President Joe Biden has announced that he will forgive $39 billion in student loan debt, just two weeks after the Supreme Court voted 6-3 to strike down his controversial student loan forgiveness plan.
On June 30, judges ruled that the administration exceeded its authority by paying off more than $400 million in student debt.
Biden instantly condemned the ruling and vowed to provide alternative support, despite the anger of taxpayers and Americans who have never been to college.
The Biden administration has now announced a plan that it says will help more than 800,000 borrowers.
What are the details and who will benefit from the latest brochure?
President Joe Biden will forgive $39 billion in student debt, weeks after the Supreme Court struck down his multibillion-dollar relief plan. Biden is photographed returning from Europe on Thursday night
Who will be affected by the latest announcement?
More than 804,000 federal student loan borrowers will see their debts eliminated under the plan.
But only those who have been making payments for 20 to 25 years will see their debts canceled due to “fixes” in the account of the monthly payments that the borrowers have made.
The forgiveness is the result of a promise made last year by the Biden administration to offer a one-time adjustment to help address any inaccuracies in payment counts for borrowers on income-based repayment plans.
These plans are supposed to allow forgiveness after the borrower makes a certain number of monthly payments, but the plans have been criticized over the years for poor communication between the Department of Education, loan servicers, and borrowers. .
“For too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress toward forgiveness,” said US Secretary of Education Miguel Cardona.
“By correcting past administrative failures, we make sure everyone gets the forgiveness they deserve.”
In the coming days, qualified borrowers who have reached the threshold for forgiveness will be notified.
What happened to the Supreme Court ruling?
The Supreme Court struck down Biden’s $400 billion student loan forgiveness plan on June 30.
The plan to pay off the debts of 26 million Americans was deemed unconstitutional and an overreach of the president’s executive power.
The program had been challenged by six red-red states and two borrowers who argued that Biden should have sought congressional approval for a plan that used substantial taxpayer funds.
Some 16 million of the 26 million people who applied for the waiver had already been approved when the Supreme Court announced its decision.
What did the decision mean for borrowers?
For the 26 million people who applied for the program, more than half of whom were approved, the ruling dashed their hopes of taking advantage of up to $20,000 in debt reduction.
If other plans are not put in place before then, borrowers will have to make full payments again 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 approximately $400 billion, good news for those who opposed the program.
Some argued that the pardon would be unfair to those who paid for college, already paid off their loans, or never attended college in the first place because of the high cost of education.
The Supreme Court struck down President Joe Biden’s $400 billion student loan forgiveness plan on June 30. The justices ruled 6-3 against Biden’s plan to eliminate the debts of about 20 million Americans.
What was the student loan forgiveness policy?
The Biden Administration announced its student loan forgiveness program in August 2022.
The plan was intended to cancel up to $20,000 of debt for eligible borrowers, which could have wiped out an estimated $430 billion of the total $1.6 trillion in cash borrowed.
People who make less than $125,000 a year, or $250,000 per household, could get up to $10,000 in debt cancellation.
Students who received a Pell Grant, a need-based federal grant for low-income families, during their education, could 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 for debt forgiveness, but the program was halted in November before the funds were released.
Joe Biden’s student loan forgiveness scheme had been stalled in legal battles since November
Why did the program stop?
The program was halted and disbursement of funds blocked due to two Supreme Court lawsuits arguing that the Biden Administration exceeded its authority in approving the debt cancellation.
Biden vs. Nebraska was brought up by Republican lawyers in six states (Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina) in September 2022 and argued that the program could hurt tax revenue.
In October of last year, the Job Creators Network Foundation filed a separate lawsuit in Texas on behalf of two student borrowers, Myra Brown and Alexander Taylor.
However, the Biden Administration argued that the plan fell under the Higher Education Opportunity Relief for Students Act of 2003, also known as the HEROES Act, which was created to ensure loan relief after the terrorist attacks. of September 11, 2001.
The Supreme Court struck down the program in the case brought by the Republican-controlled states.
Although it ruled that the case brought by two student borrowers did not have standing to challenge the program, this ruling was irrelevant given the outcome of Biden v. Nebraska.
The ruling shattered the hopes of 16 million people who were approved for relief
When will student loan payments resume?
The White House halted student loan payments during the Covid-19 pandemic, in a separate policy from the student loan forgiveness program.
The government argued that the pandemic was a national emergency, giving it the authority to cancel the debt under the HEROES Act.
But student loan payments will resume after more than three years this fall, after a deal was reached between the White House and Congress on raising the debt ceiling that formally abolished the pause.
Interest will begin to accrue 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 payments resume.