“Today, President Biden is announcing a three-part plan to provide more breathing room to America’s working families as they continue to recover from the strains associated with the COVID-19 pandemic.” Such was the pivotal promise echoed by the Biden Administration back in 2022, promising to tackle an issue voters deeply cared about in exchange for their support. In 2024, almost 2 years later, Biden’s initiatives for debt relief stand at a stalemate. Efforts are consistently being met by a back-and-forth of US Courts, stalling possible implementation and raising questions as to whether relief will ever materialise under the current administration. Given the uncertainty of the situation, further questions arise as to whether current efforts will halt or alter with the looming elections just a month away. This article will examine the ongoing legal challenges and what they could mean for students in the United States.
The Biden Administration’s Debt Relief Framework
In order to begin to offer relief to families struggling with student debt post-pandemic, the Biden Administration’s plan had 3 phases from 2022. First, a pause was placed on pending payments to decrease the financial burden. Second, target debt relief would be provided to low and middle-income families with an annual income falling below $125,000 (for individuals) or $250,000 (for married couples or households). Third, the proposition of a rule to create a new income-driven repayment plan that would make student loans more manageable for current or future borrowers. These goals aimed not only to tackle the present hardships but slowly nurture a system where students will not be burdened to pay back tuition fees well into their adult lives (at the moment 43% of borrowers are on the standard 10 years or less plan of fixed repayments).
To implement these phases, the administration carried out multiple initiatives. Most importantly, in 2023, they passed an executive action that would cancel up to $20,000 from the total debt of some eligible borrowers. In the Summer of 2023, the Supreme Court struck it down declaring such a radical change to the student loan system must go through Congress and not just be approved independently, marking the beginning of the struggle.
Biden v Nebraska 2023
In the hopes of beginning to put into place the relief efforts, in 2023 Biden tasked the Secretary of Education to come up with an implementation strategy. Under the 2003 Heroes Act, “The Secretary of Education may waive or modify any requirements or regulation applicable to the student’s financial assistance programs”. Even though these possibilities could mainly be applied to war veterans, they could also be invoked during national emergencies, suitably for the present situation in the aftermath of the pandemic. States like Missouri and Arkansas were not happy with this prospect as they had special institutions tasked with carrying out debt relief programs for which they charged a small commission. If the relief was to be approved, these institutions would lose the little commission they made on the service.
When Biden’s debt relief program implemented through the Secretary of Education reached the Supreme Court, they had 2 inquiries to determine whether such a plan could pass without the authorization of Congress. First, whether the measure was a question of vast economic and political significance. Second, if the question is to be determined as having vast economic and political significance, whether Congress clearly authorised the Secretary of Commerce to waive and modify student debt through the Heroes Act of 2003.
Generally, when an intended program has extensive economic and political impacts, it cannot simply be passed by the Secretary of Commerce but it needs to go through Congress for approval. Here, because Biden’s relief would have considerable impacts, the plan should have been passed through Congress to be implementable. Since the plan is determined to have nation wide impacts, the Secretary of Education may only act upon a clear mandate given by Congress. When looking at the Heroes Act of 2003, it broadly specifies that the Secretary of Education may “waive or modify requirements” but it is not specified what requirements and to what extent they can be changed. As the statute is unclear, the Court ruled that the Secretary of Education exceeded the given mandate under the Heroes Act by completely trying to reduce such a vast amount of loans. Therefore, the executive order to cancel up to $ 20,000 in debt was prohibited.
The Subsequent Back and Forth
In response to the Supreme Court’s ruling, in 2024 the Administration published its first set of draft rules that would seek to provide targeted student debt relief to borrowers rather than complete abolition. Most recently, these draft rules faced challenges after seven Republican-led states sued the Department of Education for “unlawfully trying to mass cancel hundreds of billions of dollars of loans”. These States subsequently filed a temporary restraining order against these developments.
Just on October 3rd, 2024, a flicker of hope arose for the Administration as a federal judge was willing to let the temporary restraining order expire as he concluded that Georgia (one of the suing states) did not have standing to sue against the relief plan. The Judge ordered the case to be transferred to Missouri. However, this hope was short-lived as the District Judge in Missouri issued a preliminary injunction against the initiative (interlocutory order to stop the defendant from continuing). Given these unfavourable developments, the legal uncertainty surrounding the initiative is being prolonged.
Where Could the Harris and Trump Administrations Take Student Debt Relief?
When addressing the possibilities under the Harris administration, “it is probable to see a continuation of a lot of the policies under the Biden administration – including student loan cancellation” highlighted Preston Cooper, a senior fellow at the American Enterprise Institute. According to Harris’s campaign website, she will “continue working to end the unreasonable burden of student loan debt and fight to make higher education more affordable.” As such, a maintained initiative to continue the stalled efforts could be seen under Harris.
When addressing the possibilities under the Trump administration, an aggressive stance against higher education institutions is predicted. According to the Trump platform website, under Project 2025 (a conservative policy agenda published by the Heritage Foundation), a new Republican administration “must end” the Biden Administration’s “abuse of the payment pause and loan forgiveness programs”. Due to the fact that under the current systems student loans are largely a transaction done between the student and the government, under the Trump Administration, private lenders may be allowed to enter into the equation (creating a competitive market) and provide loan services that are backed by government guarantees.
To conclude, much remains to be seen on the development of student loan relief programs. There is no doubt that whatever course of action is taken by the present or future administrations will be met by disagreements from various interest groups.
Featured Image: President Biden some days before the announcement of the new loan forgiveness plan, courtesy of Ting Shen/AFP/Getty Images.
