The Biden-Harris Administration’s Student Debt Relief Plan has been halted by The Supreme Court. The decision impacts anyone paying off their student loans as President Biden’s promise of around $10,000 of forgiveness for each borrower will no longer be applied.
This change does not impact current UTD students, as students do not start paying off their loans until about six months after they graduate with their degree. However, it may affect UTD faculty members and recent graduates who have likely been taking advantage of the loan forgiveness and will have to start paying their loans once again on Oct. 1.
The forgiveness plan was created in hopes to relieve people from debt, as the state of Texas alone has over $120 billion accumulated in federal student loans. In the Supreme Court case Biden v. Nebraska that took place on June 30, the Court issued a 6-3 decision striking down the debt forgiveness program. The court’s majority opinion was that it wasn’t within Biden’s power to implement the plan, finding it unconstitutional to move so much money without going through Congress. More specifically, this case determined whether the Secretary of State is still able to establish a student loan forgiveness program under the Health and Economic Recovery Omnibus Emergency Solutions act in which the Secretary can waive or modify any statutory or regulatory provision in student financial programs in case of national emergency.
“They had tried to use a 20-year-old law in response to September 11, 2001 terrorist attacks and tried to use some language in there about being able to modify terms of loans,” Thomas Gray, assistant professor of political science, said. “They tried to take that and say we can just systematically change all loans in the United States, but the Supreme Court said that’s not what Congress meant.”
There has been debate about the fairness and effectiveness of the forgiveness plan. Critics like Chris Varela, owner of Varela Financial, which offers student loan strategies to graduate professionals, believe that the forgiveness plan is unfair because it does not take into account students’ total in loans. For example, if someone had less than $10,000 left in loans to pay off, then the forgiveness plan already takes care of that. Whereas for those that have much higher loans, it would still take just as much the amount of time to pay off their loans with just $10,000 in forgiveness. Gray further explains how this concept began in response to the COVID-19 pandemic and the specifics of the policy.
“This went along with something that had actually started under the Trump administration, which was that people didn’t have to make payments anymore and interest didn’t accrue on their loans that are held with the federal government,” Gray said, “There were two prongs… one prong was nobody’s making payments and interest isn’t accruing, so people’s balances aren’t increasing… the second prong was that most people were going to get $10,000 of loan forgiveness as a one-time thing.”
To have a reinstated loan forgiveness plan, the policy will have to be modified to go through Congress. Gray said most of the House of Representatives consists of the Republican party, who tend to be opposed to raising taxes, so it is unlikely that the Biden administration can pass the plan through Congress in its current form.
“Maybe they can do a program for people who lost their jobs due to the pandemic, maybe they could do a specific program for people who lost their spouses that they have shared a financial life with during the pandemic,” Gray said. “But just everybody getting $10,000 off … there’s nowhere that I’ve seen yet in the law that is likely to allow them to do that.”
The Department of Education now has a plan to go through rulemaking. Rulemaking is a process where the executive branch can make a law within the powers Congress has given and within their powers under the Constitution. However, Gray said that this process may take months to years, which may not leave the Biden administration any more time to reinstate the policy.
“Biden’s term only has about 18 months left … Now he could potentially win reelection … and then they could do it again, but with rulemaking … you don’t have the power to just do anything.” Gray said. “The Supreme Court just told them, you can’t do something that moves hundreds of billions of dollars around without explicit congressional approval, which means whatever they do, if they want to not be struck down by the Supreme Court, it’s going to have to be on a smaller scale.”