If at first you don't succeed, try and try again. President Joe Biden appears to be taking the old adage to heart.
The president's initial plan to forgive student loan debt was recently struck down by the U.S. Supreme Court. However, the Biden administration quickly announced its "plan B" to provide debt relief to students.
Trying again, though, doesn't always lead to success. I predict that these will be the two biggest problems with Biden's backup student loan plan.
Image source: Getty Images.
1. Timing
The White House released a fact sheet about its new student loan forgiveness plan on June 30, 2023. The document stated that the plan would provide "debt relief for as many borrowers as possible, as fast as possible." However, "as fast as possible" could turn out to be slower than many students would like.
Biden acknowledged in his public remarks announcing the backup plan that "It's going to take longer." Just how much longer will it take to be implemented? Possibly up to a year.
The Biden administration's first student loan forgiveness plan used an executive order. That process allowed the Department of Education to move quickly. This time, though, the president is taking a different -- and slower -- approach that requires issuing new regulations.
Step one of this process is for the Department of Education to issue a notice of new rules. The department has already done this, with a virtual public hearing scheduled for July 18, 2023. But the next steps, including a public comment period and potential changes to the rules, won't move along as rapidly.
In the meantime, the White House promised that "the most vulnerable borrowers" won't have to worry about "the harshest consequences" of late or missed payments for up to 12 months. However, payments on student loans will still be due and interest will continue to accrue.
2. Legal challenges
The president's backup student loan plan will almost certainly face legal challenges, just as his first plan did. Supporters of Biden's second approach think that he has a stronger legal argument this time around. But there are plenty of skeptics.
Initially, the Biden administration used the HEROES Act of 2003 as the basis for student debt relief. However, the U.S. Supreme Court ruled that the legislation didn't authorize the executive branch to forgive student loans on its own without Congressional approval.
Now, the White House is using the Higher Education Act of 1965. Biden stated publicly, "This new path is legally sound." However, some legal experts expect it to meet a similar fate in the Supreme Court as his first plan did.
Chief Justice John Roberts seemed to warn the Biden administration about using the Higher Education Act in his majority opinion on the Supreme Court's first ruling. Roberts wrote that the 1965 legislation allows the cancellation or reduction of student loans only under "certain limited circumstances."
University of Pennsylvania law professor Cary Coglianese told USA Today, "It's hard to see why the court would reach a different result under language that's very similar." Student financial aid expert Mark Kantrowitz was on the same page in his comments to CNBC, stating that the president's second attempt to forgive student loans will probably fail due to legal challenges.
The third time's the charm?
If Biden's backup student loan plan is indeed blocked by the Supreme Court, look for the president to make it a major issue in his re-election bid next year. Some congressional races could also focus on forgiving student loans.
The one way that Biden can be assured of success is to pass a bill that specifically approves student debt relief. That's a nonstarter in the current Congress. However, if he wins a second term and gets enough support in the Senate and the House, Biden just might find that the third time is the charm.
