The Supreme Court has blocked President Joe Biden’s plan to forgive student loans — a major campaign promise of his. The block will affect 40 million Americans with student loans that would have benefitted from loan forgiveness.
Several states challenged the plan on the grounds that the president does not have the power and means to forgive student loans. The states that sued are Kansas, Iowa, Missouri, South Carolina, Nebraska and Arkansas.
According to an article from CBS News, the Supreme Court found that “federal law does not authorize the program to wipe out nearly half a trillion dollars in debt.” The 6-3 decision was unveiled by Chief Justice John Roberts, where he argued that student loan forgiveness would threaten the revenue of a loan company, MOHELA, in Missouri.
“MOHELA is, by law and function, an instrumentality of Missouri: Labeled an ‘instrumentality’ by the State, it was created by the State, is supervised by the State, and serves a public function,” Roberts wrote. “The harm to MOHELA in the performance of its public function is necessarily a direct injury to Missouri itself.”
President Biden previously delayed loan payments throughout the last few years due to the pandemic.
Adam Looney is a finance professor at the University of Utah and is an expert in tax and student loan policy. He said many Americans will need to begin preparing to pay loans they previously thought would be forgiven.
“My take would be that there are 20 million very disappointed people who thought their loans were going to be entirely forgiven (and millions more who expected partial forgiveness) who must now prepare to start making payments this fall,” he said in an email interview.
It’s a large switch in mindset for those depending on the forgiveness plan.
“The monthly payments are typically modest for those borrowers, but it’s an abrupt reversal of fortune,” Looney said.
Rebecca Walsh, director of communications at the U, said in an email statement on Friday that despite the decision, the U is still committed to keeping education at the university affordable.
“We are committed to making education accessible and affordable for all our students,” the statement read. “That is where our work is focused. Students and their families have to make financial decisions that make sense for them. We anticipate that loan providers will begin communicating with students about the resumption of loan payments in coming weeks.”
According to the U.S. Department of Education, loan repayments will begin in October. However, interest will start accrual as soon as September 1.
Biden released a statement via Twitter and Instagram yesterday that said the fight is not over, detailing his next steps to assist those who now have to pay back student loans.
“While today’s result is disappointing, we should not lose sight of the progress we’ve made — making historic increases to Pell Grants; forgiving loans for teachers, firefighters and others in public service; and creating a new debt repayment plan, so no one with an undergraduate loan has to pay more than 5 percent of their discretionary income,” he said in the statement.
