to publish the proposed rule on hardship. It is no secret that time is running out for the Administration to finish its regulatory agenda. If this rule is pushed to the next Administration, young borrowers may be cut out of relief entirely.
It has been a year since the Supreme Court callously ripped vital relief from tens of millions. Providing relief to young borrowers must be a priority—the Administration cannot allow young student loan borrowers to be a victim of the clock.
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Dems Press Biden Admin to Expand Student Debt Relief Plan
"We are concerned that the latest draft of the rule would fall far short of providing the full scale of debt relief that low- and middle-income Americans urgently need."
Dec 11, 2023
Seven members of Congress on Monday sounded the alarm about the Biden administration's evolving student debt cancellation plan and called on U.S. Secretary of Education Miguel Cardona to use his authority to provide broad relief.
After the right-wing U.S. Supreme Court in June struck down President Joe Biden's initial debt relief plan—designed to cancel up to $20,000 per federal borrower—the administration launched a negotiated rulemaking process to establish an alternative plan under the Higher Education Act (HEA) of 1965.
The committee responsible for crafting the rule "has met several times already, but its final round of talks began on Monday and will continue through Tuesday," reported USA Today. "Frustrations arose almost immediately. Committee members expressed disappointment in the department's latest forgiveness proposal, released last week, which many said doesn't go far enough in its current form to address the issues they've spent months debating."
U.S. Senate Majority Leader Chuck Schumer (D-N.Y.), Sens. Alex Padilla (D-Calif.), Bernie Sanders (I-Vt.), and Elizabeth Warren (D-Mass.), and Reps. Ilhan Omar (D-Minn.), Ayanna Pressley (D-Mass.), and Frederica Wilson (D-Fla.) are also unsatisfied with the draft, as they made clear Monday in a letter to Cardona.
"This regulation has the potential to improve the financial security of tens of millions of hard-working Americans who are currently trapped by crushing student debt," the lawmakers noted. "However, we are concerned that the latest draft of the rule would fall far short of providing the full scale of debt relief that low- and middle-income Americans urgently need."
The letter explains that under the draft, only four groups would be eligible for relief: "(1) borrowers with outstanding federal student loan balances that exceed their original principal balance, due to interest; (2) borrowers with loans that have been in repayment for over 20 or 25 years; (3) borrowers who are eligible for forgiveness under an enumerated repayment plan or loan program but have not enrolled; and (4) certain borrowers who took on loans to attend programs that provide insufficient financial value, lost Title IV eligibility, or were found to have committed misconduct."
The U.S. Education Department (ED) "has also released an issue paper indicating the potential need for the rule to address a fifth category: 'those experiencing hardship that is not otherwise addressed by the existing student loan system,'" the letter notes.
The HEA empowers Cardona to "enforce, pay, compromise, waive, or release" federal student loans. The lawmakers pressured him "to leverage this authority to its fullest extent, maximizing relief for the greatest number of borrowers facing financial hardship," highlighting that 43.6 million borrowers "collectively owe an astronomical $1.65 trillion."
"As we lend our support to your diligent efforts to provide debt relief through regulatory procedures, we urge you to consider several recommendations to strengthen the department's debt relief rule," the lawmakers wrote, detailing six proposals:
- Eliminate all debt that exceeds the original principal balance of the loan;
- Provide full cancellation, not just a waiver of excess interest, for borrowers who have repaid enough to cover their original principal;
- Eliminate the sudden cliff that would give full relief to borrowers whose loans first entered repayment at least 20 or 25 years ago, and no relief to similarly situated borrowers;
- Extend relief to borrowers with financial hardship and create a catch-all category for unforeseen forms of hardship;
- Extend relief to borrowers who have been victims of student loan servicer misconduct or error; and
- Eliminate the need for borrowers to submit burdensome applications by basing eligibility for relief on information that ED already has or that it can acquire from other agencies.
"We are encouraged by the department's critical efforts to provide student debt relief through negotiated rulemaking. However, we believe more must be done to improve the draft regulatory text," the letter concludes. "The Biden administration should take every
opportunity to use the authority Congress has already given it to deliver on the promises made to student loan borrowers."
Acknowledging the letter on the Senate floor Monday, Schumer declared that "following the Supreme Court's cruel, abrupt blocking of student debt relief, too many borrowers—too many—remain saddled with massive—in many cases, unbearable—amounts of debt. We can and we must do more to help these borrowers."
After being paused throughout the Covid-19 pandemic and the legal battle over Biden's first debt relief proposal, student loan repayments resumed in October. Since the high court's ruling, federal borrowers across the country have pushed the president to continue pursuing sweeping debt cancellation.
"An Education Department spokesperson said the agency had received the letter, is reviewing it, and welcomes the input from lawmakers," according to Politico.
"The Biden-Harris administration is proud of our record of providing relief to borrowers as we work to fix the broken student loan system," the spokesperson said in a statement. "This rulemaking process is about standing up for borrowers who've been failed by the country's broken student loan system and creating new regulations that will reduce the burden of student debt in this country."
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US Cities and Counties Demand Promised Student Debt Relief From Biden
The letter highlights "the crushing weight of the student debt crisis on borrowers and their communities, and the extended economic limbo millions of borrowers have been forced to endure."
Sep 21, 2023
Leaders of 20 U.S. cities and counties, representing more than 1.2 million borrowers with nearly $50 billion in student debt, wrote to President Joe Biden on Thursday demanding swift action on long-promised and long-delayed relief.
Biden's first plan to cancel up to $20,000 per borrower was struck down by the U.S. Supreme Court in June. The administration is now working on a new relief plan involving the Higher Education Act (HEA) of 1965 but has chosen to initiate a drawn-out rulemaking process that campaigners say is unnecessary.
While welcoming the HEA effort, the letter stresses the urgent need among borrowers whose loan payments are set to resume October 1 after being paused for over three years in response to the Covid-19 pandemic.
"Given the crushing weight of the student debt crisis on borrowers and their communities, and the extended economic limbo millions of borrowers have been forced to endure as partisan lawsuits blocked transformative debt relief in the courts, we urge you to continue the necessary work to deliver on your promise of up to $20,000 in student debt relief and enact your new debt relief plan as swiftly as possible," local leaders from more than a dozen states wrote to the president.
"The Supreme Court's decision to ignore the clear letter of the law and strike down your life-changing debt relief plan is further evidence of its willingness to put politics and special interests before the American people," they argued.
The letter is signed by mayors, city attorneys, and other officials from Little Rock, Arkansas; Berkeley, Oakland, and San Francisco, California; Evanston, Illinois; Gary, Indiana; Mount Rainier, Maryland; Boston, Massachusetts; Ann Arbor, Lansing, and Washtenaw County, Michigan; Kansas City, Missouri; Carrboro and Hillsborough, North Carolina; Hoboken and Newark, New Jersey; Cleveland, Ohio; Philadelphia, Pennsylvania; Travis County, Texas; and Madison, Wisconsin.
As they detailed:
America's cities are on the frontlines of the $1.7 trillion student debt crisis. This crisis has spiraled out of control, reinforcing deeply embedded inequities in our country and creating financial despair in our communities—and the pandemic has exacerbated these challenges. Relief is urgently needed to help alleviate the financial burden on residents, helping families cover rising costs and invest in our local economies and their own future. As officials in your administration have consistently stated, resuming loan payments this fall without first providing broad-based student debt relief would result in a catastrophic wave of borrower distress, dealing a punishing blow to millions of families in our communities while destabilizing our local economies and increasing demand for public benefits and services.
As the letter notes, the Consumer Financial Protection Bureau said in June that around 2.5 million student loan borrowers already have a delinquency on another loan. The federal agency also found that about 1-in-5 student loan borrowers "have risk factors that suggest they could struggle when scheduled payments resume."
Recent polling suggests that number could be even higher. As Common Dreams reported last month, 49% of borrowers surveyed by Intelligent.com said they aren't sure they can afford the looming loan bills, and 62% said they are likely to boycott repayments.
"Your administration is now only days away from restarting a fundamentally broken and underfunded student loan servicing system, throwing 45 million Americans into chaos," the new to Biden letter warns. "While we appreciate your administration's announcement to shield borrowers from the most severe economic consequences of default, millions of borrowers will be forced to navigate the complex system for the first time in more than three and a half years."
Potentially compounding the stress for borrowers, the resumption of payments could coincide with a looming government shutdown—and as Insiderreported Monday, the U.S. Department of Education "does not yet have a contingency plan for managing Federal Student Aid's operations without funding in two weeks."
Whether or not the government will be shut down when payments resume, borrowers are bracing for the impacts of another monthly bill, as are restaurants, retailers, and overcrowded animal shelters—and economists are warning of the consequences for the U.S. economy.
Pausing payments "helped ensure that people did not face financial ruin as a part of a pandemic they did not cause, and borrowers found themselves on more solid financial footing, for many, for the first time in years," Angela Hanks, chief of programs at Demos and a former Biden administration official, toldNewsweek on Thursday.
"This meant that people were able to pay other bills on time, including basics like rent and groceries," Hanks said. "For the millions of borrowers who will be forced into repayment in just a few weeks, this transition will undermine whatever stability they've been able to create for their families over the last few years."
"The end of the student loan forbearance risks disrupting an otherwise growing economy," she added. "Wages are outpacing inflation, and unemployment is down, but saddling families with another expensive bill risks undermining our collective economic progress."
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