Joe Biden's new student debt plan would cost $156 billion

The Supreme Court of the United States(SCOTUS) ruled against Joe Biden in early July, deciding that his plan to cancel student debt through executive action was unconstitutional. However, the president has no intention of abandoning the issue, so he unveiled his new plan: Saving on a Valuable Education, dubbed SAVE.

The initiative is intended to permanently reshape how borrowers repay their student loans at the federal level. What's in the plan? Once implemented, many borrowers will face lower monthly payments, less interest and those with smaller balances could see their student debt forgiven.

The step-by-step of Joe Biden's new education program

According to the Administration, borrowers will be able to enroll "later in the summer," and those already enrolled in the Revised Pay as You Earn plan (REPAYE) will automatically move to SAVE. Those who sign up before the end of the summer will have their applications "processed in time" for the first payment due dates beginning in October.

According to the president, the plan is "legally sound" and is based on the Higher Education Act of 1965. "It's going to take longer, but, in my opinion, it's the best path left to provide debt relief to as many borrowers as possible," he said.

The initiative's concrete benefits would be raising the income threshold for zero-dollar payments from 150% of the poverty line to 225%, thereby reducing payments for low-income borrowers. On the other hand, new interest limits would come into effect and borrowers would not have to pay interest that accrues in a month beyond what their monthly payment covers.

In an interview with Newsweek, Laurence H. Tribe, professor emeritus at Harvard Law School, stated that "by invoking the Higher Education Act of 1965 and directing the Secretary of Education to move forward with a new debt relief program using the Administrative Procedure Act to submit its details for public comment, Joe Biden is protecting his plans against successful legal challenges."

At the same time, this does not mean that the new plan is lawsuit-proof. "These people are nothing more than litigators, and it's part of their DNA to resort to lawsuits against anything they don't find to their liking. As long as they avoid legally frivolous challenges, there's nothing wrong with that," he added.

How much does the new plan cost?

According to White House estimates, the SAVE initiative would cost about $156 billion over the next decade, which is below the Congressional Budget Office estimates.