5 Ways Supreme Court Ruling Could Ease Student Loan Debt
8 MIN READ
Published July 24, 2023 | Updated December 13, 2023
The recent Supreme Court decision that blocked the student loan forgiveness plan was a stinging defeat for President Biden’s administration. The program was aimed at delivering relief to millions of student loan borrowers struggling with debt, who are now expected to start repaying their loans this fall.
In August 2022, President Joe Biden announced his plan to cancel up to $10,000 in student loan debt for borrowers earning under $125,000 per year and up to $20,000 for Pell Grant recipients. The announcement was set to affect millions of borrowers struggling with student loan debt.
Over 26 million people from 50 states applied for debt relief, and over 16 million applications were approved. Soon after the announcement, six states filed a lawsuit against Biden to stop this debt cancellation plan on the grounds that Biden exceeded his authority. Ultimately, the Supreme Court stepped in to hear the case.
June 2023 Supreme Court Verdict on Student Loan Debt Relief
On June 30th, 2023, the Supreme Court blocked the groundbreaking student debt relief plan to forgive all or some of the student loan debt affecting millions of Americans. The court ruled that the Department of Education is not authorized under federal law to provide such debt forgiveness.
Key Takeaways from the Verdict
Here are the key takeaways from this verdict and how it may affect you:
- Federal student loan recipients who were eligible to get debt relief under this plan experienced keen disappointment due to this verdict.
- Loan repayments are set to resume this October, affecting borrowers in 50 states. Interest will start accruing in September.
- Student loan repayments that have been on hold for over three years since the start of the pandemic will resume this fall.
Top Student Loan Debt Relief Cases Heard by the Supreme Court
There have been at least six lawsuits against the historic debt forgiveness plan since it was announced. The Supreme Court heard two of these cases. The first case, Biden v. Nebraska, involved a lawsuit filed by six states- South Carolina, Nebraska, Missouri, Kansas, Iowa, and Arkansas against the plan. The states argued that President Biden overstepped his authority under federal law without Congress’s authorization. The Biden Administration argued that the U.S. Secretary of Education has the authority to make such changes under the Heroes Act of 2003.
The second case heard by the Supreme Court was backed by an advocacy organization, the Job Creators Network Foundation. The plaintiffs’ lawyers argued that they were deprived of procedural rights because the White House did not allow the public to weigh in on the plan before it was rolled out. They also argued that the Heroes Act does not authorize the president’s plan.
Effective Ways to Seek Relief from Student Loan Debt through the Supreme Court
The U.S. Supreme Court ruling, in this case, has not been in favor of millions of student loan borrowers. Unfortunately, for individual borrowers, there are no alternative methods of seeking student loan debt relief through the Supreme Court at this time.
Teresa Dodson, debt relief expert and founder of Greenbacks Consulting, offers this advice:
“Don't wait for a verdict or outcome that is out of your control. Take Control. The best thing to do is call to discuss how you can restructure your loan and try to get a payment that fits your budget.”
Future Developments and Possibilities for Student Loan Debt Relief in the Supreme Court
Following this historic decision on the student loan forgiveness program, President Biden has announced that he plans to continue working on a proposal to forgive student loans, although this may take time. For now, the administration is focused on providing some relief through income-driven repayment plans.
The SAVE Plan can help borrowers cut down their monthly payments to just 5% of their disposable income. This is a 50% reduction from the earlier 10% that borrowers had access to. The department also plans to give borrowers additional relief by not reporting missed payments to credit bureaus for 12 months if they can’t make payments.
Criticisms and Debates Surrounding Student Loan Debt Relief in the Supreme Court
The political fallout from this ruling against President Biden was immediate. For many Republicans, this ruling was accepted as just since the debt relief program would have subsidized the education of the elites while putting the burden on hardworking taxpayers.
For Democrats, the fight continues. The pause on student loan payments will expire in weeks, and the administration is set to explore other tools and avenues to cancel student loan debt for millions of working-class Americans burdened by thousands in student loan debt.
5 Things Student Loan Borrowers Can Do Now
After a three-year break, millions of student loan borrowers will need to start making payments on their loans this fall. Here are five things you can do now to ease the burden of student loan debt.
1. Get in Touch with Your Loan Servicer
Contact your loan servicer in advance to make sure they have your updated information. You may have moved in the last three years, your loan servicer may have changed, or there may have been other changes you are not aware of.
2. Consider an Income-Driven Repayment Plan
If you are facing financial hardship, consider applying for a repayment plan. Apply for the new SAVE Plan, which can dramatically reduce your monthly payments. With lower loan payments, it may be easier for you to afford your other bills.
3. Set up Auto-Debit
The last thing you want is to miss payments once the repayment starts. Review your monthly payments to check how much you’ll need to start paying and ensure you have opted for auto-debit so you don’t miss loan payments each month.
4. Open a High-Yield Savings Account (HISA)
Make good use of your time before loan repayments start by opening a high-yield savings account. Start putting aside some money each month to make sure you’ll have some amount saved up before the payments are due in October. This will also be good practice to determine if you’ll be able to handle all your expenses.
5. Consider Other Debt Forgiveness Options
Check to see if you are eligible for debt forgiveness options, such as the Public Service Loan Forgiveness program. If you work for certain nonprofits or the government, you may be able to get your debt canceled.
You may also be able to get up to 85% of your debt canceled through the Nurse Corps Loan Repayment Program if eligible. There’s no single unified database of all existing debt relief options available today. You’ll have to put in some time to research and explore all your options to see if you qualify for any other student loan relief program.
Conclusion and Recap of Student Loan Debt Relief in the Supreme Court
Although the student loan debt relief Supreme Court ruling may not be what you’re hoping for, not all is lost. The administration is still working on alternatives that may help millions of student loan borrowers sometime in the future.
While you should remain hopeful, it is recommended that you start preparing for when your loan payments will resume. Make sure you know when payments resume, how much you’ll need to pay, if they’ll be affordable, and what other options you can consider. Ask your loan servicer about debt relief options they offer, or sign up for an income-driven repayment plan.
If you’re finding it challenging to make student loan payments due to other unsecured debts, consider paying off these debts so you’ll have more money available to pay your loans. TurboDebt can help you find the right debt relief option for your needs. Our team will offer you a personalized debt relief option based on your individual needs. Get in touch with us for a free consultation today.
Student Debt Forgiveness Update
As student loan repayments resumed in October 2023, the Biden administration announced additional aid to 125,000 borrowers. These borrowers are projected to receive an additional $9 billion in funds toward forgiving student debt, including those with permanent disabilities.
In recent fixes to the Income-Driven Repayment plan and Public Service Loan Forgiveness, more Americans were granted debt forgiveness despite the Supreme Court ruling.