President Biden’s New Student Debt Forgiveness Plan: Everything We Know

President Joe Biden is moving forward with his plan to cancel federal student loan debt, but this time through other means.

The U.S. Supreme Court ruled in June that Biden’s previous debt forgiveness plan — which relied on the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) — was unlawful. To circumvent this issue, the president is now pursuing debt forgiveness using powers granted through the Higher Education Act (HEA).

“The president remains committed to providing relief to low- and middle-income borrowers,” read a White House statement. “For too many Americans, a ticket to the middle class remains out of reach because of unmanageable student loan debt.”

A temporary restraining order blocking implementation of this plan expired on Oct. 2, which left the door open to potential debt forgiveness. However, the case was transferred to a Missouri court that quickly instituted its own temporary ban.

The plan is in its middle stages, but here’s what we know so far.

Biden is pursuing debt forgiveness through a process known as negotiated rulemaking.

Negotiated rulemaking allows federal agencies, including the Department of Education (ED), to change existing regulations. The department must set an agenda, choose representatives from various groups that would be impacted by the change, and gather for months of discussions in an effort to reach a consensus on a final rule.

The Biden administration has used this process to create a new income-driven repayment (IDR) plan, change the Public Service Loan Forgiveness (PSLF) program, and reinstate a gainful employment rule.

Sixteen negotiators, plus alternates, met with the department in October, November, December, and February to flesh out ED’s draft proposals for debt forgiveness. The committee was only scheduled to meet for three sessions but added February negotiations to widen relief to “borrowers experiencing hardship.”

ED and negotiators failed to reach a consensus on most of the department’s proposals but did reach a consensus on relief for borrowers experiencing hardship.

Still, negotiated rulemaking showed that ED plans to offer debt forgiveness to the following groups of borrowers:

ED plans to formally propose its regulations regarding borrowers “experiencing hardship” in November 2024.

Negotiated rulemaking, while more likely to withstand legal scrutiny, is a lengthy process.

ED recently wrapped up the first major hurdle when it finished its final rulemaking session with negotiators in late February.

The Student Loan Relief Committee and ED failed to reach a consensus on six issues, but they did reach a consensus on five of the 11 total regulatory proposals.

The department published the majority of its proposals in the Federal Register on April 17 and left 30 days for public comment, meaning people had until May 17 to leave their thoughts and suggestions. ED’s proposal did not include regulatory language to benefit “borrowers experiencing hardship,” but stated on Oct. 25 that proposed regulations for this group of borrowers would be published “in the upcoming weeks.”

ED’s statement showed that the department’s proposal will mirror language approved in February, including granting relief to borrowers ED deems to have at least an 80% to default within the next two years.

ED implied in a July 31 announcement that borrowers should expect the plan to go into effect sometime in the fall, barring court-mandated delays. The department also announced that borrowers should expect an email in August 2024 outlining the debt forgiveness plan, although receiving an email does not guarantee the borrower will qualify for debt forgiveness.

Borrowers had until Aug. 30, 2024, to opt out of debt forgiveness.

The U.S. District Court for the Southern District of Georgia issued a temporary restraining order blocking Biden’s proposed plan on Sept. 5, 2024. That judge let that restraining order expire on Oct. 2, potentially opening the door to allowing ED to carry out the plan.

However, the judge also referred the case to a Missouri court, stating that Georgia was an “improper venue” for the suit. The Missouri judge who picked up the case soon after instituted a similar block.

For now, the timeline for debt relief – or whether debt relief will be allowed at all – remains unclear.

It is still unknown how much debt the federal government may decide to cancel through Biden’s Plan B forgiveness plan.

Many advocates initially anticipated that the Biden administration would put forth a proposal mirroring the previous debt forgiveness plan. That plan would have erased up to $10,000 in federal student loans for all borrowers making less than $125,000 per year, or couples making less than a combined $250,000. People who received at least one Pell Grant while in college were eligible for up to $20,000 in total loan forgiveness.

Formal rulemaking showed that this would not be the case.

ED later revealed that if Biden’s Plan B for student loan relief goes into effect, it will benefit approximately 25 million federal student loan borrowers.

Biden’s plan would fully eliminate accrued interest for 23 million borrowers, according to the department. It would erase all remaining federal student loan debt for over 4 million borrowers and provide debt relief of at least $5,000 to more than 10 million borrowers.

In the case of borrowers “experiencing hardship,” the department stated that it would only grant loan forgiveness to borrowers ED determines to have an 80% chance or more to default on their federal student loans within the next two years.

That includes Parent PLUS borrowers.

Biden’s initial plan for federal student loan debt forgiveness ultimately failed in the U.S. Supreme Court because it relied on the HEROES Act.

Chief Justice John Roberts, writing for the majority opinion, said the HEROES Act gives ED the power to “waive or modify” existing regulations, but not rewrite the system from the ground up. He said the department could only make “modest adjustments” to the student loan system through this act.

“The [loan cancellation] plan has ‘modified’ the cited provisions only in the same sense that ‘the French Revolution “modified” the status of the French nobility’ — it has abolished them and supplanted them with a new regime entirely,” Roberts wrote.

Negotiated rulemaking, meanwhile, offers government agencies much broader powers to rewrite regulations.

A Congressional Research Service report from 2017 outlined that while rulemaking is still subject to judicial review, negotiated rulemaking may make it harder for a court to overturn these regulatory changes. According to the report, changes made through rulemaking are more likely to survive judicial review if the agency can prove that it examined all relevant data and laid out an articulate explanation for any regulatory changes.

“Fundamentally, the … standard requires only that an agency demonstrate that it engaged in reasoned decisionmaking by providing an adequate explanation for its decision,” the report states.

The Legal Services Center of Harvard Law School wrote in September 2020 that the secretary of education has the authority to cancel debt under the HEA.

The Supreme Court overturned the Chevron Doctrine in June 2024, which was an unexpected curveball that could lessen this proposal’s chances of survival.

The June court decision severely curtailed federal agencies’ powers to draft regulations. Essentially, the court said Congress is the primary arbiter in setting policy and regulations, and departments like ED should have a more limited scope of power.

This means the fate of Biden’s debt forgiveness plan may once again lie in the hands of the Supreme Court.

Missouri Attorney General Andrew Bailey, joined by attorneys general from six other states, filed a lawsuit to block this Plan B forgiveness plan on Sept. 3, 2024. It was a lawsuit involving the Missouri attorney general in September 2022 that ultimately went to the Supreme Court to block Biden’s previous debt forgiveness plan.

The case later changed venues from Georgia to Missouri, but chances of debt forgiveness surviving court battles remain slim.