US Supreme Court struck down President Biden’s Student Loan Cancellation Plan. This plan would have provided up to $20,000 in student loan relief to eligible borrowers.
The Supreme Court ruled the plan unconstitutional, saying the president had exceeded his authority allowed the use of decrees – in particular the powers conferred by the HEROES law.
For student borrowers, this is a big setback in getting student loan relief. Here’s what you need to know.
U.S. Supreme Court strikes down Biden loan forgiveness
In a 6-3 decision dated June 30, 2023, the U.S. Supreme Court declared President Biden’s student loan forgiveness plan to be unconstitutional – thereby permanently blocking the plan from taking effect.
While one case was dismissed for lack of standing, the MOHELA case was found to have standing (Biden v. Nebraska), and that’s where the Supreme Court ruled against loan forgiveness.
As a reminder, President Biden wanted to use the power he believed granted under the HEROES Act to forgive $10,000 to $20,000 in student loans to eligible borrowers.
Borrowers who have already received a Federal Pell Grant will receive up to $20,000 in federal student loan forgiveness. All other eligible borrowers will receive up to $10,000 in federal student loan forgiveness.
To qualify, the borrower’s income during the pandemic (2020 or 2021) must have been less than $125,000 for individuals and $250,000 for married couples or heads of households.
What this means for borrowers
For student borrowers, this is a setback. Many borrowers were counting on this relief before student loan repayments resumed.
Therefore, borrowers will not see their balances change.
Additionally, the student loan payment pause and interest relief is set to expire on August 30, 2023. This means that interest on borrowers’ loans will resume in September and payments will be due again beginning in October.
Other Paths to Student Loan Forgiveness
It’s important to remember that even without Biden’s loan forgiveness plan, about 50% of all federal student loan borrowers are eligible for some type of loan forgiveness plan.
This includes popular programs like Cancellation of civil service loans, teacher loan forgiveness, and loan forgiveness tied to borrowers’ income-based repayment plans. There is even state-based student loan forgiveness programs available – some are very generous!
While the U.S. Supreme Court’s decision is disappointing for borrowers, the 42-month payment break has brought much relief to many. Additionally, borrowers should not ignore the changes coming next year with the new REPAYE student loan repayment plan – which could significantly reduce the monthly payments of borrowers.
Additionally, many borrowers already qualify for various student loan forgiveness programs that exist through other laws.
For borrowers who want to see the action – contact your representative in Congress. One of the biggest issues the Supreme Court ruled on was presidential power. There is no constitutional doubt that Congress can pass legislation authorizing loan forgiveness if it chooses.