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What does the SCOTUS ruling on student loan forgiveness mean for 16 million people already approved?


The Supreme Court has struck down President Biden’s student loan forgiveness plan.

The justices ruled 6-3 that the administration overstepped its authority with the program to wipe out more than $400 million in student debt. 

The program was challenged by six Republican states and two borrowers who argued Biden should have sought approval from Congress for a plan using substantial taxpayer funds. 

The White House said it plans to announce new actions to protect student borrowers later today. The administration plans to make ‘crystal clear to borrowers and their families that Republicans are responsible for denying them the relief that President Biden has been fighting to get to them,’ a source told CNN

But what will happen to the 16 million people already approved for forgiveness? 

What does the decision mean for you? 

For the 26 million people who applied for the program, more than half of whom were approved, the ruling will dash their hopes of taking advantage of having up to $20,000 cut from their debt. 

If no other plans are put in place before then, this means that borrowers will have to return to making full repayments in October when they resume after more than three years this fall.   

Estimates from the Congressional Budget Office said the plan would have cost taxpayers roughly $400 billion, which has now been saved – in welcome news to those who opposed the program.   

Some argued the forgiveness would be unfair to those who either paid their way through college, repaid their loans already, or never attended college in the first place due to the high cost of education.

The Supreme Court has struck down President Joe Biden ‘s $400 billion student loans forgiveness plan in another bombshell decision. The justices ruled 6-3 against Biden’s plan to wipe out debts for around 20 million Americans

What was the student loan forgiveness policy? 

The Biden Administration announced its student loan forgiveness program in August 2022. 

The plan intended to cancel up to $20,000 of debt for eligible borrowers – which could have wiped away an estimated $430 billion of the total $1.6 trillion in borrowed cash.

People who earn less than $125,000 a year, or $250,000 per household, could get up to $10,000 in debt cancelation. 

Students who received a Pell Grant – a needs-based federal grant for lower-income families – during their education, stood to receive up to $20,000 in forgiveness. 

Some 26 million people applied for the program, according to the Department of Education – more than half of the 46 million eligible borrowers. 

Of the applications, 16 million were provisionally approved to have their debt forgiven, but the program was paused in November before any funds had been given out. 

Joe Biden's student loan forgiveness scheme had been held up in legal battles since November

Joe Biden’s student loan forgiveness scheme had been held up in legal battles since November

Why was the program paused?

The program was halted, and funds were blocked from being disbursed, because of two Supreme Court lawsuits arguing the Biden Administration overstepped its authority in approving the debt erasure.

Biden v. Nebraska was brought by Republican attorneys in six states – Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina – in September 2022, and argued that the program could harm tax revenues.

In October last year, the Job Creators Network Foundation filed a separate lawsuit in Texas on behalf of two student borrowers Myra Brown and Alexander Taylor.

The Biden Administration, however, argued the plan fell under the 2003 Higher Education Relief Opportunities for Students Act, otherwise known as the HEROES Act, which was created to ensure loan relief after the September 11, 2001 terrorist attacks.

The Supreme Court struck down the program in the case brought by Republican-controlled states. 

Although it ruled that the case brought by two student borrowers did not have the standing to challenge the program, this ruling was irrelevant given the outcome in the Biden v. Nebraska case. 

The ruling will dash the hopes of 16 million people who were approved to take advantage of the relief

The ruling will dash the hopes of 16 million people who were approved to take advantage of the relief

When will student loan repayments resume? 

The White House paused student loan repayments during the Covid-19 pandemic – in a separate policy to the student loan forgiveness program.

The Government argued the pandemic was a national emergency, which gave it the authority to cancel debt under the HEROES Act.    

But student loan payments are set to resume after more than three years this fall, after a deal was reached between the White House and Congress on raising the debt ceiling formally abolished the pause.

Interest will start accruing on September 1, according to the Department of Education, and borrowers will need to start making payments on federal student debt again in October.  

According to a new report from Wells Fargo, the average monthly payment will be between $210 and $314 once repayments resume. 

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