The Supreme Court is expected to release its decision on student-loan forgiveness later this month, and the Biden administration is reportedly preparing for the courts to rule against them.
- Later this month, the Supreme Court is expected to announce its decision on the HEROES Act, which would forgive up to $20,000 in student-loan debt for millions of borrowers who earn less than $125,000 annually.
- The Biden administration is reportedly planning for the court to rule against them, Bloomberg reports.
- If approved, President Joe Biden’s student-loan-forgiveness plan would remove an estimated $430 billion in loans from government lenders.
- White House officials have publicly stated confidence that the court will uphold the legislation, but sources told Bloomberg that it is preparing for a worst-case scenario.
Why it’s news
President Biden promised student-loan forgiveness on the campaign trail, but he has yet to follow through, and it looks like his administration may run into significant difficulties with legally forgiving student debt.
During the February oral hearings, conservative justices on the court seemed skeptical of the legality of President Biden’s plan, but liberal justices were more open to discussion, Bloomberg reports.
If the current forgiveness plan is struck down, the Biden administration will not likely counter with a new plan immediately. While some officials have suggested that other legal routes can be taken, it is unclear how quickly a new plan could be put together or whether or not the Biden administration would choose to pursue it.
Instead, officials are now focusing on how to help borrowers who will soon have to start making payments on their loans again. Due to pandemic-related restrictions, many have not made payments in the last three years. So far, President Biden has not signed off on any official plan if the court strikes down the law.
Part of the debt ceiling deal President Biden recently signed requires that student loan payments resume by August 30. Once payments resume, there will be a three-month forgiveness period where borrowers will not be penalized for missing payments, Bloomberg reports.
As of March this year, U.S. student loan debt reached $1.78 trillion. The average graduate with a Bachelor’s degree owes more than $28,000, while students with higher education, such as medical school debt, may owe more than $200,000.
A Goldman Sachs analysis found that eliminating $400 billion in student-loan debt from the economy would have a relatively small effect on the economy and improve middle-class buying power in some cases. However, reviving student loan payments could have a negative effect on the economy.
Graduates have not had to factor repayments into their budgets for the last three years. Many Americans are already struggling to make ends meet with higher living costs. Adding student loan repayments could place more consumers in a financially difficult situation.