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The Supreme Court just struck down Biden’s student loan forgiveness plan. Here’s Plan B.

The White House hasn’t given up on loan forgiveness.

Elizabeth Warren stands at a lectern in front of the supreme court. People holding signs saying Cancel Student Debt surround her.
Sen. Elizabeth Warren speaks at a student loan cancellation rally in February 2023.
Jemal Countess/Getty Images
Christian Paz is a senior politics reporter at Vox, where he covers the Democratic Party. He joined Vox in 2022 after reporting on national and international politics for the Atlantic’s politics, global, and ideas teams, including the role of Latino voters in the 2020 election.

Though the Supreme Court ruled 6-3 on Friday to strike down President Joe Biden’s plan to forgive up to $20,000 in student loans, student debt relief might still be happening, albeit a little slower than with the original plan.

Speaking from the White House hours after the decision, the president announced his Plan B: to use the Higher Education Act, a 1965 law that governs most federal student loan programs, to provide the relief that the Court blocked.

“I’m announcing today a new path consistent with today’s ruling to provide student debt relief to as many borrowers as possible as quickly as possible,” Biden said. “We will ground this new approach in a different law than my original plan, with the so-called Higher Education Act.”

Biden also announced an alternative to the pause on student loan repayments that was scheduled to restart at the end of the summer: a temporary 12-month “on-ramp” for repayment, from October 1, 2023 to September 30, 2024, during which missed loan payments will not harm borrowers’ credit and the threat of default will be temporarily removed.

Progressive activists and legal scholars have long argued that a separate pathway exists for justifying loan forgiveness, even after an unfavorable Supreme Court ruling. Advocates have long said the options are there for the Biden administration — if it moves quickly and forcefully.

“We like to say that there’s a Swiss Army knife for canceling student debt — if they’ve taken away the tweezers, use the screwdriver; if someone takes your hammer, use a wrench,” Astra Taylor, a co-founder of the debtors union called the Debt Collective, told Vox in early June. “There’s other ways to do this. Republicans have been terrible, very adversarial, but ultimately the Democrats and President Biden are not as powerless as they like to pretend they are.”

The Biden administration remained quiet leading up to the Court’s decision, usually telling reporters it is confident that its plan will hold up in court. (The White House declined to comment before the decision was released.) But Biden seemed defiant in his address, saying, “This new path is legally sound. It’s gonna take longer, and in my view it’s the best path that remains.”

A possible Plan B for this kind of broad debt relief, meanwhile, isn’t totally new — it’s long been championed by the likes of Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer. It would involve resting the case for debt forgiveness on a broad provision of a law pertaining to higher education signed more than half a century ago. Whether it would withstand a court challenge is an open question, of course — but there’s only one way for the administration to find out.

So what happens now?

The first thing to understand about how broad student loan cancellation could happen again despite a Supreme Court ruling against the Biden plan is that different sources of legal authority exist for such a policy objective.

The Biden administration’s current program depends on a specific provision in a post-9/11 era law that gave the secretary of education the power to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs” under the Higher Education Act of 1965 (HEA), which governs federal student loan programs.

That law, known as the HEROES Act of 2003, gave the Education Department this specific “waive or modify” authority to act for people on active duty or National Guard duty during a war, military operation, or national emergency; for people who lived or worked in a region affected by a national emergency; or for those who suffered an economic hardship from one of those crises.

In August 2022, the White House announced its interpretation of the HEROES Act to include debt cancellation, noting that the Covid-19 pandemic was a national emergency, that “waive or modify” applied to borrowers’ debts, and that, therefore, the administration could act without congressional approval to make sure borrowers affected by the pandemic would not be worse off financially because of their loans.

This legal justification for student loan cancellation is pretty cut-and-dried, as Vox’s Ian Millhiser has previously explained. But it wasn’t always the go-to theory for justifying broad debt relief.

Early advocates for student loan relief have long lobbied for the White House to use specific provisions within the HEA to forgive loans by executive action within the Education Department.

If the Court rejects the HEROES Act argument, the White House could invoke the HEA’s “compromise and settlement” authority — a line in the 1965 law that advocates and legal scholars like Luke Herrine, an assistant professor of law at the University of Alabama, have argued gives the secretary of education broad authority to “compromise, waive, or release’’ federal student debt.

The HEA essentially established the foundations of the modern American college funding system (including grants, federal loans, and repayment plans), and gave the secretary of education the authority to collect debts. That power to collect debt, theoretically, means the department has the authority to forgive all that debt, too.

The federal government has already invoked this power before to forgive debt through the Public Service Loan Forgiveness program — a debt repayment and forgiveness program for borrowers who work for a nonprofit or in public service in federal, state, tribal, or local government — and other income-based programs, as well as to settle cases with individual debtors, like the $6 billion settlement in Sweet v. Cardona, a class-action lawsuit in which borrowers claimed they were misled by mostly for-profit colleges.

Those forms of settling and forgiving debt are “the clear, unambiguous use case,” Herrine told Vox, since the government has already successfully invoked this compromise and settlement authority. “But the statutory language doesn’t explicitly limit the authority in any way. So the question is, ‘If there aren’t these explicit limits, how do you understand what the limits on the authority are?’”

The maximalist view is pretty simple: The authority given to the secretary of education is broad, and leaves at their discretion how to readjust or reprioritize debt collection and cancellation.

How would Plan B work?

Cancellation is possible even through a few narrower views of this executive authority, Herrine says, via two plausible justifications.

The first involves the Education Department making the case that to properly continue to collect on debts going forward and avoid a cycle of defaults and outstanding unpaid debts once the repayment pause ends, the government would have to cancel a given amount of debt upfront and make it easier to collect on new debt. “It’s a sort of short-term loss for a longer-term gain,” Herrine said.

The other main justification comes from the fact that the Education Department has already notified at least 16 million people that they were eligible and approved for some kind of debt cancellation under the first Biden plan. Applications were submitted in November 2022, approvals given within the month, and emails sent out to borrowers.

“Once you tell somebody that ‘We just have to do a few more things and your balance is going to be reduced,’ have you effectively changed the terms of the student loans? Or even if you haven’t officially done that, have you done something that that person might reasonably have relied on and changed their financial circumstances such that they can, if you try to collect that amount on them in court, assert that as a defense?” Herrine said.

“If that’s the case, then the Department of Education would be basically doing that cancellation or something close to that amount of cancellation to prevent these lawsuits,” he added.

Under that justification, cancellation of debt would be a way to get ahead of legal challenges by borrowers who could have received that help if the government had not changed course midstream.

The rollout of these versions of debt cancellation would also look different from the original Biden plan. Unlike the HEROES Act authority, a plan based on the Higher Education Act could be issued either as a regulation, which would be subject to a negotiation process and a 30- to 60-day public comment and congressional review period, or as an “order,” which would be a backward-facing application of existing authority. According to a notice posted to the Education Department’s website, it appears the White House will be pursuing the regulation/rule-making negotiation process.

These distinctions get into the weeds a bit, but the difference is important, legal scholars like Herrine argue. A regulation would be bound by an established rulemaking process that could open it up to additional legal scrutiny and challenges, and could still be overturned by Congress.

An order — which is how some progressive advocates would prefer a new plan be issued — would require a few more legal arguments and coordination with other executive agencies and departments, and could still face legal challenges, but could lead to faster implementation of loan cancellation — and if it ends up in the courts after, it would push them to decide if they can reimpose forgiven loans.

That difference in speed is important to many advocates. The time lag between the Biden administration’s announcement of its forgiveness plan, the rollout of an application, and the approval of relief is one of the main criticisms many advocates for student loan forgiveness have of Biden’s original plan; it took too long to implement, giving opponents ample opportunities to prepare and launch legal challenges.

If the Biden administration is aggressive and quick in finding alternative paths for loan forgiveness, it could force the question of how to handle the student loan crisis back to the courts — right as we head into an election year.

Update, June 30, 4:50 pm: This story was originally published on June 15, before the Supreme Court’s decision. It has been updated to reflect that the Supreme Court struck down Biden’s loan forgiveness plan and incorporate details of the White House’s plan.

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