US Supreme Court blocks President Biden’s plans to forgive student loan debt
The move also marks a political setback for the Democratic president, as tackling student loan debt was a key pledge he made on the 2020 campaign trail to energise younger voters.
Friday 30 June 2023 17:32, UK
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U.S. President Joe Biden delivers an economic policy speech at The Old Post Office in Chicago, Illinois, U.S., June 28, 2023. REUTERS/Leah Millis
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The US Supreme Court has blocked President Biden’s plan to cancel or reduce student loan debt for millions of Americans.
The 6-3 decision effectively killed the $400bn plan, announced by the president last August, and left borrowers on the hook for repayments that are expected to resume by late summer.
The justices ruled against Mr Biden in a decision favouring six conservative-leaning states that objected to the policy and held that the administration needs Congress’s endorsement before undertaking such a costly programme.
The court’s action dealt a blow to the 26 million US borrowers who applied for relief after the president announced the plan in 2022.
A White House source said the president plans to announce new actions on Friday to protect student loan borrowers in the wake of the ruling.
Under the plan, the administration proposed to forgive up to $10,000 in federal student debt for Americans earning less than $125,000 a year.
Pell Grant recipients, who are the majority of borrowers, would be eligible for $10,000 more in debt relief. The administration said 43 million would have been eligible for relief.
The ruling marks a political setback for the Democratic president, as tackling student loan debt was a key pledge he made on the campaign trail in 2020 to energise younger voters.
Student debt protests outside the Supreme Court. Pic: AP
Image:
Student debt protests outside the Supreme Court. Pic: AP
Mr Biden’s plan aimed to fulfil his campaign promise to cancel a portion of $1.6 trillion in federal student loan debt.
It was criticised by Republicans who called it an overreach of his authority and an unfair benefit to college-educated borrowers while other borrowers received no such relief.
President and founder of the Student Debt Crisis Centre, Natalia Abrams, said the responsibility for new action falls “squarely” on Mr Biden’s shoulders.
In a statement, she said: “The president possesses the power, and must summon the will, to secure the essential relief that families across the nation desperately need.”
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The ruling puts pressure on the Biden Administration to find an alternative way to forgive student debt that could potentially withstand legal challenge.
Loan repayments are expected to resume by late August under a schedule initially set by the administration and included in the agreement to raise the debt ceiling.
Payments have been on hold since the start of the COVID pandemic more than three years ago.
The Department of Education had estimated that the debt relief would cost taxpayers about $30bn annually over the next decade through foregone loan repayments – about $2.5bn per month – or about $305bn in total.
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