TAMPA, Fla. — The Supreme Court ruled President Joe Biden's federal student loan debt relief plan is unconstitutional, ending the hopes of debt forgiveness for tens of millions of Americans.
WHAT YOU NEED TO KNOW:
- Supreme Court ruled the student loan debt relief program is unconstitutional
- Student loan payments will restart in October after being paused since the start of the pandemic
- The loan amount will be unchanged from what it originally was
The justices voted 6-3 in favor of Republican-led states that sued the federal government over the program. The vote was along ideological lines on the court.
Under President Biden’s plan announced in August 2022, people who received a Pell Grant would have been eligible for up to $20,000 in student loan forgiveness. Those who didn’t receive a Pell Grant would have received up to $10,000 in debt relief.
Many Republicans took exception to the plan, calling it a bailout for the wealthy despite income caps set at $125,000 for individuals and $250,000 for couples.
Supreme Court Student Loan Decision by ABC Action News on Scribd
Two student loan borrowers and six Republican-led states sued the federal government over the program. The Supreme Court ruled against the two student loan recipients but in favor of the states — essentially killing the program.
The two student loan borrowers claimed the program wasn’t fair because of eligibility requirements and the fact that it only addresses government-backed loans and not private loans. The states argued that the Department of Education lacked the authority to forgive student loan debt, claiming that was an act for Congress to sign off on.
The Biden administration contended that Congress gave the executive branch authority in 2003 to reduce or eliminate student loan debt during a national emergency. At the time President Biden announced the plan, the country was in a national emergency due to the COVID-19 pandemic.
Up to 43 million borrowers would have benefited from the plan, the Biden administration said.
Stefanie Marrero has federal student loans and would've qualified for $20,000 in debt relief under the program.
"Me amongst like so many other borrowers just would've been just in a much better financial place," said Marrero. "It was pretty devastating. It was a pretty hard blow this morning."
However, not all people felt that program was fair. Amanda Lynton says she and her husband are both veterans.
"Part of the incentive and our compensation for joining the military is the college assistance, and so for us, although when we signed up, our main objective was to serve our country, it was a major added benefit for us to get that college tuition," said Lynton. "For us, people just kind of floating on through and having their debt relieved like that at the cost of us and others, it’s kind of a slap in the face honestly.”
"I know a lot of people were probably counting on the relief from the payments, and those people may have spent that money that they had squirreled away," said Bill Karins, a Branch Development Manager with Achieva Credit Union.
Karins said budgeting is key. Other steps he suggests are trying to refinance if you have a higher rate and getting ahold of your servicer.
"Find out if there are any kind of payment delays that they can do so that they can get ahead a little bit, if they can kinda of push it back a little bit, put some of the debt at the back end of the loan so that they can get more prepared to make their payments," said Karins.
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How to prepare to start paying back your student loans
Here are things experts suggest you do now:
- Start saving money
- Take a look at finances - make cuts to your budget to accommodate loan payments
- Get online and check what your current loan payment is
- Contact your loan company to see about switching payment plans to one that works for you
