Student Loan Cancellation Update: Democrat Lays Out New Forgiveness Plan

The Supreme Court may have blocked President Joe Biden's plans to cancel student loan debt, but Representative Alexandria Ocasio-Cortez said there are "absolutely" ways for the administration to still fulfill the president's campaign promise.

"There is absolutely still a chance of cancellation," the New York Democrat said Monday on an Instagram story. "When the Supreme Court struck it down, they said that the administration couldn't use a specific avenue, namely the HEROES Act, but there are alternative avenues that we have pursued. They are going to be laying out that program over the course of the next year."

In June, Biden's plan to cancel up to $10,000 in student debt per borrower (and $20,000 for Pell Grant recipients) was deep-sixed by the Supreme Court after the justices sided with the six Republican-led states that challenged the program. The Court's ruling said the program exceeded the education secretary's authority under the Higher Education Relief Opportunities for Students Act.

The 2001 HEROES Act allows the education secretary to "waive or modify any statutory or regulatory provision" to protect borrowers during times of national emergencies, which the Biden administration argued was occurring because of the "devastating economic consequences of the Covid-19 pandemic."

The HEROES Act is the same law that was used by the Trump administration (and later Biden) to pause student loan repayments and suspend interest accrual during the pandemic.

Biden's first attempt at broad student loan cancellation, according to estimates, would erase over $430 billion in student debt and lower the median amount of non-forgiven loan repayments by $15,800. The White House said it would provide relief for up to 43 million borrowers and cancel full remaining balances for 20 million of those Americans.

In response to the Supreme Court's ruling, the Biden administration said it was working on an alternative path that involved the 1965 Higher Education Act. Biden's "Plan B" involves a longer, more complicated regulatory process known as negotiated rulemaking, which relies on an advisory committee to vote on proposed actions that the Education Department can use to propose rules.

"Progressives in Congress were prepared for the possibility that the Supreme Court might overturn the Biden loan program and what we did was that we prepared and made an argument to the Biden administration that we could continue with student loan cancellation using a different legal authority," Ocasio-Cortez said.

"Instead of that HEROES Act authority that I mentioned earlier, we had always argued that the Higher Education Act is the proper legal vehicle to continue and pursue student loan forgiveness for millions of Americans," the progressive Democrat said. "The program would still cancel up to $20,000 in student loan debt, but it would take up to a year for the program to roll out."

Learn more: Student Loan Forgiveness Updates and FAQs: Who Qualifies and How To Apply

Since the Supreme Court's June decision, the Biden administration has also launched its Saving on a Valuable Education (SAVE) plan. The income-driven repayment plan cuts monthly payments down from 10 percent to 5 percent of a borrower's discretionary income. It includes zeroing out the payments of more than a million borrowers who make less than $30,000.

However, congressional Republicans have introduced efforts to overturn the SAVE plan, arguing that student loan relief is unfair to borrowers who have already paid off their debts or individuals who never attended college or took out loans to do so.

On her student loan guide on Instagram, Ocasio-Cortez encouraged borrowers to apply to the SAVE program. She breaks down the options borrowers will have once monthly payments, which have been on pause since the beginning of the pandemic, resume in October.