Biden Has a Plan B for Student-Loan Forgiveness. The Courts Could Kill It, Too.

The Education Department this summer began an arcane regulatory process that officials hope eventually will offer millions of Americans a chance to erase part or all of their federal student-loan debt. The administration was forced to start from scratch after the Supreme Court ruled in June that the executive branch had exceeded its authority when it put in place a $430 billion plan to wipe away up to $20,000 in student debt for Americans making less than $125,000 a year.

The new debt forgiveness plan, which relies on a different legal authority, is likely to face similar legal challenges to the ones that killed the original effort. Unknown is exactly how many borrowers would be eligible for the program and what kind of relief they might receive.

The program might not be up and running before the 2024 election, and even if it is, legal challenges and possible injunctions could prevent it from being implemented. A Republican president likely would stop the effort in its tracks.

The lingering questions are adding to the uncertainty hanging over the roughly 40 million Americans with federal student loans as they prepare to resume loan payments next month for the first time in more than three years. The Education Department instituted a pause on the payments in March 2020 in response to the spread of Covid-19.

“It makes it hard to make long-term decisions and plans. It makes it difficult to think about the future,’ said Lina-Maria Murillo, 42 years old, an assistant professor at the University of Iowa with roughly $150,000 in federal student loans.

Malik Lee, an Atlanta-based certified financial planner, said he advises his clients not to bank on across-the-board loan forgiveness. “Personally, I don’t think it’s going to happen," he said. He encourages people to take advantage of the Biden administration’s existing programs, such as a new plan that can halve borrower’s monthly student-loan repayments.

Student-loan forgiveness has emerged in recent years as a salient issue for young voters, driven by progressive activists and liberal lawmakers such as Massachusetts Democratic Sen. Elizabeth Warren, who pressured Biden to take action. Republican lawmakers, and some voters who didn’t go to college, never took out loans or already paid them back oppose the effort, arguing that borrowers should repay the loans without taxpayer help.

Biden was initially skeptical that he had the authority to cancel student loans on a large scale, but he decided to move forward with the program after more than a year of internal debate with his top advisers.

After the Supreme Court struck the program down, Biden said in a speech at the White House the same day that he would try again. The Education Department then undertook a rule-making process under the Higher Education Act. The administration argues that the 1965 law gives the secretary of education sweeping “compromise and settlement" authority to eliminate debt.

The rule-making process requires months of hearings, public comment and input from various constituencies. The department held a hearing in July and received 24,000 responses following its call for public comment. Starting this fall, a team of outside negotiators will begin meeting to offer input on what shape the new rules should take. The negotiators will include student-loan borrowers, college and university representatives, state officials and civil rights organizations.

Months after the negotiations conclude, the department will publish proposed rules that reflect feedback from the negotiators. Following additional public comment, the department is aiming to complete the rules next year. An Education Department spokesman said the department was working to finish the process as quickly as possible.

Officials with the Justice Department, Education Department and White House have been meeting behind the scenes for weeks to come up with a path forward for the new student- loan rules that can withstand Supreme Court scrutiny. But some administration officials privately expressed deep concern that the Supreme Court would overturn any future student-loan forgiveness programs.

One option being considered by administration officials, according to people familiar with the discussions: using the Higher Education Act to forgive debt for specific groups of borrowers, instead of everybody all at once. The more targeted approach would build on the administration’s efforts to cancel debt for disabled people and those who work in public service or were defrauded by for-profit schools. Some in the administration think the proposal, which would include tailored legal and economic rationales for each group, could dampen legal attacks and help nearly as many borrowers as across-the-board debt elimination.

The White House, in a statement, said the president will continue fighting to ease students’ debt burdens, adding that he hopes to use the new rule-making process to “deliver relief to as many people as possible as quickly as possible."

Legal scholars and activists said using the Higher Education Act to forgive student loans offers the administration a better chance of prevailing in the courts because the authority to cancel debt is more clearly enumerated than it is in the law Biden relied on the first time around. The president used the Heroes Act to underpin his first loan-forgiveness program. But the Supreme Court ruled that the law, which allows the education secretary to modify student-aid programs to respond to emergencies, didn’t allow him “to rewrite that statute from the ground up."

Several legal scholars said the Supreme Court is likely to be similarly skeptical of any future effort to forgive student loans en masse using the Higher Education Act, pointing to the “major questions" doctrine embraced by the court’s conservative justices. The doctrine says that Congress needs to have clearly delegated explicit authority to the executive branch before agencies are allowed to resolve a major question through expensive new rules.

“They could easily apply that same kind of idea to an approach that was based on the Higher Education Act," said John Brooks, a law professor at Fordham University who has studied federal student loan programs. “It’s just a little bit harder to get there because the administration is on firmer footing."

Chief Justice John Roberts, in the June ruling, wrote that the Higher Education Act allows the education secretary “to cancel or reduce loans in certain limited circumstances," indicating that the court’s majority is skeptical of a broad interpretation of the law.

Gabriel T. Rubin and Julia Carpenter contributed to this article.