Will Biden’s Student Loan Cancellation Plan Blocked By Supreme Court? Here’s What Could Happen! 

The burden of student loan debt weighs heavily on tens of millions of Americans. According to Motley Fool, with outstanding balances surpassing $1.6 trillion in the first quarter of 2023, student loans have become the second-largest source of debt for individuals, trailing only home mortgages.

Will Biden’s Student Loan Cancellation Plan Blocked By Supreme Court? (PHOTO: MarketWatch)

Will Biden’s Student Loan Cancellation Plan Blocked by Supreme Court?

The scale of this issue prompted President Biden to unveil a plan in August 2022 that aimed to provide debt cancellation for federal student loan borrowers. However, opponents challenged the plan in federal court, leading to the Supreme Court‘s decision to review the cases. As arguments took place on February 28, a final ruling is expected in June.

As the anticipation builds, many legal experts now predict that the Supreme Court will block Biden’s student loan cancellation plan. This potential outcome raises concerns among borrowers and lenders alike, leaving them uncertain about what lies ahead.

Biden’s student loan cancellation plan proposes canceling up to $10,000 in debt for all eligible borrowers, with the possibility of up to $20,000 for those who received Pell Grants. The cancellation program would apply to individuals or joint filers with adjusted gross incomes below $125,000 and $250,000, respectively.

Lawsuits challenging the plan quickly emerged, including suits from Texas students who argued against the fairness of excluding those with only private student loans and granting larger cancellations to Pell Grant recipients. Additionally, several state governments filed suits claiming that the plan exceeded the Education Department’s authority and imposed financial harm on the states. Injunctions were granted in both cases, halting the implementation of the student loan cancellation plan. The Supreme Court agreed to hear arguments for both cases simultaneously.

If the Supreme Court rules in favor of the Biden plan, the Education Department could proceed swiftly. Many applicants have already received conditional approval for debt cancellation, and millions more would become eligible.

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Biden’s Student Loan Cancellation Plan

However, if the Supreme Court upholds the lower court rulings, the Biden administration would need to explore alternative approaches to implement student debt cancellation. One option would involve Democratic representatives proposing a bill in Congress that explicitly authorizes the cancellation program. Although this method is most likely to withstand Supreme Court scrutiny, it faces political challenges due to Republican control of the House of Representatives.

Alternatively, the Department of Education could attempt to move forward independently by utilizing a different source of statutory or regulatory authority. Some legal experts have pointed to alternative laws that could provide a stronger legal basis for executive action. Nevertheless, opponents would likely file lawsuits against the government once again, leading to a prolonged legal battle.

As borrowers await the Supreme Court’s decision, the recent resolution of the debt ceiling debate adds to the uncertainty. The current pause on student loan repayments is set to expire towards the end of August. While borrowers may have other relief options available, it is prudent to prepare for loan repayments to resume. Planning for the worst-case scenario is a wiser choice than passively hoping for the best outcome.

READ ALSO: House Passes Bill Blocking Student-Loan Forgiveness And Ending Payment Pause