Student loan borrowers disagree with the Supreme Court decision
What it won’t mean for borrowers: Five Common Issues about the High-Court U.S. Supreme Court Decision on Student Loan Relief
The United States Supreme Court struck down the plans of President Biden to clear federal student loan debts for tens of millions of Americans.
Chief Justice John Roberts stated that the authority to “modify” statutes and regulations allowed the Secretary to make modest adjustments and additions.
The high court’s ruling signifies another example of its expanding use of the “Major Questions Doctrine,” the idea that Congress must speak very clearly when granting power to executive agencies like the Department of Education to make decisions about issues that are politically or economically significant. The doctrine suggests that courts shouldn’t assume that Congress granted this power if there is any uncertainty about it. The Secretary of Labor’s vaccine mandate was thrown out last year by the high court.
She said that the six states are not associated with the Secretary’s loan forgiveness plan. They are a classic ideologicalPlaintiff, because they think the plan is bad, but they are not worse off because the Secretary doesn’t.
The decision is a disappointment to federal student loans borrowers who were eligible for relief under the plan.
“The HEROES Act allows the Secretary [of Education] to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act,” the ruling states, “but does not allow the Secretary to rewrite that statute to the extent of canceling $430 billion of student loan principal.”
The “modifications” by the Department of Education, Roberts wrote, “created a novel and fundamentally different loan forgiveness program” that “expanded forgiveness to nearly every borrower in the country.”
That August announcement came after months of speculation that the president would act, and its warm reception by younger voters may have contributed to Democrats’ better-than-expected showing in the midterm elections. But the proposal was also beset by a host of Republican legal challenges that ultimately led to the Supreme Court stepping in.
While the court’s decision will be discussed in the coming days, here are five things to know about what it won’t mean for borrowers.
What Did Biden Say About Student Loan Borrowers in the First Three Years of the Student Loan Debt Crisis? The U.S. Department of Education Appeals to the United States Supreme Court
In this Moment, the collective disappointment and possibly disillusionment of so many Americans is worth acknowledging, whatever you think of Biden’s proposal.
“I will never be able to get rid of these loans. If the interest rates are not changed, then I will not be able to get out from under it.
Panton took out federal student loans to pay his way through college and dutifully made monthly payments from late 2003 until March 2020, when the pandemic payment pause began.
“It is really sad that student loan borrowers have been stuck in a position that is political, and now they are victims to a politicized court, which is willing to jeopardize their financial security for political gain,” saysYu of the Student Borrower Protection Center.
The Student Borrower Protection Center is one of a handful of advocacy groups that have been vocal in their support of debt relief, and have put pressure on President Biden to be as generous as possible. The NAACP also pushed hard for relief.
“I see it as an unfortunate reality that in a country where we bail out Fortune 100 companies, where we bail out banks that have not been good actors, that this Supreme Court would allow that to happen, and yet,” says Derrick Johnson, the NAACP’s president and CEO, the court would choose to leave millions of borrowers “stuck in a vicious cycle of debt.”
Johnson advised Biden in the case of an unfavorable ruling to pursue all legal pathways to get rid of student loan debts.
“Let us be clear,” Johnson warned, “absent further, swift action in the wake of an unfavorable ruling from the Court, Black voters stand to be incredibly disillusioned by an Administration who failed to deliver on key campaign promises but succeeded in widening the racial wealth gap.”
Biden’s debt relief plan, as generous as it was, would have done nothing to address the growing levels of student loan debt borrowers are taking on. The U.S. government will still issue loans to help Americans pay college costs despite the fact that college prices are going up.
“I’m very pleased that the Supreme Court is following the Constitution,” says Rep. Virginia Foxx of North Carolina, the Republican chairwoman of the House education committee. “What the president has done is take on the role of Congress by deciding through a rule to appropriate money from the taxpayers to people who willingly took on a debt. I think he has done things that are against the law.
While Republican opposition was fierce, a majority of the public (55%) supported forgiving up to $10,000 per person in federal student loan debt, according to a June 2022 NPR/Ipsos poll.
The federal government has a debt and recent legislation requires student borrowers to repay their loans at the end of August. Though even before that legislation, the Biden Administration had committed to a similar timeline.
Making matters worse, many older borrowers will have a new loan servicing company – not to mention they may have forgotten their online portal passwords; some may not have even checked their balances in months, if not years. Those days are coming to an end.
The borrowers that got a chance at a fresh start are the greatest risk of falling through the restart cracks. The department is offering protections from collection on their accounts and the chance to regain access to repayment plans if they are in default. To benefit from the program, these borrowers have to contact their loan servicer.
That concern stems, in part, from NPR reporting in January that revealed serious funding shortfalls inside Federal Student Aid (FSA), the Education Department office tasked with managing the government’s student loan portfolio.
At the moment, the agency has to navigate an unprecedented flood of borrowers who are coming back to the system.
Already, the agency has quietly delayed an effort, promised by the Biden administration, to review the loans of millions of borrowers who were unfairly set back by years of mismanagement around income-driven repayment plans. The review has been continued into the future.
And that review is a logistical cakewalk compared to the Everest of helping millions of borrowers – whose loans have been paused for more than three years – navigate the return to repayment.
Reply to Student Loan Borrowers’ Concerns about the Return to Repayment and the Education Department’s Measures of Support for Their Repayment Plans
The new repayment plan that is different from the status quo will require an overwhelming amount of investment and support for borrowers. Again, loan servicers’ call center employees are the voice of the federal student loan program, and the system will need more of them, and they’ll need more training to implement any new repayment plan. The fact that servicers are being told to slash service right now is not a hopeful sign.
Instead, however, the Education Department has cut funding to loan servicers, according to multiple sources familiar with the cuts, and is allowing them to scale back call center hours.
“We are fully committed to supporting student loan borrowers as they successfully navigate returning to repayment,” says a department spokesperson in a statement to NPR. The statement says the Department is concerned that Federal Student Aid doesn’t have adequate funding this year. The department has made clear that restarting repayment requires a lot of resources to avoid harm to borrowers.
“It is possible that loan servicers may be overwhelmed with a high volume of inquiries,” says the National Association of Student Financial Aid Administrators (NASFAA) in a warning to borrowers. You may need to call several times before getting connected if you don’t reach your servicer by phone the first time.
The student loan system worked poorly when funded, and the consequences of returning to repayment are going to be disastrous, warns Persis Yu, a borrower advocate.
The head of the House education committee is concerned about the return to repayment because of the way the department is managed. She doesn’t think there is much sympathy to give more money to the department. It’s using its money inappropriately, using people inappropriately. And something has to be done about that.”
Source: https://www.npr.org/2023/06/30/1176839127/supreme-court-student-loan-forgiveness-decision
Debt Relief for the Kennedys: A Case Study of Biden’s Debt Reduction Plan and the Republican Challenge to Student Loans
Before publishing this story, I pre-wrote two different versions: one if the court had preserved Biden’s debt relief plan, another in case it scrapped it. Both versions had the same ending.
“The system has been broken for a long, long time, and the Republican attempt to limit interest on student loans is just one example of how broken it is,” says Foxx.
The inflation-adjusted cost of college has nearly doubled since 1990, from about $15,000 a year to $29,000 in 2020. Students are being helped to keep up. The Congressional Budget Office stated that the federal student loan debt increased more than sevenfold between 1995 and 2017:
The Biden administration does have a plan to address that brokenness, and it hinges on a newly proposed, much more forgiving income-driven repayment plan – one that has drawn praise from borrower advocates and sharp criticism from Republicans.
Even if the administration is able to roll out this new plan, it is unclear how quickly it would be available to borrowers who want to repay their debts.
The Kennedys were able to consolidate their student loans years ago as part of a program for married couples. What they didn’t realize is that those new, joint consolidation loans would disqualify them from potentially getting their debts erased through Public Service Loan Forgiveness.
Their group of consolidated borrowers won a hard-fought victory last year, getting a bill through Congress, which the president signed, to officially separate their loans and, in turn, qualify for federal forgiveness programs.
When Student Loans Go Forbidding Medical Treatment: Ariana Kennedy, a South Carolina, Martin and Chris, and Their FFEL Loans
“I just started laughing, and then I started crying because, I mean, the absurdity of the way that this is set up against us is laughable,” Brigid says. The couple is now in forbearance, a less forgiving way to pause their payments in which interest continues to pile up, as they put their resources toward Chris’ treatment.
Their student debt is in the hundreds of thousands, an intimidating figure for two public educators. Moreover, Chris is currently battling cancer, which means he could qualify for interest-free deferment. The couple has been arguing with their servicer over a deferment while he undergoes treatment. They finally got an answer recently: Since their loans are consolidated into one loan, both of them would have to have cancer in order to qualify for an interest-free pause in payments.
“We really do feel like it’s our responsibility to pay these loans,” she says. “But we’ve also paid the principal back about two and a half times what we took out.”
Chris and Brigid Kennedy, a married couple from South Carolina, are one of the people who were not included in Biden’s plan because they have FFEL loans. It isn’t the first time a type of loan was used to determine whether they received forgiveness.
FFEL loans, issued and managed by private banks but guaranteed by the federal government, were once a pillar of the federal student loan program, until they were phased out in 2010. When NPR reported on the FFEL guidance change, an administration official said roughly 800,000 borrowers would be excluded from relief.
This pause has allowed her to switch careers and pay off her car, things that felt overwhelming with the weight of her student loan payments. All of her loans are federally held and, under the Biden administration’s plan, she would have received $10,000 in cancellation. She remembers that it gave her a little hope on the day it was announced. But not enough to ease the pressure of paying interest on top of her original debt.
She has over $30,000 in student loans, which is more than what she initially took out for her degree, due to a brief period of forbearance after she graduated in 2013.
The payment pause was a gift, one that Ariana would miss very much. She has gotten used to small comforts like having a steady savings account and not stressing out about every “purchase larger than $20.”
Source: https://www.npr.org/2023/07/01/1185327143/student-loan-forgiveness-supreme-court-reactions
Under the Biden Administration, Student Loan Forgiveness is a “Cynical Plot” and a Debt Recession – A Conversation with Carolina Rodriguez
He called the debt relief program a “cynical ploy” by the administration, a harmful one: “The goodwill that could come from targeted student loan forgiveness can be put at risk by trying to provide forgiveness to virtually everyone.”
He says, “They were taking a big risk in getting people’s hopes up, and now seeing those hopes dashed.” “This is politics, right? I think the administration should be called out for the deception that comes with it.
The president of the conservative-leaning Thomas B. Fordham Institute has been a critic of Biden’s plan for some time, and he says the blame lies with the administration.
But she’s expecting a surge as the summer comes to a close, and payments do finally resume: “A lot of the borrowers are still going to be in denial that they now have to plan for this.”
Under the Biden administration, she’s seen investment in these programs and a deluge of changes to the student loan landscape: “We sometimes joke in the advocacy community, it’s like a decade’s worth of changes in two years.”
“There was no trust before. There is no trust now,” she says. Most borrowers she speaks to are interested in other paths to forgiveness, such as Public Service Loan Forgiveness and income-driven repayment plans.
Carolina Rodriguez spends her days talking to borrowers like Strickland at New York’s Education Debt Consumer Assistance Program (EDCAP). She said that such feelings of defeat and resignation are not unusual.
He was a student at the University of North Carolina, Chapel Hill. In order to attend, he had to take out roughly $30,000 in federal loans, which is on par with the national average for a bachelor’s degree from a public institution.
Source: https://www.npr.org/2023/07/01/1185327143/student-loan-forgiveness-supreme-court-reactions
Can we save a little more, but we can’t afford it,” says Strickland, a 25-year-old borrower in Raleigh, N.C.
“I would say Congress needs to pass this, but that’s not going to happen,” says Graeme Strickland, a 25-year-old borrower in Raleigh, N.C. It has become a culture war around this issue. And like, this is my income. I’m able to spend money on groceries because of this.
