President Joe Biden has announced new measures to avoid a recent adverse Supreme Court decision to help borrowers repay their student loans.
During his remarks at the White House, Biden criticized the Supreme Court’s decision on student loans, calling it a mistake. He also took aim at Republicans, accusing them of opposing relief for working and middle-class Americans.
In the wake of the disappointing Supreme Court ruling on student debt relief, the Biden-Harris administration is taking steps to support students and borrowers. pic.twitter.com/xWFmPOK9OB
— The White House (@WhiteHouse) July 3, 2023
Biden stated that he was basing the plan on a different act, the Higher Education Act of 1965, rather than the Higher Education Student Aid Opportunity Act of 2003 (HEROES Act).
When asked by a reporter if he had given borrowers false hope regarding loan forgiveness, Biden blamed Republicans, saying they had taken away the hope that was provided.
Biden laid out new repayment options and laid out his administration’s broader relief plan as part of a backup plan to prevent the president from reneging on campaign promises that would alienate millions of voters ahead of a campaign challenging re-election.
“During this period, if you can pay your monthly bills, you should,” Biden said from the White House. “But if you can’t, if you miss payments, this ramp will temporarily remove the threat of default or damage to your credit, which can hurt borrowers for years to come.”
Biden had previously chastised the Supreme Court shortly after the ruling, saying, “This fight is not over… My administration’s student debt relief plan would have been the lifeline that tens of millions of North- hard-working Americans as they try to recover one by one. -pandemic of the century.”
“The hypocrisy of Republican elected officials is impressive,” he added. “They had no problem with billions in loans to companies related to the pandemic, including hundreds of thousands and in some cases millions of dollars to their own companies. And those loans were forgiven. But when he went trying to relieve millions of hard-working Americans, they did everything they could to stop it.”
“I believe the Court’s decision to overturn our student debt relief plan is wrong,” he added.
Biden’s backup plan would help students avoid credit damage, if the legal muster passes. Starting October 1, when student loan payments resume after a three-year hiatus during the Covid pandemic, borrowers will have the opportunity to enroll in an “onramp repayment program” temporary of 12 months. This program aims to mitigate the risk of default.
During this period, if borrowers are unable to make payments, the onramp program will temporarily prevent default, which can have long-term negative effects on their credit ratings.
Biden stressed that the Department of Education will not report missed payments to credit bureaus during this period in order to support borrowers who may be struggling as they get back into repayment.
It’s important to note that this plan differs from the student loan pause implemented by former President Donald Trump in 2020, which Biden extended several times. During this ongoing program, no interest accrued as no monthly payments were required.
Additionally, Biden announced changes to limits on the percentage of discretionary income that goes toward student debt. From now on, degree borrowers will not have to pay more than 5% of their discretionary income each month, down from the previous limit of 10%.
Additionally, Biden expressed his administration’s commitment to providing student debt relief to as many borrowers as possible through the Higher Education Act of 1965. He mentioned that Education Secretary Miguel Cardona would have the authority to commit, waive or release loans in specific circumstances.
The Supreme Court rejected the Biden administration’s arguments that its student loan plan was legal under the HEROES Act. This law allows the government to provide relief to student loan recipients during a “national emergency” to ensure that they are not in a worse financial position because of the emergency.
As a senator, Joe Biden had participated in legislation that blocked bankruptcy proceedings for student debt and lifted income requirements for parents and students. Financial observers had warned that the US Congress was placing a ticking time bomb at the heart of the US higher education system, culminating in the current student loan crisis.
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