President Biden announces plan B after Supreme Court rejects his student loan forgiveness plan

HOUSTON - President Biden says he's working to give student loan borrowers a new path to loan forgiveness after the U.S. Supreme Court blocked his initial plan.

Biden's original proposal would have forgiven up to $20,000 for 43 million borrowers.

People's reaction to the 6-3 Supreme Court decision is mixed.

"I have $60,000 in student loans. I did apply for that program. I’m a working student. I went back late in life so that would have really assisted me," said borrower Zena Booker Smith.

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Disappointment runs deep among borrowers we talked to.

"It stops you from buying homes, stops you from car loans. Once you have a degree, I have a degree from Baylor. But a $250,000 loan is a lot to pay back," said Reggie Rice.

Some say the right to dismiss federal student loan debt in bankruptcy should be restored.

"We have to have our bankruptcy rights, that’s the solution. That’s what’s going to regulate the lending, and that’s my only concern," said student loan borrower Jacque Abron,  a member of advocacy group Student Loan Justice.

While others flinch at what would have been a $400 billion dollar cost.

"I feel like the general public isn’t educated enough about where exactly the money is coming from and where it’s going," said Caleb, a student.  

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Many borrowers fear they won't be able to resume payments when the three-year pause ends in September after high inflation has driven up the cost of living.

"I’m hurt by it. I’m struggling as it is, paying my bills even before COVID hit," said borrower Daniel Sherwood.

President Biden has announced he's working on a new path to student loan forgiveness and wants to remove the threat of default during a 12-month on-ramp to repayment.

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"We will bound this new approach in a different law than my original plan, the so-called Higher Education Act, that will allow (Education) Secretary (Miguel) Cardona, who's with me today, to compromise, waive, or release the loans under certain circumstances," Biden announced at a press conference.

"Now is the time to take a look at your budget, and figure out what it is you’re going to be able to allocate toward your federal student loans and make sure your servicer has your up-to-date information," said financial attorney Leslie Tayne.

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Meantime, Tayne says borrowers can consider many repayment options, including Extended, Pay As You Earn, and Income-Driven Repayment Plans.

"It’s strictly based on what your income is, so you would have an income qualification. In some cases, you don’t have to pay anything back," explained Tayne.

There is also the revamped Public Service Loan Forgiveness Plan, which is now working much smoother.  And borrowers in default can enroll in a new Fresh Start program, which lets them get back into good standing and start an Income-Driven Repayment Plan.

Loan servicers changed for many borrowers last year. Log on to StudentAid.gov to find your current servicer to discuss your options.