In a significant blow to the Biden administration’s efforts, the Supreme Court has struck down the proposed student loan forgiveness plan. The ruling, with a 6-3 vote along ideological lines, means that millions of borrowers who were anticipating the erasure of up to $20,000 in student debt will now have to resume making payments.
While this decision is undoubtedly disappointing for borrowers who had hoped for relief, economists suggest that its impact on the overall U.S. economy will be minimal. The court’s verdict, penned by Chief Justice John G. Roberts Jr., was based on the argument that the president lacks the authority to unilaterally cancel a substantial amount of consumer debt without explicit authorization from Congress.
Under the proposed plan, the Department of Education aimed to forgive $10,000 of student loan debt for individuals earning less than $125,000 per year, and up to $20,000 for recipients of Pell Grants. All federal loans would have been eligible for forgiveness, excluding private student loans. Married couples or heads of households earning less than $250,000 would have also qualified for assistance.
This ambitious plan had the potential to eliminate the entire student loan debt for at least one-third of borrowers, benefiting a staggering 43 million people. However, the Supreme Court’s ruling has halted its implementation.
President Joe Biden has expressed his determination to explore alternative avenues for delivering student debt relief. He has indicated that his administration will pursue a different loan forgiveness program under the Higher Education Act, a law enacted in 1965. The act grants the education secretary the power to waive or modify loan provisions in response to national emergencies, such as the ongoing coronavirus pandemic.
While the rejection of the original forgiveness plan is a setback, President Biden remains committed to finding a path forward to alleviate the burden of student loans for struggling borrowers. The administration will now pivot its focus to working within the framework of existing legislation to provide much-needed relief in these challenging times.
