“I’m announcing today a new path consistent with today’s ruling to provide student debt relief to as many borrowers as possible as quickly as possible.”- President Joe Biden.
“The HEROES Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, but does not allow the Secretary to rewrite that statute to the extent of canceling $430 billion of student loan principal.” - Chief Justice John Roberts wrote in the majority opinion.
The Supreme Court’s ruling on President Joe Biden’s student loan debt cancellation plan has left both opponents and proponents of loan forgiveness in a comfort zone to engage in the ongoing debate. The Biden’s plan targeted up to $10,000 in federal loan debt for borrowers earning under $125,000, with an increased limit of $20,000 for those who also received a Pell grant during their college education.
The Supreme Court’s decision invalidated President Biden’s student loan forgiveness plan, ruling that a 2003 federal law does not allow the program to wipe out nearly half-a-trillion dollars in debt. This issue has now been met with mixed reactions.
Many a US citizens, particularly those who believed it would provide relief to millions of borrowers, have seen the rejection of the loan forgiveness plan by the Supreme Court as devastating one.
Organizations like the National Association of Student Financial Aid Administrators expressed their concerns about the ruling, highlighting the impact on the financial futures of borrowers.
On the other hand, conservative think tanks like The Heritage Foundation argued that loan forgiveness would punish responsible borrowers and the colleges and universities that raise tuition costs. According to legal fellow Jack Fitzhenry and Lindsey Burke, the director of Heritage’s Center for Education Policy at the Heritage Foundation, the financial burden imposed on American taxpayers by this program of questionable merit was staggering.
They have also asserted that its inherent unfairness becomes apparent, as it would have penalized millions of responsible individuals who diligently fulfilled their obligations by repaying their student loans, while also affecting those who never incurred any loan debts.
“If we want to help students deal with the increasing cost of getting a degree, giving a bailout to the very colleges and universities that hike prices is not the answer,” they said in a joint statement.
Meanwhile, House Speaker Kevin McCarthy, a prominent figure within the Republican Party, voiced his concerns about President Biden’s approach to student loan forgiveness, emphasizing its purported negative impact on working families. “The President of the United States cannot exploit emergency powers established two decades ago to benefit his affluent supporters while disadvantaging hardworking families who have consciously decided against assuming student debt,” Speaker McCarthy said.
On Friday, he further underscored the Supreme Court’s ruling, portraying it as a significant setback for Democrats and their alleged distorted and exaggerated perception of executive authority.
Jared C. Bass, acting senior vice president for Education at the Center for American Progress, a policy institute that takes a liberal stance on economic and social issues, effectively condemned the Supreme Court’s decision. “This ruling takes away a lifeline for millions of households crushed by student-loan debt,” he said.
On this flaming issue, different experts and researchers have conducted a number of studies to assess the potential impact of student loan forgiveness. Adam Looney from the Brookings Institution suggested that targeting Pell Grant recipients, who are more vulnerable to default and dropping out, could be an effective approach. Looney found that a significant percentage of Black and Hispanic borrowers, who face financial challenges, have received Pell Grants.
However, other researchers, such as Sylvain Catherine and Constantine Yanneli, argue in a study published last February in the Journal of Financial Economics that forgiveness could be regressive since high earners took out larger loans and low earners might overstate the benefits of debt cancellation.
The cost of forgiving federal student loan debt has also been a topic of debate.
The Wharton School of the University of Pennsylvania estimated that forgiveness would cost between $300 billion and $980 billion over a 10-year period, with a significant portion of debt relief going to borrowers in the top income distribution.
House Speaker Kevin McCarthy criticized the plan as favoring high-earning individuals and questioned the use of emergency powers for such purposes.
Robert F. Kennedy Jr., a contender in the 2024 Democratic presidential primary against Biden, expressed his disappointment with the Supreme Court’s ruling on student loans, describing it as an “unfortunate” outcome stemming from President Biden’s inability to foster unity in Congress regarding this critical matter that affects young Americans. Kennedy emphasized that if he were elected, he would exert pressure on Congress to deliver substantial relief for student debt and work towards reducing the expenses associated with education.
On the contrary, liberal-leaning organizations like the National Consumer Law Center voiced their disappointment, emphasizing the financial security of low-income Americans and the need for debt relief.
Despite the recent Supreme Court ruling, advocates for student loan forgiveness persist in their call for action. Efforts to leverage the Higher Education Act and explore alternative pathways for debt relief through the Department of Education’s regulatory process have gained momentum. However, the multifaceted nature of the student loan system necessitates enhanced communication and support for borrowers as they prepare to resume loan repayment.
The complexity of the issue becomes apparent when considering the effectiveness of targeting specific groups, like Pell Grant recipients, while weighing concerns about the financial implications and potential repressiveness of loan forgiveness. As the debate unfolds, it is crucial to prioritize the financial well-being of borrowers and explore alternative solutions to address the ongoing student loan crisis in the United States.
The two legal challenges to the student loan forgiveness plan reached the Supreme Court, with one initiated by six Republican-led States and the other filed by two students. In the student-filed case, the argument centered on the Biden administration’s alleged failure to follow the proper process in implementing the plan.
The Biden government relied on the Higher Education Relief Opportunities for Students Act, commonly known as the HEROES Act, which was enacted in the aftermath of the 9/11 attack, which allows the Secretary of Education the power to waive or modify terms of federal student loans during times of war or national emergency.
But the Court ruled that the Department of Education did not have the jurisdiction to forgive student loan debt under the HEROES Act, stating that it was an unlawful act of presidential power lacking explicit Congressional approval.
The White House cited the COVID-19 pandemic as the basis for declaring a national emergency.