Major Student Debt Relief Redux

Update 770 — Major Student Debt Relief Redux
Biden’s Effort to Make Good on 2020 Promises

On Monday, President Biden announced a plan to provide an estimated $84 billion in new debt relief for nearly 30 million of the 43 million borrowers facing $1.6 trillion in outstanding federal student loans. The effort seeks to make good on his 2020 campaign promise to deliver relief to the millions indebted. The announcement comes as Biden faces a significant dropoff in polling among younger voters, 65 percent of which supported him in 2020.

The plan introduced this week is not Biden’s first proposal to address student debt. But the Supreme Court nullified his last major effort, ruling in July 2023 that the plan was unconstitutional under the dubious Major Questions doctrine. What is in the plan? How does it differ from the relief plan blocked by the Court? Is this plan likely to survive the inevitable legal challenges? Or is it the effort that counts politically, given that a court ruling on the plan is not likely to come until after the November elections? See below.



President Biden’s new student debt relief program, announced Monday, is nothing if not ambitious. If implemented, the plan would fully eliminate accrued interest for 23 million borrowers, cancel the full amount owed for four million borrowers, and provide $5,000 in direct relief to more than 10 million borrowers. Notably, no estimate for the total cost of the plan has been provided so far, but inferences can be made that costs could reach or exceed $200 billion. The plan comes in addition to Biden’s several prior initiatives seeking to make it easier for borrowers to pay their loans (rather than forgiving them outright — such as the Saving on a Valuable Education (SAVE) program. Further details on the plan’s components will be published for public comment in the coming weeks. 

The plan has been tailored to avoid the pitfalls that doomed the President’s previous student debt relief plan in Biden v. Nebraska, providing relief to a narrower set of borrowers and anchoring the relief in a different authorizing statute. This week’s plan builds on his previous student debt relief initiatives, which have so far provided relief of $146 billion to nearly 4 million borrowers, including:

  • $62.5 billion for nearly 872,000 borrowers through the Public Service Loan Forgiveness (PSLF) program.
  • $45.7 billion for 930,500 borrowers using income-driven repayment (IDR) plans, including $1.7 billion forgiven for borrowers who have been paying off their loans on an IDR plan for 20 years or more.
  • $22.5 billion for 1.3 million borrowers who were defrauded by their schools.
  • $14.1 billion for 548,300 borrowers who have a permanent disability.

The State of Student Debt and How We Got Here

As of 2023, student loan debt in the United States totaled $1.727 trillion. The vast majority of this balance, about $1.602 trillion for 43.2 million borrowers, is for federal student loans. The average federal student loan balance is $37,088 per borrower for those with graduate and undergraduate debt. The federal student loan debt balance has increased nearly 400 percent since 2000, peaking in 2022 before dropping slightly. It drags down economic growth in general and the well-being of student loan borrowers specifically. Student loan debt is the second largest form of consumer debt, trailing only mortgages. Economists have speculated that consumer debt drags down consumer spending and leads to borrowers putting off or altering major decisions such as buying a home, making future career plans, starting a business and even getting married. 

Source: Education Data Initiative

Today’s student loan debt yoke has been decades in the making. During the 1980s, both the federal government under President Reagan and local governments began to cut government funding for higher education, leading institutions to raise tuition. At the same time, many began to speculate that the increase in financial aid itself contributed to the rising cost of higher education, as the rise in student loans backed by the government allowed colleges and universities to raise their tuition even further. 

The 1990s and 2000s saw several signal developments regarding student loans. Via passage of the Student Loan Reform Act of 1993, the federal government effectively reduced the role of Sallie Mae, the government-sponsored enterprise that had used US Treasury funds to buy government-backed student loans from banks. Instead, the federal government began providing William D. Ford Federal Direct Loans, the successor of the Guaranteed Student Loan program allowing the federal government to issue loans directly to students in addition to backing bank-issued loans.

For-profit institutions of higher learning saw a 329 percent increase in enrollment from 2000 to 2010, increasing the demand for student loans. During the 2007 Great Recession, public funding for higher education saw cuts at the state level while funds at the federal level increased due to a rise in Pell Grants. From 2008 to 2018, tuition for four-year public colleges increased 37 percent — though net tuition and fees for undergrads after grant aid stayed relatively constant overall — while state funding for two- and four-year public colleges fell by over $7 billion since 2008.

Reducing Student Debt: Administration Efforts to Date 

Biden’s initial plan, announced in August 2022, would have provided $10,000 in forgiveness for most borrowers and up to $20,000 in total forgiveness for those who had received a Pell Grant. This plan would have provided relief for borrowers earning under $125,000 per year for individuals and $250,000 for couples. Approximately 43 million borrowers were expected to be eligible for debt forgiveness under this plan, with total relief exceeding $400 billion.

This plan was challenged almost immediately by six conservative state Attorneys General and eventually struck down by the Supreme Court in June 2023. In Biden v. Nebraska, Chief Justice Roberts and five other conservative Justices ruled that the Biden Administration had overstepped the authority given to the Secretary of Education by the Higher Education Relief Opportunities for Students (HEROES) Act to “waive or modify” laws and regulations governing federal student loan programs. 

Roberts rejected the Administration’s argument that the student debt relief plan was authorized by and consistent with the purpose of the HEROES Act, to ensure that student borrowers impacted by a national emergency were not placed in a worse financial position because of it. The majority blocked Biden’s plan, invoking the “Major Questions doctrine,” and deciding that if an agency like the Department of Education seeks to determine an issue of major national significance, it must be supported by clear congressional authorization. 

Many legal experts criticized SCOTUS’s use of the Major Questions doctrine in the Nebraska case, arguing that the majority used the doctrine in this case and others to examine any significant action taken by a federal agency and decide whether Congress gave it specific authorization. The doctrine could hamstring federal agencies’ ability to exercise appropriate authority on major issues and requires that Congress be explicit about the powers it delegates to a degree largely unprecedented. Also, the doctrine does not specifically define “an issue of major national significance,” which could greatly inflate courts’ authority over actions taken by the executive branch implementing the law. 

The Basis for President Biden’s New Plan

For this newest push to provide student debt relief, the Biden Administration is relying on the 1965 Higher Education Act for its legal authority — which allows the Secretary of Education to compromise, waive, or release loans — rather than the HEROES Act.

The plan is also structured to address narrower sets of borrowers, instead of the blanket loan forgiveness that Biden’s previous plan attempted, in the hopes of not overstepping the Education Department’s authority. According to some legal experts, parts of the plan, such as relief for borrowers who are already eligible for pre-existing programs, are on sounder legal footing than provisions of the previous plan because it distributes benefits Congress wanted people to get using existing regulatory provisions.

Still, the new plan will almost certainly see a challenge by conservatives in court and it is unclear that it will hold up to legal scrutiny. Using a different law to justify the Department of Education’s actions on student loans might still represent an overreach of the agency’s authority in SCOTUS’s eyes as per the Major Questions doctrine. Additionally, opponents are likely to argue that the plan is unfair to those who paid back their loans already, those who paid tuition without a student loan, and those who did not go to college at all to avoid borrowing. That said, President Biden is using this new plan to clarify that he is taking student debt forgiveness seriously. President Biden’s new plan calls for canceling debt outright for: 

Borrowers with excessive interest

President Biden’s plan would eliminate up to $20,000 in accrued interest for an estimated 25 million borrowers who owe more than they originally borrowed due to unpaid interest. In addition, borrowers could get their interest wiped away if they are enrolled in an income-driven repayment (IDR) plan and their incomes fall below a threshold — $120,000 for individual borrowers and $240,000 for married borrowers. The Administration estimates that 23 million borrowers will have their balance growth forgiven entirely.

Borrowers eligible for existing forgiveness programs

The Administration also seeks to cancel debt for around 2 million borrowers who are otherwise eligible for relief through the SAVE Plan, the Public Service Loan Forgiveness program, or other forgiveness opportunities but have never applied. The Administration would allow the Department of Education to use data it has on hand to identify borrowers otherwise eligible for this relief without requiring them to apply for the aforementioned programs.

Borrowers with long-standing debt

The plan would cancel debt for borrowers who have been paying back their undergraduate student debt for 20 years or more and graduate-school student debt for 25 years or more, in alignment with the maximum amount of time borrowers are meant to be in repayment in IDR plans. The Biden Administration estimates that 2.5 million borrowers would receive relief through this policy. Borrowers would not need to be on an income-driven repayment plan to qualify.

Borrowers in low-financial-value programs

The Biden Administration’s plan would cancel student debt for loans associated with “low-financial-value programs,” or loans associated with institutions or programs that lost their eligibility to participate in the Federal student aid program or were denied recertification because they cheated or took advantage of students.

Borrowers experiencing hardship

The Biden plan would also expand on previous relief plans for borrowers experiencing significant financial hardship. Financial hardship includes significant cost burdens from expenses such as rent and childcare. While the details are not yet available, the Administration promised to cancel student debt for borrowers experiencing financial hardship “in their daily lives that prevent them from fully paying back their loans now or in the future.”

Student Debt Forgiveness and the 2024 Election

During the 2020 election campaign, President Biden promised to forgive at least $10,000 in student debt for borrowers earning under $125,000 a year. President Biden’s ongoing attempts to forgive as much student debt for as many borrowers as possible, along with structuring his current plan on sounder legal ground as a response to the Nebraska decision, ties back into fulfilling this key 2020 campaign promise as the 2024 election approaches. 73 percent of voters believe the government should take some action on student loan debt, and 50 percent support the partial or complete elimination of student loans.

Student debt forgiveness has broad appeal among young voters. 53 percent of Gen Z respondents tell pollsters that they or someone in their household had student debt, including 46 percent of younger millennials and 39 percent of older millennials. It should come as no surprise, then, that 59 percent of Gen Z respondents in swing states said they supported Biden’s decision to cancel $146 billion in student loans. 

But Biden’s actions on student debt forgiveness to date do not seem to be making much of an impression on young voters, with the above poll showing that 43 percent think that Biden is doing too little to address student loans. Per NBC exit polls, 65 percent of voters aged between 18 and 24 voted for Biden in 2020. By contrast, recent polls show that young voters are not as enthused about Biden today. A recent poll showed Trump leading Biden among Millennial and Generation Z Americans by 2 percent. As the 2024 election will almost certainly be close again, President Biden cannot afford to lose ground with a voting block that provided overwhelming support in 2020. 

If Biden wants to make it clear that he is looking after the interests of young voters, pursuing large-scale student debt forgiveness makes sense, even at the risk of support from those excluded in the plan, such as those who paid their debts off. Even if the courts ultimately shoot down Biden’s newest plan or it faces other opposition, he can still make the point that he is taking on the outsized student debt forgiveness issue seriously and make his case to regain support from Gen Z and Millennial voters.