Student Loan Forgiveness: How Will the Supreme Court Hearings Impact You?
The road to finalizing President Joe Biden’s student loan forgiveness has been an arduous one since it was first announced in August 2022. Following multiple lawsuits and injunctions, the plan, which has been halted, will be finally reviewed by the Supreme Court on Feb 28.
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A “People’s Rally for Student Debt Cancellation” protest of the plan in front of the Court is scheduled for that day, and co-sponsors of the rally include the Center for Responsible Lending (CRL), the Debt Collective, the Student Borrower Protection Center (SBPC), the NAACP, MoveOn, the National Consumer Law Center (NCLC), and the National Education Association (NEA).
Why is the HEREOS Act Important?
At the crux of the matter is whether the HEROES Act which was enacted in the wake of the Sept. 11 attacks and provides authority to grant relief from student loans.
When the program was announced in August 2022, the Justice Department said in a brief of support of the program that the HEROES Act “authorizes the Secretary to address the financial hardship arising out of the COVID-19 pandemic by reducing or canceling the principal balances of student loans for a broad class of borrowers.”
Lawsuits against the program, however, have been arguing that the HEROES Act does not allow the administration to implement the student loan program.
“The Program is thus an unconstitutional exercise of Congress’s legislative power and must be vacated,” according to the court documents. “In this country, we are not ruled by an all-powerful executive with a pen and a phone. Instead, we are ruled by a Constitution that provides for three distinct and independent branches of government,” Judge Mark. T. Pittman, of the U.S. District Court for the Northern District of Texas, argued in his Nov. 10 decision.
In turn, the Departments of Education and Justice filed a legal brief with the Supreme Court in January, countering that argument.
How Many Borrowers Have Been Approved?
The outcome of the Feb. 28 hearings will have an impact on millions of borrowers. Indeed, according to White House January data, a total of 26.26 million student loan borrowers have applied or were deemed automatically eligible for relief under President Joe Biden’s student loan forgiveness program, and there are 16.48 million fully-approved applications sent to loan servicers for discharge.
In addition, according to the White House, more than 40 million borrowers would qualify for the debt relief program, with nearly 90% of the benefits of the relief going to borrowers earning less than $75,000 per year.
How Much in Forgiveness Will the Average Borrower Get?
If enacted, the forgiveness program would grant up to $10,000 in federal student debt relief for borrowers whose income in 2020 or 2021 was less than $125,000 (or $250,000 for households). And for Pell Grant recipients, that amount increases to up to $20,000 in student loan cancellation. If you are a dependent student, your eligibility is based on your parental income. Most federal loans are eligible, including undergraduate and graduate direct loans, parent PLUS and grad PLUS loans, consolidation loans. Federal family education loan (FFEL) program loans held by ED, Perkins loans held by ED, and defaulted loans, according to studentaid.gov.
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The Supreme Court is largely expected to issue a decision in June.
Meanwhile, the administration has extended the pause on federal student loan repayments to allow for the Supreme Court to rule in the case on the student debt relief program.
“The pause will end no later than June 30, 2023. Payments will resume 60 days after the pause ends,” the White House tweeted.
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