![]() ![]() This was the case when the Trump Administration first froze the loan payments in March 2020 due to Covid-19. Under this law, the president is permitted to “modify” certain rules in the event of a national emergency. The Justices determined the two Texas students did not have legal standing in their case because they could not establish “injury.” But the hurdle that stopped Biden’s forgiveness plan altogether was its reliance on a provision of a post-9/11 law, the Heroes Act of 2003. The states challenged the principle that the Secretary of Education has the power to implement a student loan forgiveness plan on the basis of a presidential executive order. The Supreme Court heard arguments on February 28 based on both the Texas case and a separate challenge brought by six states: Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina. “It benefit people with less debt more than…people with higher amounts,” says Chris Varela, owner of Varela Financial, which offers student loan strategies to graduate professionals. Some critics argue the plan is unfair because it excludes some borrowers and does not take into account a borrower’s total loan debt. ![]() The plaintiff in that case was a conservative-led group representing two student loan borrowers its lawyers argued the administration did not follow federal procedures, causing some students to be partially or fully ineligible for the program. The plan was introduced in August 2022, but in November it was halted after a Texas federal judge declared it unlawful. Overall, it was projected that 40 million borrowers would have seen some savings. In doing so, it would have cleared the debt entirely for roughly 20 million people. “It will cut monthly payments to zero dollars for millions of low-income borrowers,” he said, and “save all other borrowers at least $1,000 per year.”īeginning July 1, 2024, the SAVE plan will be available to borrowers with student loans in good standing.ĭetails of the SCOTUS Ruling on Student Loan Forgivenessīiden’s original plan would have forgiven up to $20,000 in debt depending on the borrower’s income and loan type. In a statement, Cardona described a third action: the establishment of a new income-driven repayment plan called Saving on A Valuable Education (SAVE). He also announced that the secretary of education, Miguel Cardona, would immediately begin the process of making new rules for debt relief, using his authority under the Higher Education Act. During this period-from Octoto September 30, 2024-the government will not consider borrowers who miss monthly payments to be delinquent, report them to credit bureaus, have their loans placed in default, or refer the debt to collection agencies. To help stave off loan default, the Department of Education will provide borrowers with a 12-month “on-ramp” to repayment. In a press conference later in the day, Biden identified the next steps his administration would take, “using every tool at our disposal.”īiden unveiled a plan intended to ease some borrowers back into student debt payments. “I believe that the Court’s decision to strike down our student debt relief plan is wrong.” President Joe Biden immediately issued a statement condemning the Supreme Court’s decision and vowing to fight back. was supposed to help me, not hurt me.” Biden: “This Fight Is Not Over” “It’s a part of my livelihood just being taken from me when it was supposed to be the opposite. “That’s a prison sentence,” said Melissa Moser, who graduated nine years ago and is facing $40,000 in outstanding student loan debt. Across loan categories, the total amount of student debt is more than $1.7 trillion. The total amount of direct federal student loans outstanding exceeds $1.3 trillion, according to calculations by the New York Federal Reserve. The decision will force many borrowers to resume making hundreds of dollars in monthly student loan payments, beginning in October. But the ‘modifications’ challenged here create a novel and fundamentally different loan program,” wrote the justices. “Prior to the Covid-19 pandemic, ‘modifications’ issued under the Act were minor and had limited effect. But the justices, in a 6-3 opinion led by conservatives, said the forgiveness plan, which hinged on a post-9/11 law meant to offer relief in a national emergency, was an overreach of the law. The June 30 verdict deals a crushing blow to roughly 40 million borrowers who were hoping they’d have all or some of their student loans forgiven by this fall, when the Covid-19-related loan forbearance period ends. The Supreme Court has ruled out President Joe Biden’s plan to forgive $441 billion in federal student loan debt.
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