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Supreme Court to hear Biden’s student loan forgiveness argument

Posted at 8:24 AM, Feb 28, 2023
and last updated 2023-02-28 10:34:20-05

The Supreme Court will listen to arguments for and against President Joe Biden’s plan to forgive student loan payments for millions of borrowers.

The question before the Supreme Court is whether the administration can forgive these loans without Congressional authorization.

According to government figures, 26 million borrowers applied for forgiveness before the government stopped processing applications. Of those, 16 million were approved for forgiveness. The administration estimated that 40 million in total would be eligible for forgiveness.

Biden's plan calls for borrowers with incomes of up to $125,000 to receive up to $10,000 in federal student loan forgiveness. That amount increases to $20,000 for borrowers who received pell grants.

In November, federal courts ruled the Biden administration could not move forward with forgiveness. The Biden administration has since appealed the decision and has taken the case to the Supreme Court.

In the meantime, federal student loan payments remain on pause until at least June, pending the Supreme Court’s decision.

The Supreme Court’s decision likely won’t come for several more months.

Proponents of student loan forgiveness point out the rising cost of education in recent decades. The cost of tuition at a public four-year university in 2020-21 averaged $9,400, up from $8,500 from a decade earlier, when adjusted for inflation.

Government data show that in the last three decades, the cost of attending a public university, which is generally far more affordable than a private one, has doubled, when adjusted for inflation. In the last 40 years, the cost has tripled.

A student attending a public university from 2017-21 would be expected to pay $38,093 in tuition and mandatory fees, in 2021 dollars. A person who attended a public university in 1977-81 would have been expected to pay $10,335 in 2021 dollars.

Opponents say Biden’s plan is too costly. The Congressional Budget Officesaid the cost for the government to forgive student loans is an estimated $400 billion.

The administration is expected to argue that the HEROES Act can be applied to pass student loan forgiveness.

“The HEROES Act, first enacted in the wake of the September 11 attacks, provides the Secretary broad authority to grant relief from student loan requirements during specific periods (a war, other military operation, or national emergency, such as the present COVID-19 pandemic) and for specific purposes (including to address the financial harms of such a war, other military operation, or emergency),” wrote Secretary of Education Miguel Cardona. “The Secretary of Education has used this authority, under both this and every prior administration since the Act’s passage, to provide relief to borrowers in connection with a war, other military operation, or national emergency, including the ongoing moratorium on student loan payments and interest.”

Opponents are expected to argue that loan cancellation of this magnitude requires Congressional approval.

JB Bryan, as president and chief investment officer of JB Financial Group, has helped Central Virginia clients with their money since 1995.

“I thought that there would never be a day that school loans were going to be paid off,” she said.

Bryan believes the justices will side with the lower courts when their decision is expected to come out by early summer.

“There's no reward for the person that did the right thing. That hurts. That hurts from a financial advisor perspective, because I have advised so many people to do the right thing,” Bryan explained.

Monthly payments will eventually resume for a majority of borrowers regardless of who SCOTUS sides with.

“If the average payment is $300 and you haven't paid a payment, nor any interest for the last three years, that's almost $10,000 that you have hopefully saved,” Bryan stated.

Bryan advised individuals with student loan debt to begin factoring in the payments into their budgets now.

“I think at minimum you need to prepare yourself mentally for making those payments,” she recommended. “So, start now get comfortable with making that payment so that you don't have that shock of getting back on track.”