The US Supreme Court has ruled, in Biden v Nebraska, that President Biden did not have the authority to cancel or reduce student loan debt. The court ruled that the administration does not have the authority to spend this much money without Congressional approval.
The court held that the HEROES Act contained no language that authorized the president’s action.
Here’s a link to the opinion.
Of the 8 plaintiffs who sued, only 1 was found to have standing to challenge the President’s plan. The State of Missouri successfully argued that its state loan authority would be adversely affected by the administration’s loan forgiveness plan.
More than 26 million people had applied for the plan, and over 43 million were thought to be eligible. More than 1 in 8 Americans will soon start paying student loans. Only 1/3 of Americans support the court’s action.
The Republican party is opposed to student loan relief, even though many in the party took advantage of large COVID loans that were forgiven, in amounts far higher than the $20,000 maximum proposed by Biden.
What Happens Now?
The Supreme Court’s Ruling does not affect other pre-existing student loan reduction programs, such as the Pay As You Earn (PAYE) program, and the REPAYE program, announced earlier this year.
Those programs provide significant payment reductions to those who qualify.
The Biden administration announced his plans to replace the REPAYEprogram with a new save program, which will offer the same 5% of income threshold for income based repayment for people who earn less than 225% of the poverty line. That lower income threshold is also higher than it used to be. Whereas, in earlier income-based programs you had to be earn than 150% of the poverty line income to qualify.
Many Borrowers Who Have Missed Payments Are Not Taking Advantage of the “Fresh Start” Forgiveness of “Default”
It’s also important that borrowers take advantage of the fresh-start forgiveness of defaults program that has been going on for a while. This allows people who have been in default to have their accounts declared current, even if they’re not so they can take advantage of some of these new programs. It’s important that borrowers take advantage of these programs because they are one-time time-limited and very valuable
The Fresh Start program is for borrowers who defaulted on their federal student loans before the pandemic. Benefits include:
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Loans returned to “current” status on borrowers’ credit reports.
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Removal of negative default marks on credit reports.
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Access to federal student aid and other government loans, like mortgages.
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Access to flexible repayment plans, like income-driven repayment.
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Access to short-term relief, like deferment or forbearance.
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Suspension of collection efforts, even after the student loan payment pause ends.
Some benefits, such as access to federal student aid, are available automatically, but you’ll have to enroll in the Fresh Start program and agree to enter a repayment plan for others. You must enroll by September 2024 to get the full benefits.