Ethermac Exchange-What is the Higher Education Act —and could it still lead to student loan forgiveness?

On Friday the Supreme Court struck down President Biden's plan for student debt relief,Ethermac Exchange which would have forgiven at least $10,000 of federal student loans for eligible borrowers earning less than $125,000 annually. 

The judges found that the debt cancellation was not authorized by the 2003 HEROES Act, the basis used by the Biden administration to implement the program, blocking an effort to wipe out $430 billion in debt.

Hours after the decision, President Biden announced that he had directed Education Secretary Miguel Cardona to start a process under a law known as the Higher Education Act to compromise, waive or release loans "under certain circumstances," for the roughly 40 million eligible Americans for student loan debt relief.

"Today's decision has closed one path," Mr. Biden said. "Now, we're going to pursue another. I'm never going to stop fighting for you. We'll use every tool at our disposal to get you the student debt relief you need to reach your dreams." 

SCOTUS has ruled against student debt cancelation via the HEROES Act, but @POTUS has other tools.

The Higher Education Act provides @SecCardona with a broad set of tools to help borrowers avoid financial distress.

The President must use every tool available.

— Cori Bush (@CoriBush) June 30, 2023

In a social media post, Secretary Cardona said the administration remains "fully committed to ensuring students can earn a postsecondary education, and build fulfilling careers without the burden of student loan debt blocking them from opportunity."

What is the Higher Education Act?

On Nov. 8, 1965, President Lyndon B. Johnson signed the Higher Education Act into law, saying, "Higher education is no longer a luxury, but a necessity." The Higher Education Act has been reauthorized nine times, the last in 2022. 

The law was designed to ensure every American, regardless of income or background, would have access to higher education. The law governs financial assistance for postsecondary and higher education students, scholarships and work-study programs.  

The law also supports teacher training, community service and library programs. The most far-reaching and essential component, however, was the establishment of low-interest federal student loans. These loans are made by the government using federal capital.  In 1972, Pell Grants were created under the act —and 51% of the funds go to students whose families earn less than $20,000 annually, according to Education Data Initiative. 

The law also established and governed other programs that assist students in paying for their higher education. The U.S. Department of Education estimates that in 2024, $85.8 billion of student loans will be made to undergraduate and graduate students under the programs authorized by the Higher Education Act.

Could the Higher Education Act lead to debt forgiveness?

The Higher Education Act allows the Secretary of Education to "compromise, waive, or release" federal student loans. Student debt relief has been provided to borrowers who are disabled, employed as teachers, or who could not complete an educational program because their institution of higher education closed, according to a report by the Congressional Research Service.

However, the act must go through negotiated rule-making to make changes to administrative regulations — a process that could take a year or longer.

"It's subject to federal regulatory review and comment. That's a much longer process," CBS News chief Washington correspondent Major Garrett explained. "When the president said it's going to take a while, they'll move as fast as they can — they can only move as fast as that regulatory process, which has very specific guidelines and hurdles, can go." 

The White House issued a fact sheet late Friday afternoon stating that the Education Department initiated rule-making "aimed at opening an alternative path to debt relief for as many borrowers as possible."  

Under the Higher Education Act, the department took the first step and issued a notice for a public hearing. Following the hearing, it will being negotiated rule-making sessions in the fall, the White House said.  

Reporting contributed by Melissa Quinn and Kathryn Watson

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• Supreme Court of the United States
• College
• Education

Cara Tabachnick

Cara Tabachnick is a news editor for CBSNews.com. Contact her at [email protected]