Supreme Court decides the fate of millions of student loan borrowers

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Millions of student loan borrowers have been waiting to find out whether the Biden Administration’s plan to forgive some federal student debt will provide them with financial relief.

On Friday, the last day of this year’s session, the Supreme Court ruled the plan unconstitutional, throwing a key Biden campaign promise into doubt and denying debt forgiveness for 26 million people who had applied. The vote was 6-3, with the liberal justices dissenting.

The court considered two cases at the same time, U.S. Department of Education v. Brown, which was brought by two student loan borrowers who didn’t qualify for relief, and Biden v. Nebraska, which was brought by six Republican attorneys general who argued the plan would hurt state tax revenue and the income of a student-loan agency.

Before a court halted the program last fall, 26 million borrowers had applied for relief and 16 million had been approved. The Biden plan proposed forgiving up to $20,000 for borrowers whose income was low enough to receive a Pell grant while in college, as long as their current income was less than $125,000 (or $250,000 for married couples or heads of household), and $10,000 for borrowers within those income limits but who had not received a Pell grant.

The Hechinger Report spoke in February with three experts, each with a different view, about what was at stake in the case.

The Biden Administration cited the Higher Education Relief Opportunities for Students Act passed in 2003 (also known as the HEROES Act), which allows the government to forgive student loans for borrowers who are at risk of default because of war, military operation, or national emergency. They argued that the Covid pandemic qualified as a national emergency, which was the same justification Trump Administration officials used when they paused student loan repayments in 2020.

Many Republicans and conservative advocates fought against Biden’s $400 billion plan, contending that it was unfair to taxpayers who never went to college and to people who paid back their loans without help. Student debt forgiveness advocates argued that the financial burden had been stymieing the futures of an entire generation who went to college to ensure financial stability and, in some cases, a path out of poverty. Low-income students and Black borrowers – especially Black women – have been disproportionately affected by student loan debt.

Student loan payments have been on pause since March 2020 and are scheduled to resume October 1.

The Hechinger Report has covered many aspects of the student debt crisis – including federal loans, parent loans and “hidden” debt that doesn’t show up in government statistics.

Also, Jon Marcus reported on an often unasked question – what are colleges’ responsibilities when it comes to mounting student debt?

The Supreme Court case was never going to have an impact on the lives of people with private student loans. More than $127 billion is owed by these borrowers, who have been falling further behind recently. We wrote about a group of students who took out private loans to attend for-profit colleges and were left out of a relief plan.

The Hechinger Report has also reported extensively on the hidden forms of student debt that keep students in financial peril. We broke open the issue of transcript withholding – when  students can’t get their transcript because they owe money to a university. The practice has now been banned in several states and the federal government has proposed prohibiting it nationally. We also reported on students being sued by their states for unpaid bills and on debt collection agencies that were making millions of dollars from collecting on overdue tuition payments and fees.

We wrote about for-profit colleges that loan money directly to students, which they often cannot pay back. And we exposed the plight of parents who take out loans so their children can go to college and end up in debt for the rest of lives.

Regardless of the Supreme Court’s decision, tens of millions of people will continue to have to pay off debt they took on to get a college degree. Americans are encouraged to make this gamble – borrow now for a better life down the line— but the high cost of tuition guarantees that the question of whether it’s worth striking this bargain will be with us for years to come.

This story about the student loans was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for our higher education newsletter.