Biden’s latest student debt woes are just the beginning

President Joe Biden’s election-year plan to ratchet up relief for millions of student loan borrowers hit a major legal roadblock this week, leaving progressive groups scrambling to get the White House to take new, immediate action to stem the fallout.

The unexpected setbacks in court blocked key parts of a new program offering borrowers more generous repayment terms. They also landed almost a year after the Supreme Court knocked down Biden’s first, more sweeping, attempt at debt forgiveness and sting more coming from two Obama-appointed federal judges.

The rulings are the latest win for Republican state attorneys general who are fighting every step of the administration’s efforts to discharge debt and provide subsidies to borrowers. And the sudden halt to parts of the program may also presage a summer of confusion for borrowers.

Within hours of the decisions, the Education Department was forced to begin reversing its plans to significantly lower monthly payments for millions of people that had been set to begin next week. The rulings will also deprive the White House of one of the tools Biden uses to make regular announcements about canceling batches of debt.

Biden’s student debt relief is a centerpiece of his effort to energize important parts of his base where he’s seen a softening of support, particularly among young and Black voters. Now progressive groups are urging the Biden administration to stave off the political damage of the rulings by freezing student loan payments across-the-board the way he did through the height of the pandemic.

“The good news for the president is that this overreach by these Republican attorneys general has given him a winning political hand,” said Mike Pierce, who leads the Student Borrower Protection Center, one of the advocacy groups that has pressured Biden on debt forgiveness for years. “He just needs to play it.”

The Biden administration has taken many of its cues on student debt policy from progressive groups and lawmakers over the past four years.

Randi Weingarten, the influential president of the American Federation of Teachers, wrote a letter to Education Secretary Miguel Cardona with Pierce this week calling on the agency to “suspend all monthly payments, interest charges, and debt collection for all student loan borrowers across the student loan system” in response to the rulings. They cited the need to address an “unprecedented operational challenge for the student loan system.”

The NAACP on Thursday joined the calls for the Biden administration to act, urging the Education Department "to suspend student loan bills until these court orders no longer pose a threat to the rights of all borrowers under the current law and continue to disproportionately impact Black borrowers."

Republicans have blasted the hundreds of billions of dollars that Biden’s expansion of the repayment program is expected to cost taxpayers. Sen. Bill Cassidy , the top Republican on the Senate education committee, lauded the court rulings this week for blocking “unfair, irresponsible” policies that he decried as “a cynical attempt to buy votes before the next election.”

The Justice Department has already filed appeals of the court rulings that blocked the repayment program, but administration officials are weighing additional actions.

“The Department is continuing to assess the rulings and determine next steps to best support borrowers while creating minimal harm and confusion,” an Education Department spokesperson said in a statement to POLITICO. “The Department will communicate directly to borrowers impacted by these decisions soon.”

The department spokesperson said the agency is continuing to allow borrowers to enroll in the SAVE plan, the administration's latest repayment program, as the litigation continues.

More than 8 million borrowers are currently enrolled in the program. About 4.5 million of them have income low enough to qualify them for a $0 monthly payment. Those borrowers will continue to be excused from having to make payments, the department spokesperson confirmed.

But many of the remaining 3.5 million borrowers were in line to have their monthly payments lowered starting in July, and those borrowers are now in limbo after the court ruling.

The Student Debt Crisis Center, which has worked with Democrats on loan forgiveness issues, called on the administration to pause payments for as long as the benefits of the new repayment program remain blocked by the courts. Borrowers had been set to go to the ballot box this fall with many having their monthly loan payments cut in half under the new program and there’s some risk for Biden, said Natalia Abrams, the group’s president.

“Now that’s not happening, and a lot of folks feel that the plan has failed,” Abrams said. “While we know it's the courts, and that's who our organization blames, borrowers just blame everyone.”

Jason Delisle a nonresident fellow for the Urban Institute who was an adviser to former Florida Gov. Jeb Bush’s 2016 Republican presidential campaign, said he can see the logic behind why some may call for a pause on repayment, but he believes there should be a targeted approach.

“There has to be some workarounds for the narrow slice of borrowers in that circumstance,” he said. “I can’t imagine that the department couldn’t give narrow groups of borrowers a forbearance.”

Jack Lobel, a spokesperson for Voters of Tomorrow, a left-leaning group that encourages Gen Z to vote, said for many young voters, the latest ruling is a testament to how much Republicans are working against student debt relief, and not a Biden administration fumble.

“The Republicans' talking points for why they’re doing this makes no sense. Republicans call student loan debt relief buying votes, but say nothing about Trump's tax cuts for the ultra wealthy,” Lobel said.

The Biden administration for months has pushed its SAVE plan as a centerpiece of its “safety net” for borrowers struggling to afford monthly student loan payments.

The program, which the administration finalized in January, is a refresh of income-driven repayment options that the Education Department has offered for years. Biden’s program offers far more generous terms than previous iterations, such as lower monthly payments, greater interest subsidies, and an easier path to ultimate loan forgiveness after 10 to 25 years of making payments.

But among some, the SAVE plan, was far more moderate than some of Biden’s other student loan initiatives.

Many student debt activists and progressives had balked at the idea of tweaking income-driven repayment programs, preferring instead to keep the heat on Biden to write off large amounts of debt altogether.

The SAVE program, which now enrolls some 8 million borrowers, attracted more support from moderate Democrats and other groups than Biden’s unprecedented efforts to cancel swaths of outstanding student debt outright.

Every moderate Democrat — with the exception of Sen. Joe Manchin of West Virginia, now an independent — stuck with Biden earlier this year in the face of GOP-led efforts to kill the SAVE plan in Congress.

Even the Chamber of Commerce, which urged the Supreme Court to stop mass student debt relief, teamed up with the White House earlier this year to help promote the SAVE plan. So did the American Fintech Council, which represents some smaller, private student lenders.

The Education Department is in the process of finalizing another mass debt relief plan that relies on a different law, the Higher Education Act, after the Supreme Court scrapped his first attempt.

But the rulings by two federal judges this week highlight the legal scrutiny that all of Biden’s student loan programs face in a court system increasingly skeptical of executive policymaking.