Student loan forgiveness — one of the Biden administration’s most high-profile economic initiatives, aimed at the millions who carry student loan debt — has encountered legal setback after setback.
With the Supreme Court expected to rule on the administration’s teetering student loan forgiveness program before the end of the month, the White House is looking for a workaround to deliver on a promise that was a highlight of Joe Biden’s presidential campaign.
The court will decide whether the Department of Education has the power to pick up the tab for up to $20,000 in student loans for millions of people. If the discussion during oral arguments is any indication, the high court’s conservative majority is leaning toward ruling that the agency has overstepped.
If the program goes down for exceeding executive or administrative authority, the Biden administration has indicated that it will try to shift the debt away from the original borrowers through a different legal route.
This is especially important to Biden as the debt ceiling compromise he struck with Republicans requires that student loan payments resume by the end of summer after having been suspended for three years.
In one possible alternative, the administration could enforce broad-based debt restructuring using DOE’s authority for “compromise and settlement,” according to reporting from The Wall Street Journal.
Though this type of administrative action is usually applied on a case-by-case basis, the administration’s lawyers have recently made the case for applying it to broad swaths of student loan borrowers.
The administration can buy time to come up with a permanent plan by temporarily pausing the penalties for failing to make payments for a period of months and possibly up to a year, per the WSJ.
The administration is also considering more targeted ways of accomplishing debt relief based on expanding pre-existing programs, the WSJ reported.
Several debt relief programs already exist including those for public service, the disabled, and victims of for-profit school fraud. The administration can also consider easier and wider access to income-based payment plans, per the WSJ.
An alternative plan has been put forth by the Pacific Legal Foundation (PLF), which employs and represents Frank Garrison, who is challenging the administration in court over the program.
PLF argues that a state-based approach would allow Garrison to use an existing Public Service Loan Forgiveness program to achieve debt relief without an income tax hit in Indiana, whereas the Biden plan is taxable under current law.
