In August 2022, the Biden administration announced a plan to cancel up to $20,000 in student loan debt for eligible borrowers. The plan, legally challenged almost immediately, was struck down in early July by the Supreme Court, ruling the Executive had overreached its authority. Then, on July 14, the Biden administration announced its latest moves: using the negotiated rulemaking process under the Higher Education Act to forgive student loans, revising income-driven repayment plans, and providing more than 800,000 qualifying borrowers with nearly $40 billion in loan forgiveness. On the latest episode of Policy Outsider, Rockefeller Institute Director of Education Policy Studies Brian Backstrom and Fellow Rebecca Natow discuss the Supreme Court’s ruling, the Biden administration’s latest plan, and what comes next in the lengthy saga of addressing the nation’s student loan debt crisis.


Brian Backstrom, director of education policy studies, Rockefeller Institute

Rebecca Natow, fellow, Rockefeller Institute & associate professor of educational leadership and policy, Hofstra University

Learn More:

States Step In: Relieving the Burden of Student Loan Debt

Student Debt In New York State: A Compendium of Work by the Rockefeller Institute of Government

State-Sponsored Child Investment Accounts: Helping Parents Save for Collage, Helping Students Avoid Loan Debt

  • Transcript

    Transcript was generated using AI software and may contain errors. 

    Alexander Morse  00:00

    Hey there and welcome to Policy Outsider presented by the Rockefeller Institute of Government. I’m Alex Morse. Biden vs. Nebraska is one of two recent United States Supreme Court cases that ultimately denied the Biden administration’s student debt relief plan to forgive up to $20,000 in student loan debt, to make sense of the decision, and what to expect from the executive and legislative branches to address the student debt crisis. We have Brian Backstrom Director of Education Policy Studies at the Rockefeller Institute, and Rebecca Natow, fellow at the Rockefeller Institute and Assistant Professor of Educational Leadership and Policy at Hofstra University. Brian and Rebecca detail why the original student debt relief plan failed at the Supreme Court and outlined the rulemaking roadmap the Biden administration is pursuing to find solutions and provide relief to student borrowers. Coming up next.

    Alexander Morse  01:13

    Rebecca Natow, Brian Backstrom, thank you so much for joining today.

    Rebecca Natow  01:16

    Thank you for having me on.

    Brian Backstrom  01:17

    So very happy to be here.

    Alexander Morse  01:19

    Let’s talk about the recent United States Supreme Court decision on Biden vs. Nebraska that ruled the Biden administration did not have the authority to forgive student debt under the HEROES Act. Is the decision what you expected?

    Brian Backstrom  01:32

    I think so. A lot of the legal scholar commentary beforehand really centered on the fact that this whole court case had to pass the test of standing. If it passed test of standing, it was probably too much of an overreach by the Biden administration too significant of a program. And quite frankly, the Congress had already made comments and took actions that indicated that this was their purview more than the executive branch’s purview. But it really did center around whether the plaintiffs had proper standing to sue. And you saw that in the dissent by Justice Kagan, which I actually thought was pretty wonderful dissent. She said, basically, that this was a perfect example of judicial overreach. But she didn’t have a majority opinion. She had a dissenting opinion and the majorities, countered with no, this is really an executive overreach. And that’s where we ended up.

    Rebecca Natow  02:30

    Yeah, and I’ll add to that, that it was a decision that was expected in light of the Supreme Court’s recent history of reining in executive action without a clear statutory authorization, including last summer’s decision by the Supreme Court in West Virginia vs. the EPA, in which the Supreme Court held that under the major questions doctrine, whenever an agency is taking an action of profound economic and political significance, there must be a clear authorization from Congress in order to do that. And we now know from Biden vs. Nebraska, that the Supreme Court considers the large scale federal student loan cancellation policy to be a major question under this doctrine.

    Brian Backstrom  03:11

    And it was. The proposal as it was structured by the Biden administration affected about 98% of student borrowers and cost an estimated and I think it’s a low estimate of $430 billion. And you had even Speaker Nancy Pelosi saying, in advance of the ruling that she didn’t think that the executive branch had this authority to cancel student debt of this magnitude. So all of the precedents and all of the current policies seem to line up that if they passed the test of standing, it would fall.

    Alexander Morse  03:49

    So it’s been a few weeks since the United States Supreme Court decision, and the Biden administration has already taken at least a couple of actions in response. What’s happening now?

    Brian Backstrom  03:58

    The Biden administration wanted to soften the blow of return to payments. One of the things they did is they said for the first 12 months that student loan repayments were required from October 2023 to September 2024. There wouldn’t be any harsh penalties if people missed a payment, they wouldn’t be referred to debt collectors, they wouldn’t be determined to go into default. They encourage people to use the time to make sure that they’re making payments, but they said we’re not going to take any harsh penalties for that first transition period back to regular repayments. I think one of the more significant moves that the Biden administration also did is it restructured income-based repayment programs. And they created a new program that was much more generous, called the SAVE program. That’s an acronym for saving on a valuable education that cut in half the percentage of discretionary income that was used to make calculation of how much borrowers would have to repay It was estimated to save on average $1,000 for every borrower. It raised the amount of non discretionary income that was used to calculate how much payments would be for borrowers. And it forgave loans in 10 years instead of the normal 20, for borrowers who had less than $12,000, in borrowed loan balance. That was really kind of targeted to wipe out the debt of community college borrowers. So it was a creative solution to providing the relief that the Biden administration want to do. And there’s also other provisions, there’s no growth in the amount of debt based on interest payments that weren’t made. So if the income based repayment program calculates your monthly repayment at $0, you’re not going to be accruing interest on interest. So a lot of very reasonable, very smart approaches to providing student loan relief.

    Alexander Morse  05:58

    Rebecca, as part of the Biden administration’s new program for addressing student loan debt, there’s going to be some regulatory or rulemaking changes. What are some of those and how is that going to play out?

    Rebecca Natow  06:10

    Right. So the Biden administration indicated the same day as the Supreme Court decision came out and Biden vs. Nebraska that they were going to undertake negotiated rulemaking under the Higher Education Act to move forward with student loan forgiveness under that statute. Negotiated rulemaking is something that is required by the Higher Education Act whenever there is a regulation that’s going to affect those Title IV  student aid programs of which the student loan, the direct loan program is part of that. So that’s going to be a much lengthier process. Negotiated rulemaking refers to bringing the affected constituency groups together with the Department of Education, so students, student loan debtors, consumer advocates, loan servicers, all different types of higher education institutions. Anybody who the department reasonably believes will be affected by the forthcoming regulation is going to have some representation in negotiated rulemaking. The first step in that process is to hold public hearings, which the Department has already done. Those are just basically a listening session where anybody can sign up to speak for a few minutes with Department of Education officials tell them their thoughts on the forthcoming regulation, what specific areas they think the negotiations should cover, and maybe even some areas of constituency groups that need to be represented at the table. The next step will be for the Department of Education to issue a call for nominations of negotiators. And at that time, they’ll also based on what they heard at the public hearings, they’ll also indicate some specific, more specific areas of regulation that they expect to handle with this forthcoming regulation. I expect that to be pretty narrow, the Biden administration wants to move forward with the question of student loan forgiveness. So it’s not going to be one of these really complicated regulations with a lot of different parts, it will be pretty focused on student loan forgiveness. Once the nominations come in, the Department then selects the individuals who will be present for those negotiations with the Department. They typically pick one primary one alternate negotiator for each of the constituency groups. And then they’ll meet for several days at a time over a course of several months with a few weeks break in between to negotiate the language of the proposed regulation. What the goal of negotiated rulemaking is for the department and the negotiated rulemaking participants to come to a consensus on what that proposed regulation language is going to be. Consensus in this context means everybody agrees. So all of the negotiators have to be on board with what that Notice of Proposed Rulemaking NPRM, we’ll say, even the department’s negotiator. So if even one party dissents, and that could be the Department of Education itself, then the Department of Education gets to write that NPRM on its own. So if there’s consensus, the Department uses that language, if not, the Department will write the regulation on its own, although research that I’ve conducted shows that the Department does consider those conversations and negotiated rulemaking and takes those conversations into account, even if they don’t borrow the exact language that was talked about during negotiations. And once that proposed regulation is published, then there’s another 30 to 60 day comment period, where the Department receives comments from the public, written comments, and there will be a lot of them. Some of the more controversial regulations have had up to 90,000 or more comments, I expect this one to have even more than that, because the public hearings that have already happened already received more than 17,000 comments, and that’s highly unusual for this process to have so many comments. So there’s a lot of interests and the Department has to read all those comments and has to respond to them. Not individually, they can they can group them into categories, but has to respond to them in the preamble of the final regulation, indicating what types of comments came in, and why or why not the Department is making changes in response to those comments. And then after that, once the final rule gets issued, there’s still another waiting period before the regulation can actually take effect. So this is going to be quite a lengthy process and certainly a much longer process than what we saw last summer during the loan forgiveness under the HEROES Act.

    Brian Backstrom  10:21

    I think I saw that current estimates are that this process will take at least a year. So it is a long process in the making. Well, one of the things that the Biden administration announced and show you some of the magnitude of this, the whole issue involved is that they’re trying to correct some errors that they’ve seen in income-based repayment programs. There were payments that students had made that hadn’t been counted towards their loan forgiveness process. And I think that that more than 800,000, borrowers had had some sort of miscalculation by their loan service providers. Fixing that they estimate will offer forgiveness in the range of $39 billion. And it’ll wipe out current debts of more than 800,000 student loan borrowers in New York alone, we’re talking about 42,000 student loan borrowers that will see about $2 billion in student loan relief just from making these corrections that should have been made all along.

    Alexander Morse  11:27

    So that’s a nice overview of what to expect next under this rulemaking process, if lengthy, and may be a little complicated. So I’m curious as to why this is the course of action being pursued now as opposed to originally. Brian, you didn’t think that the Biden administration had standing pursuing student debt relief under the HEROES Act, but the Higher Education Act may be a better approach. So why are they pursuing the Higher Education Act now as opposed to last year?

    Brian Backstrom  12:00

    Well, the HEROES Act, and that was the subject of a lot of the court’s ruling is the HEROES Act, allowed for modification. It didn’t allow for this type of overhaul substantial new program. Under the Higher Education Act, they have a provision called compromise and settlement that seems to give the Secretary of Education much broader authority to revamp the entire project. Matter of fact, Senator Chuck Schumer and Senator Elizabeth Warren, back in February 2021, outlined a strategy for providing loan forgiveness through the Higher Education Act. You’ll have to ask Biden administration to find out exactly why they pursued the HEROES Act. But I think one of the primary reasons that at least it looks like to me is that they wanted quick action. And so they wanted to avoid this, they wanted to use the the speedy action they could do under the HEROES Act. And quite frankly, the multiple times that student loan repayment requirements had been paused, was all done under the HEROES Act. And so this was sort of a next step, it was just too big of a step and too far outside of the lines. So I think that the using the Higher Education Act, as sort of was was indicated early on by some observers, is the way to go.

    Alexander Morse  13:20

    So let’s talk about the fate of this new student debt relief plan under the Higher Education Act. Is it possible that we can see this wind up at the Supreme Court again and deny the relief?

    Rebecca Natow  13:33

    I can definitely see that happening. In fact, I would be surprised if there wasn’t a lawsuit almost immediately, once the final rule is issued, seeking an injunction and arguing that, again, the Biden administration, the Department of Education did not have the authority to release student loan debt this way. It is a different statute, as Brian indicated, there’s different language, including that that provision also says that the Department of Education has the power to release a claim against it, which is a bit more specific and different from modify, which was the language under the HEROS Act. But at the end of the day, it’s going to come down to that major questions doctrine. Was there a clear congressional authorization, assuming the makeup of the Supreme Court doesn’t change, there’s a decent chance that we might see that same result should just go to the Supreme Court again.

    Alexander Morse  14:20

    And we also mentioned that the rulemaking process is quite lengthy and could be a year or maybe longer and that might extend beyond the 2024 presidential election. What could happen if Biden fails in his reelection bid?

    Rebecca Natow  14:33

    Right. So I think that it’s likely that we’ll see a final rule before the 2024 election. I think we could see that as early as next summer. But if there is an injunction and it doesn’t, it doesn’t actually take effect until after that election. And then if Biden were to lose reelection and the Republican President were to come in, then they could use the rulemaking process again to rescind that regulation, and not have the loan forgiveness go into effect at all.

    Brian Backstrom  15:00

    I think one of the reasons that this question is coming up is because it is messy because of the approach being taken by the executive branch to enact such dramatic rules. The Supreme Court decision here and Biden V. Nebraska basically said this is a congressional decision. And I think that no matter the outcome of the presidential election, Congress might decide, you know, this really does belong with us. And we’re the ones that are going to make new policy, we’re the ones that are going to make a new program. So it may simply be that whether Biden gets reelected, whether new Democrat president gets elected, whether a new Republican gets elected, that this switches from the executive over to the legislative branch.

    Alexander Morse  15:48

    Rebecca Natow, Brian Backstrom. Thank you so much for your time explaining the Supreme Court’s decision on student loan relief and what to expect moving forward.

    Rebecca Natow  15:56

    Thank you so much.

    Brian Backstrom  15:57

    Yeah, thanks. Appreciate it.

    Alexander Morse  16:04

    Thanks again to Brian Backstrom, Director of Education Policy Studies at the Rockefeller Institute, and Rebecca Natow, Fellow at the Rockefeller Institute and Assistant Professor of Educational Leadership and Policy at Hofstra University for sharing their insights into the recent United States Supreme Court decisions on the Biden administration’s student debt relief initiative. If you’re interested in learning more about student debt, check out the episode description for resources on federal and state policies designed to ease debt burdens and how students and parents can prepare the cost of college. If you liked this episode, please rate subscribe and share. It will help others find the podcast and help us deliver the latest in public policy research. All of our episodes are available for free wherever you stream, your podcasts and transcripts are available on our website. Special thanks to Rockefeller Institute staff, Joel Tirado, Heather Trela and Laura Schultz for their contributions to this episode. Thanks for listening. I’m Alex Morse. Until next time.

    Alexander Morse  17:35

    Policy Outsider is presented by the Rockefeller Institute of Government. The public policy research arm of the State University of New York. The Institute conducts cutting-edge nonpartisan public policy research and analysis to inform lasting solutions to the challenges facing New York state and the nation. Learn more at Rock or by following at Rockefeller inst. That’s Rockefeller i n s t on social media. Have a question comment or idea? Email us at [email protected].

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