Joe Biden’s New Debt Forgiveness Plan, Explained

The Biden administration isn’t giving up on finding a way to forgive potentially hundreds of billions of dollars in student loans to tens of millions of Americans. 

The Supreme Court’s recent ruling in Biden v. Nebraska means the president has no authority under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES) Act to forgive more than $400 billion of student loan debt. But immediately after the ruling President Joe Biden announced he will now pursue the same goal using the Higher Education Act of 1965 (HEA).

What is the Higher Education Act?

President Lyndon Johnson signed the HEA to increase access to higher education in a job market that increasingly required college degrees. It authorized several federal funding programs dedicated to expanding the quality and affordability of higher education through student loans, scholarships, and grants, including the Pell Grant, which aids undergraduate students with “exceptional financial need.”

Congress has authorized some debt relief programs under Title IV of the HEA, such as the Public Service Loan Forgiveness Program, which eliminates the remaining debt for eligible public servants—teachers, law enforcement officers, military personnel, and other borrowers employed by the government or a non-profit—after 10 years of monthly payments. More than 600,000 Americans have received relief under the program.

No administration has used the statute to cancel loans on the scale of Biden’s HEROES Act plan, but the idea has been suggested in the past: Sen. Elizabeth Warren campaigned on debt cancellation under the HEA during her 2020 presidential run and commissioned a brief from Harvard Law School outlining the legal justification for doing so.

How would it work?

The secretary of education has broader authority under the HEA than under the HEROES Act. A new plan would rely on Section 468 of the HEA, which gives the secretary the power to “enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired.” The language is similar to the HEROES Act, which permits the secretary to “waive or modify any statutory or regulatory provision … as the Secretary deems necessary in connection with a war or other military operation or national emergency.” 

Unlike the HEROES Act, however, the secretary’s power under the HEA is not limited to a national emergency. And while both laws refer to the secretary’s power to “waive,” the language in the HEA refers to the waiving of claims against debtors rather than the waiving of provisions of the law in question itself, which is what Biden’s original loan forgiveness plan attempted with regard to the HEROES Act. 

The Biden administration hasn’t yet explained what a new plan would look like, but there are a few options, according to Luke Herrine, an assistant professor of law at the University of Alabama. It could try to re-implement its original plan, which forgave up to $20,000 worth of student loans for individual Pell Grant recipients making under $125,000 a year and up to $10,000 for non-Pell Grant recipients. Or it could scale down its plan—“perhaps more narrowly targeting debtors who have been in perpetual default or who have been paying for too long,” Herrine tells The Dispatch.

Regardless, the plan will take significantly longer to execute than Biden’s previous proposal, which is why he didn’t take the HEA route originally, despite its broader scope. Any new plan would have to undergo a process known as negotiated rulemaking, a “long and laborious” procedure that involves responding to the concerns of various constituencies, Beth Akers, a senior fellow at the American Enterprise Institute, tells The Dispatch. 

The Department of Education has already announced a plan to establish a negotiated rulemaking committee and has set the date of a virtual public hearing for July 18. The process has the potential to stretch past the 2024 presidential elections.

Will Biden’s new plan succeed?

The Supreme Court in Biden v. Nebraska referred to Biden’s previous plan as “the Executive seizing the power of the Legislature,” and it’s unclear whether the high court would look any more kindly on a new proposal. Programs like Public Service Loan Forgiveness and Teacher Loan Forgiveness were authorized by Congress—which typically holds the “power of the purse”—and the implementation of such a large-scale program without congressional approval is unprecedented. Like the previous plan, it may collide with the major questions doctrine, which requires agencies acting on measures of “major national significance” to operate under “clear congressional authorization.”

Jed Shugerman, a professor of law at Boston University, tells The Dispatch that while a plan under the HEA may have stood up to court challenges initially, Biden’s choice to begin with the HEROES Act using the pandemic as a pretext was a poor decision.

“I think because the administration used the wrong statute and got off on the wrong foot, the Roberts court is going to look at any of these attempts as—in language that other justices have used—‘pulling an elephant out of a mousehole,’” Shugerman says.

“Perhaps it provides an opportunity for the administration to continue to keep this political hope alive through the next presidential election cycle,” Akers says. “That’s sort of a cynical view, but I think one that’s kind of fair, given that the court really did pretty explicitly say in its decision that this is something that would need to be acted upon by Congress rather than using executive authority.”

But there may be other paths: The Biden administration could suggest reviewing individual debtors on a case-by-case basis using existing settlement provisions. And the Supreme Court may be more inclined to “approve a narrower plan or a plan extensively supported by an administrative record,” according to Herrine.

In the meantime, borrowers must resume payments by October 1.