What does the SCOTUS ruling on student loan forgiveness mean for 16 million people already approved?

The Supreme Court has rejected President Biden’s student loan forgiveness plan.

The judges ruled 6 to 3 that the government had exceeded its authority with the program to wipe out more than $400 million in student debt.

The program was challenged by six Republican states and two borrowers who argued that Biden should have sought congressional approval for a plan using significant tax dollars.

The White House said it plans to announce new measures later today to protect student borrowers. The administration plans to “make it crystal clear to borrowers and their families that the Republicans are responsible for denying the relief that President Biden has fought to get to them,” a source told me. CNN.

But what happens to the 16 million people who have already been approved for forgiveness?

What does the decision mean for you?

For the 26 million people who applied for the program, more than half of whom were approved, the ruling will dash their hopes of benefiting from a debt reduction of up to $20,000.

If no other plans are put in place before then, that means borrowers will have to pay off again in full in October, when they resume this fall after more than three years.

The Congressional Budget Office estimates that the plan would have cost taxpayers about $400 billion, which has now been saved — good news for those opposed to the program.

Some argued that the forgiveness would be unfair to those who either paid their way through college, already paid back their loans, or never went to college at all due to the high cost of education.

What was the student loan forgiveness policy?

The Biden administration announced its student loan forgiveness program in August 2022.

The plan aimed to cancel up to $20,000 in debt for eligible borrowers — which could have wiped out an estimated $430 billion of the total $1.6 trillion in cash borrowed.

People earning less than $125,000 a year, or $250,000 per household, can get up to $10,000 in debt forgiveness.

Students who received a Pell Grant—a need-based federal grant for lower-income families—during their education could receive up to $20,000 in forgiveness.

According to the Department of Education, about 26 million people have signed up for the program — more than half of the 46 million eligible borrowers.

Of the applications, 16 million were provisionally approved for debt cancellation, but the program was paused in November before funds were disbursed.

Joe Biden’s student loan forgiveness plan had been embroiled in legal battles since November

Why was the program interrupted?

The program was halted and disbursement of funds blocked due to two Supreme Court lawsuits alleging that the Biden administration had overstepped its authority in approving debt forgiveness.

Biden v. Nebraska was filed in September 2022 by Republican attorneys in six states — Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina — arguing that the program could hurt tax revenues.

Last October, the Job Creators Network Foundation filed a separate lawsuit in Texas on behalf of two student borrowers Myra Brown and Alexander Taylor.

However, the Biden administration argued that the plan fell under the Higher Education Relief Opportunities for Students Act of 2003, also known as the HEROES Act, which was created to guarantee credit relief after the September 11, 2001 terrorist attacks.

The Supreme Court struck down the program in the case brought by Republican-controlled states.

While it ruled that the case brought by two student borrowers had no standing to challenge the program, this ruling was irrelevant given the outcome in the Biden v. Nebraska case.

The ruling will dash the hopes of 16 million people who were allowed to benefit from the exemption

When will student loan repayments resume?

The White House has paused student loan repayments during the Covid-19 pandemic — in a separate policy from its student loan forgiveness program.

The government argued that the pandemic was a national emergency, which gave it the power to cancel debts under the HEROES Act.

But student loan payments will resume this fall after more than three years, after a deal was reached between the White House and Congress to raise the debt ceiling and the break was formally abolished.

Interest begins on September 1, according to the Department of Education, and borrowers must begin paying federal student debt again in October.

Once repayments resume, the average monthly payment will be between $210 and $314, according to a new report from Wells Fargo.