Biden's student loan forgiveness plan faces the ultimate test at the Supreme Court
IOU on the hill… SCOTUS started hearing arguments challenging President Biden's student loan forgiveness plan yesterday, putting the financial future of 40M+ indebted Americans in the (judicial) balance. Last year, Biden announced plans to cancel up to $20K in federal student loan debt for qualified borrowers. But the program was halted in November after six GOP-led states brought a case against it — and it’s still on pause. Now the US’s highest court must decide whether the forgiveness policy is an overreach of executive power, and if it causes harm to plaintiffs.
- Behind the bench: Conservative justices seemed skeptical, with some saying it would be unfair for Americans who already paid off their loans or never took on debt.
- Biden’s camp said that the debt-relief plan was legal under the Heroes Act, which gives the Department of Education extra power during national emergencies.
- State attorneys said the plan could strip Missouri (a key player in the case) out of revenue earned from its state’s loan servicer.
Repayment woes… the court’s forgiveness decision isn’t the only challenge borrowers are facing. The pause on loan repayments has been extended eight times through two presidencies, saving borrowers $5B/month. But if the legal disputes aren’t resolved by June, then payments will restart in August. If the court issues a ruling in March, they could restart as early as May.
Americans might not be prepared… Some recent college grads have never had to make a student loan payment, since the pause has lasted nearly three years. The extra costs could weigh on millions of US families already grappling with record household debt and stubborn inflation. The average loan payment is nearly $400/month.