By abandoning a student debt relief plan, Biden leaves 40 million borrowers in limbo

Amid growing calls for President Joe Biden to cancel all student debt, the administration announced last week that it would be abandoning the plan, ditching it just a few weeks after Jeff Zients, the White House chief of staff, outlined student-debt cancellation as the president’s major goal before leaving office.

Biden promised during his 2020 campaign to cancel at least $10,000 of student debt for borrowers with annual incomes under $125,000. While the Supreme Court blocked that initial proposal last year, the administration subsequently provided $175 billion in debt relief to 4.8 million borrowers. 

All told, though, nearly 40 million borrowers still hold $1.62 trillion in federal student debt, as well as an additional $130 billion in private student-loan debt.

When Biden first announced the plan, legal analysts predicted he would cancel student debt under the Higher Education Act of 1965, which would not require congressional approval. More specifically, it would allow the secretary of education to “compromise, waive, or release any title, claim, lien, or demand” on debtors. It enables the Department of Education to “modify any provision of a loan note” or reduce “a debt in any amount.”

Instead, the administration chose to invoke the HEROES Act of 2003, which allows the education secretary to "waive or modify" financial statutes during national emergencies, such as the Covid pandemic. The White House believed this approach would withstand judicial scrutiny since Donald Trump, during his first tenure as president, had used it to pause debt collection. 

But the Supreme Court, in a 6-3 vote, struck down the plan. Chief Justice John Roberts, writing for the majority, ruled that the "waive or modify" clause only permits "modest adjustments and additions to existing provisions, not transform them." 

Roberts rejected both the secretary of education's authority to waive the debt and the administration's use of the HEROES Act for debt relief, arguing that the law was not intended for such programs. In her dissent, Associate Justice Elena Kagan argued that HEROES does grant such power to the secretary, criticizing the majority for "picking the statute apart, and addressing each segment of Congress's authorization as if it had nothing to do with the others."

She further expressed worry that this decision reflects the increased role of the Supreme Court in governance and policy. She wrote that the majority decision illustrates “the Court’s own concerns over the exercise of administrative power” and that in this role the Court “becomes the arbiter — indeed, the maker — of national policy.”

Following the decision, the White House released a statement saying that the “fight is not over,” assuring that the administration would continue to work on behalf of indebted students. Yet on Dec. 20, administration officials declared they would be abandoning the relief plan.

While Democrats blame the Supreme Court, the Biden administration must shoulder their failure to follow through on their campaign promises, despite having avenues left unpursued.

For instance, Biden officials opted for smaller measures that involved bureaucratic hurdles rather than the more robust HEA. Those obstacles required debtors to wait six weeks for an application, which took even longer to grant approvals. During those lag times, Republican lawmakers found sympathetic judges to adjudicate in their favor.

During the process of providing relief for the four million debtors — and  after the Supreme Court rejected their initial plan — the Department of Education did not notify debtors of their right to file a claim.

Furthermore, the crisis extends beyond young adults. In 2022, 3.5 million Americans over 60 held an aggregate $1.25 billion in student loan debt. In the last 20 years, the number of Americans nearing retirement with student loan debt has increased by 500 percent. They include people who lost money in the stock market following the 2008 crash, and had to take out loans to send their children to college.

On Dec. 11, the Debt Collective, the first union of debtors in the U.S, organized a protest in Washington, D.C., for student debtors above the age of 50. One participant was a social worker whose $145,000 debt included $125,000 in interest alone, In These Times reported. 

The administration could still act on behalf of older borrowers. Section 902.2 of the Federal Claims Standard Act allows the Department of Education to modify debts based on age and repayment ability, though the administration has yet to use that option.

An administration’s approach towards debt forgiveness reveals its commitment to upward mobility. Education has historically been the key mechanism for people to materially improve their lives and build generational wealth.

Student debt is doubly pernicious: it burdens older borrowers while also disproportionately affecting people of color due to systemic inequalities in wages and inherited wealth. These debt burdens can cascade across generations, with some borrowers even forced to forfeit Social Security benefits when unable to repay.

While student debt relief could help address these structural inequalities and counter universities' increasingly exploitative practices, the underlying problem continues to worsen. Over the past two decades, college tuition has grown at twice the rate of the consumer price index, driven largely by expanding administrative costs and lack of regulation.

With tuition now exceeding both median household income and home prices, higher education has transformed from an engine of upward mobility into a barrier that reinforces existing economic divides.

These factors, combined with Biden's retreat from debt relief, are just several examples that prompted Bernie Sanders to recently characterize the U.S. as an oligarchy.

Carter Myers-Brown is a New York-based essayist who writes about labor policy, the environment and social movements.