We could learn as early as Thursday or Friday whether or not the Supreme Court will block or allow President Joe Biden’s controversial student loan debt forgiveness program to move forward.
Editor’s Note: The Supreme Court did not announce its decision on student loan debt forgiveness either Thursday or Friday as expected. The next potential date for the decision announcement is Tuesday, June 27.
The nine Supreme Court justices are expected to announce their decision on the case before adjourning for summer recess at the end of June, with Thursday being the court’s next scheduled opinion release day. While 18 cases remain pending, opinions in three of the more high-profile cases are expected this week. In addition to whether Biden has the authority to cancel student debt, other decisions expected this week include whether colleges can continue to use affirmative action and whether certain businesses have a right to refuse services for same-sex weddings.
“Student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October.”
Statement on Department of Education website
The Biden Administration wants to eliminate up to $20,000 of student loan debt for eligible borrowers, who have already seen their student loan payments paused since the onset of the Coronavirus pandemic in March 2020. When that payment pause expires at the end of September, those roughly 40 million borrowers will face a big adjustment, as the typical monthly student loan payment is around $350. Some estimates say the often-extended pause kept about $15,000 in the pockets of borrowers.
The recent bill passed by Congress and signed into law by President Biden to raise the debt ceiling included a provision that forces the resumption of federal student loan payments later this year. The Department of Education recently posted on its website that “student loan interest will resume starting on Sept. 1, 2023, and payments will be due starting in October.”
Borrowers who were making payments before the student loan payment pause took place in March 2020 likely won’t see a change in their monthly payment, while those who graduated during the pause and have yet to make a student loan payment will be keen to find out the exact amount of their minimum required payment come October.
The Department of Education said borrowers will receive a billing statement or other notice at least 21 days before payment is due, and the notice will include the borrower’s payment amount.
Multiple legal challenges
What we will learn later this week is whether either or both of two lawsuits that reached the Supreme Court seeking to block Biden’s student debt relief plan have been successful in doing so.
Back in August 2022, Biden first announced details of his plan to deliver on a campaign promise to provide $10,000 in student debt cancellation for millions of Americans, and up to $10,000 more for those with Pell Grants. Borrowers who earn less than $125,000 a year, or families earning less than $250,000, would be eligible for the $10,000 loan forgiveness.
Biden’s student loan debt relief plan has faced a series of legal challenges since its introduction. The plan was paused in November after a federal appeals court in St. Louis issued an injunction against it, stemming from a lawsuit involving six states: Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. The lawsuit claimed the Biden Administration overstepped its authority and would rob states of future tax revenue. Lawyers for the states also argued that the administration could not use the COVID-19 pandemic to defend the program.
This prompted the Biden Administration to file an emergency application to the Supreme Court, who later announced the plan would be on hiatus until a decision is reached.
Also last November, a federal judge in Texas blocked the plan after a lawsuit claimed it had unreasonably excluded two students.
Justices seem inclined for cancel forgiveness
According to The New York Times, the Supreme Court’s conservative majority seemed “deeply skeptical” of the legality of the Biden administration’s plan to wipe out approximately $430 billion in student debt when hearing nearly four hours of oral arguments on the cases back in February, heightening the prospect that the justices would thwart efforts to forgive the loans of tens of millions of borrowers.
Chief Justice John G. Roberts Jr. indicated that the administration had acted without sufficiently explicit congressional authorization to undertake one of the most ambitious and expensive executive actions in the nation’s history, violating separation-of-powers principles.
“I think most casual observers would say if you’re going to give up that much amount of money, if you’re going to affect the obligations of that many Americans on a subject that’s of great controversy, they would think that’s something for Congress to act on,” the Times quoted Roberts as saying.
The court’s three liberal members said Congress had already acted, by passing a law in 2003 that authorized the secretary of education to address emergencies.
“Congress could not have made this much more clear,” Justice Elena Kagan said, adding: “We deal with congressional statutes every day that are really confusing. This one is not.”
More than 26 million borrowers have already applied for the loan relief, including around 16 million who had already received approval (but had not yet had their loans adjusted) when the program was put on hiatus.
In the unlikely event the Biden Administration is to prevail, the Times noted it would probably be on the ground that none of the plaintiffs in the two cases had established standing to sue.
Help from SECURE 2.0 provision
One other thing to remember is that SECURE 2.0 legislation includes a provision to help workers accumulate savings through their employer’s 401(k) match while making student loan payments. This removes the difficult decision for many student debt loan payers of whether to make a loan payment or contribute to their 401(k) to capture the employer match. In the past, this decision has resulted in many participants missing out on the company match.
According to recent Cerulli research, an overwhelming 63% of student debt holders (regardless of income level) indicate that they would continue to make the same payments to their student loans and continue to save the same amount into their retirement accounts with the provision, while 35% of participants indicate that they would reduce the amount saved into their retirement to pay down their student loans more quickly.
SEE ALSO:
• Supreme Court Hears Arguments on Biden’s Student Loan Forgiveness Plan
• Senate Sends Debt Ceiling Bill to Biden, Averting Potential Default
• Tackling Student Loan Debt Relief Issues with Candidly’s Laurel Taylor
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
