President Joe Biden has announced he will forgive $39 billion in student loan debt — just two weeks after the Supreme Court voted 6 to 3 to scrap his controversial student loan forgiveness plan.
On June 30, the judges ruled that the government had exceeded its authority with the program to wipe out more than $400 million in student debt.
Following the decision, Biden slammed the ruling for promising to provide alternative support — despite the anger of taxpayers and Americans who have never been to college.
The Biden administration has now announced a plan it says will help more than 800,000 borrowers.
What are the details and who benefits from the latest handout?
President Joe Biden will forgive $39 billion in student debt — weeks after the Supreme Court struck down his multibillion-dollar bailout. Biden is pictured Thursday night returning from Europe
Who will the latest announcement affect?
The debts of more than 804,000 federal student loan borrowers will be wiped out under the latest plan.
But only those who have already made payments between 20 and 25 years will have their debts wiped out due to “repairs” to the number of monthly payments borrowers have made.
The forgiveness comes as a result of a pledge made last year by the Biden administration to offer a one-time adjustment to correct any inaccuracies in the number of payments made to borrowers in income-driven repayment plans.
These plans are supposed to allow forgiveness after the borrower makes a certain number of monthly payments, but the plans have been criticized over the years for poor communication between the education department, loan managers, and borrowers.
“For far too long, borrowers fell through the cracks of a broken system that failed to accurately track their progress toward forgiveness,” said US Secretary of Education Miguel Cardona.
“By resolving past clerical errors, we ensure everyone gets the forgiveness they deserve.”
Eligible borrowers who have reached the necessary threshold for forgiveness will be notified in the coming days.
What happened to the Supreme Court ruling?
The Supreme Court on June 30 struck down Biden’s $400 billion student loan forgiveness plan.
The plan to wipe out the debts of 26 million Americans was deemed unconstitutional and an excessive reach of the president’s executive.
The program had been challenged by six Republican states and two borrowers who argued that Biden should have sought congressional approval for a plan using significant tax dollars.
About 16 million of the 26 million people who asked for forgiveness had already been approved when the Supreme Court announced its decision.
What did the decision mean for borrowers?
For the 26 million people who applied for the program, more than half of whom were approved, the ruling dashed their hopes of benefiting from a debt reduction of up to $20,000.
If no other plans are made before then, 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 — 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.
The Supreme Court on June 30 overturned President Joe Biden’s $400 billion student loan forgiveness plan. The judges ruled 6-3 against Biden’s plan to wipe out the debts of about 20 million Americans
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 lacked standing to challenge the program, this ruling was irrelevant given the outcome in the Biden v. Nebraska case.
The ruling destroyed 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 Sept. 1, and borrowers must begin paying federal student debt again in October, according to the Department of Education.
Once repayments resume, the average monthly payment will be between $210 and $314, according to a new report from Wells Fargo.