Predictions for the Impact of a Supreme Court Decision to Deny Student Loan Forgiveness

The U.S. Supreme Court may decide to invalidate the Biden administration's student loan forgiveness program, which could be a major setback for the millions of Americans who were expecting to have their debt cancelled.

In August, President Joe Biden declared that he would forgive a minimum of $10,000 and a maximum of $20,000 in federal student loan debt for millions of borrowers. Shortly after, Republicans and conservative organizations initiated six legal disputes against his proposal.

The Supreme Court has decided to listen to oral arguments concerning two of the lawsuits at the end of February.

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If the Supreme Court decides against the president and the debt relief that was promised does not come to fruition, what will be the outcome? According to experts, this is what is expected.

James Kvaal, Undersecretary of the U.S. Department of Education, recently declared in a court filing that if the government is not allowed to offer debt relief, there could be a "massive rise in federal student loan delinquency and defaults due to the COVID-19 pandemic."

In the past, student loan borrowers have been given forbearances during natural disasters, yet Kvaal noted that when payments resumed, default rates still increased drastically.

Since March 2020, the federal government has implemented a relief policy that pauses student loan payments due to the pandemic. This policy is set to remain in effect until the legal proceedings concerning the president's plan are finished or until the end of August, whichever occurs first.

Kvaal noted that the one-time student loan debt relief program was created to prevent default rates from rising drastically.

Kvaal noted that the borrowers most at risk of not being able to pay back their loans are those who would have had their entire balance forgiven under Biden's student loan forgiveness plan.

The government predicted that their plan would benefit approximately 18 million individuals.

According to Kvaal, those with student loans had the expectation that they would not have to make extra payments on their federal student loans. This could potentially prevent them from making payments even if the Department is unable to provide debt relief.

Astra Taylor, co-founder of the Debt Collective, a union for debtors, warned that if federal student loan payments were restarted without providing forgiveness, it would have "severe" political repercussions for Democrats.

She declared that President Biden will be starting his 2024 reelection effort as the nation's debt collector.

Taylor suggested that if the U.S. Supreme Court, which is known for its conservative leanings, prevents the president's plan from going through, Biden should look into other legal methods to provide assistance to those with loans.

She suggested that the president could use a different law to back up his plan, such as the Higher Education Act of 1965. This law states that the Education Department has the authority to take action on any rights, titles, claims, or liens related to federal student loans.

The Biden administration is citing the Heroes Act of 2003 as justification for their ability to cancel student debt.

The Education Department has been granted the authority to make changes to federal student loan programs in times of national crisis. However, some have argued that the current administration is using the Covid-19 pandemic to fulfill a campaign promise, and that the relief is not tailored to those who have been financially impacted by the virus.

Mark Kantrowitz, an expert in higher education, suggested that the president could attempt to prolong the federal student loan payment suspension that was put in place during the pandemic.

Kantrowitz suggested that this action is more likely to stand up in court.

The student loan crisis in the United States has had a particularly devastating effect on Black Americans, with the total amount of debt reaching an alarming $1.7 trillion.

According to a report from the Brookings Institution, the average amount of student loan debt owed by Black borrowers at graduation is $7,400 more than that of their white counterparts.

The disparity between Black and White college graduates only increases with time. On average, Black college students owe more than $52,000 four years after graduation, while the average White graduate owes around $28,000.

Wisdom Cole, national director of the youth and college division at the NAACP, expressed that if Joe Biden's student loan forgiveness plan did not come to fruition, it would be a "catastrophic setback" for African Americans.

Cole warned that the racial wealth gap will only increase and the cycle of economic inequality will persist if nothing is done. He emphasized that if our leaders truly value Black lives, they must take action to prevent this from happening.