If you are still paying back your student loan, you were likely disappointed with the Supreme Court’s decision to strike down President Biden’s loan forgiveness program. While this ruling may have thwarted the administration’s plans for thousands of borrowers, the fight isn’t over. Biden and student loan forgiveness programs may still provide borrowers debt relief.
Where does Biden’s proposal for student loan forgiveness stand in 2023?
The Supreme Court blocked President Biden’s sweeping student loan debt relief plan designed to forgive up to $10,000 for all borrowers ($20,000 for Pell Grant recipients). The original Biden plan relied on the Heroes Act to authorize the Department of Education to reduce or eliminate the principal balance of federal student loan debt due to the COVID-19 pandemic. Justice John Roberts noted that eliminating debt of this magnitude required congressional approval.
Despite the ruling, the Biden Administration continues to pursue new student loan forgiveness programs. The President is leaning on the Higher Education Act (HEA), which grants the U.S. Education Department the ability to release or waive loans. The President is pursuing updates to income-driven repayment plans that could wipe out nearly $39 billion of student loan debt. Over 800,000 borrowers could see their student loan debt completely eliminated.
Arguments in favor of student loan forgiveness
People often pursue higher education to build careers and earn a better living. Still, the excessive cost of postsecondary education can leave borrowers with debt that can take years, even decades, to pay off. Supporters of loan forgiveness programs cite the following benefits.
1. Economic benefits of reducing student debt
Forgiving student debt would allow borrowers to keep more income, which could provide a boost to the overall economy. Individuals and families would have more cash to spend, which can support economic growth.
2. Addressing the burden of student loans on individuals and families
Student loans can take years to repay with additional financial impacts. Your credit score can drop if you fall behind in making your monthly payments. A lower credit score could affect your ability to rent an apartment or finance a car.
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3. Potential positive impact on the economy and consumer spending
Borrowers whose payments are eliminated or reduced have more money to spend elsewhere. With more discretionary income available, increased consumer spending can boost the economy.
Arguments against student loan forgiveness
While student loan forgiveness plans are a win for some people, not everyone benefits from these student debt relief programs.
1. Concerns over fairness and rewarding irresponsible borrowing
Borrowing money isn’t the only way to pay for higher education. To help pay for school, some students are willing to make sacrifices to pay for higher education. Frugal spending, commuting rather than living on campus, or working a full- or part-time job can help students pay for their education.
To a responsible student who made great sacrifices to avoid debt or a borrower who dutifully makes their loan payments each month, discharging the debt of others who weren’t willing to make such sacrifices doesn’t seem fair.
2. Potential negative impact on the federal budget
One argument against student loan forgiveness is its possible effect on the federal budget. Canceling student debt doesn’t make it go away. The federal government absorbs the debt and must find a way to pay it down, increasing budget deficits. The federal government could compensate for the added deficit through tax increases, spending cuts, or borrowing more money.
3. Alternatives to loan forgiveness
Some students find alternative solutions to fund their education so they can limit or avoid taking on debt. Instead of taking out a loan, students can consider attending a community college, state university, or an online institution for lower tuition costs. Students can also try to refinance student loans and worse case, file for bankruptcy.
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Analysis of political feasibility
Student loan forgiveness programs face stark opposition from some lawmakers and political opponents.
1. Examination of the challenges and obstacles to implementing loan forgiveness
Not everyone agrees that student loan forgiveness programs are fair to all students. Unlike the Heroes Act, implementing loan forgiveness under the Higher Education Act requires administrative proceedings that could take over a year to complete. Even if these procedures are completed successfully, borrowers may not see relief for at least one year.
2. Discussion of potential resistance from lawmakers and political opponents
Student loan forgiveness programs may face opposition from lawmakers and politicians who argue it doesn’t fix the problem. A debt cancellation program may bring temporary relief to student loan borrowers. Yet without meaningful reform to the cost of postsecondary education, future students could easily find themselves drowning in debt years down the road.
3. Evaluation of the likelihood of Biden’s proposal becoming a reality
The possibility of Biden’s proposal becoming a reality remains to be seen. Biden’s proposed plan works within the parameters of established programs, like the income-driven repayment plan. Should the administrative process be delayed, or legal objections raised, Biden’s proposal may be put on hold or be struck down.
Potential effects on higher education and future students
The increased scrutiny around the cost of tuition from colleges and universities could benefit prospective students.
1. Discussion of potential changes in college affordability and accessibility
The student loan debt crisis has brought to light the affordability and accessibility challenges students face when seeking higher education. The average tuition fee for private for-profit universities between 2020 and 2021 was $37,600 compared with $31,700 in 2010 through 2011.
Beyond the student loan debt relief plan, lawmakers may pursue legal options to reign in college costs.
2. Examination of how loan forgiveness may influence students’ decisions to attend college
To avoid years of paying back loans to finance their education, students may opt for more affordable options, such as community colleges, state-run universities, or trade schools. Sometimes, people skip college together because they cannot afford it.
Yet if the student believes their loan could be forgiven, they may attend higher-priced, private universities. What’s the harm in taking on student loan debt from an expensive university when the loan is forgiven in the future?
3. Consideration of the long-term impact on the accessibility of higher education
The rising cost of colleges and universities can deter people from seeking higher education. Yet, when institutions become more affordable, they become more accessible. Students who complete their postsecondary degrees often earn higher wages. Studies reveal the median earnings of year-round workers with a bachelor’s degree is $56,400. Workers with a high school diploma earned over $20,000 less, with median earnings of $35,200.
Beyond salary differences, a college-educated worker may realize other benefits, such as better healthcare and lower unemployment rates. An educated workforce also benefits the economy with lower unemployment rates.
Don’t Despair — Student Loan Forgiveness May Still Happen
A quality education can set you up for future job opportunities. However, the cost of a college education may hold some people back from pursuing a postsecondary degree. While the Supreme Court overturned Biden’s original student loan forgiveness plan, the good news is lawmakers continue to seek student loan forgiveness programs.
FAQ
Can President Biden cancel all student loan debt?
No, President Biden cannot cancel all student loan debt. In fact, on June 30, 2023, the Supreme Court denied this $400 billion plan.
How will student loan forgiveness affect borrowers?
Student loan forgiveness applies differently to borrowers based on how much they owe and their yearly income.
Will President Biden forgive all student loans?
No, Biden’s plan does not forgive all student loans and was denied on June 30, 2023 by the Supreme Court.
