As the Supreme Court rejected President Biden’s plan to forgive student loans, the White House quickly put forward other ways to assist borrowers.
The Biden administration has started a regulatory process to investigate the possibility of offering debt relief under the authority of the Higher Education Act of 1965.
White House Takes Swift Action to Aid Student Loan Borrowers Post-Supreme Court Ruling
The Education Department has also finalized a new income-driven repayment plan, dubbed the most affordable repayment plan in history, and a temporary 12-month on-ramp repayment scheme.
These actions directly respond to the Supreme Court’s decision and are intended to lessen the financial burden that borrowers must bear.
Using the regulatory process permitted by the Higher Education Act of 1965, the Biden administration is aggressively working to give debt relief.
To provide as many middle-class and working-class borrowers with an alternate route to debt relief as feasible, the Education Secretary has started a rule-making process.
To gather input and feedback, a virtual public hearing has been announced for July 18, with stakeholders invited to submit written comments.
Following the hearing, the Education Department will address the identified issues and conduct negotiated rule-making sessions in the coming months.
Clarity on Forgiveness Plan Parameters: The White House factsheet did not explicitly state whether the Biden administration is pursuing the same forgiveness plan parameters previously struck down by the Supreme Court.
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Pursuing Debt Relief under the Higher Education Act
The original plan involved forgiving $10,000 for individuals earning below $125,000 and households with incomes less than $250,000.
An additional $10,000 in forgiveness was allocated for recipients of need-based Pell Grants.
Clarification on the specific debt relief parameters being pursued under the Higher Education Act is currently awaited from the White House press office.
As part of their efforts to assist borrowers, the administration unveiled a temporary 12-month on-ramp repayment program.
This program ensures that borrowers will not face penalties for late, missed, or partial payments when they resume repayment in October.
Although payments will still be due, and interest will continue to accrue, the interest will not capitalize at the end of the on-ramp period.
Importantly, missed payments during this period will not be reported to credit bureaus, resulting in default, or leading to collection agency referrals.
While the administration provides relief measures, it encourages borrowers who can afford to make their payments to do so.
This approach aims to strike a balance between offering assistance to struggling borrowers and maintaining the stability of the student loan system.
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