In February, the Supreme Court will hear the case on Biden’s plan to forgive up to $20,000 per borrower.
In all likelihood, the case will be either a complete win for borrowers or a total loss. There isn’t much of a chance that the Supreme Court will approve some but not all loan cancellations.
While it might be fun for the political types to discuss what comes next, the question is essential for student loan borrowers. Changes expected in the next year, or even the next five years, are critical in determining how we manage our debt today.
The Future of Student Loan Forgiveness if Biden Loses in Court
The obvious result of a loss in the Supreme Court is that borrowers won’t benefit from the $10,000 or $20,000 of forgiveness.
The long-term outlook on student loan cancellation or forgiveness-for-all also looks bleak in the event of a loss at the Supreme Court.
Many borrowers have been excited by the possibility of total federal student loan cancellation or larger amounts of forgiveness. Elizabeth Warren, Chuck Schumer, and other Democrats have called for a plan to forgive $50,000 per borrower. Bernie Sanders wanted to cancel all student debt for all borrowers. Both plans depended upon the President’s ability to cancel debt through an executive order.
If Biden loses in the Supreme Court, it will mean that the President doesn’t have the authority to cancel student debt for all borrowers. Thus, even in a Sanders or Warren presidency, forgiveness for all wouldn’t be an option.
Could Congress Pass Student Loan Cancellation Legislation?
Biden’s original plan for $10,000 of forgiveness was to have Congress pass a bill authorizing it. This route would have avoided the Supreme Court challenge.
Unfortunately for borrowers, debt cancellation didn’t receive a warm welcome in the halls of Congress. Republicans were uniformly opposed, and Democratic support was mixed.
If forgiveness were to pass in the foreseeable future, it would likely require a filibuster-proof Democratic majority in the Senate — and the odds of that happening look slim.
Targeted Relief for Federal Borrowers
Even though a loss at the Supreme Court would be a considerable setback for borrowers, hope would remain.
The first couple years of the Biden Administration are a good blueprint for how life for borrowers could improve in the coming years.
Forgiving up to $20,000 per borrower ate up most of the headlines, but other changes to student loan policy made a huge difference for many borrowers.
These changes included temporarily expanding the Public Service Loan Forgiveness Program to help borrowers who would have otherwise missed out on the program. Additionally, the administration made it easier for borrowers to get their loans discharged under the borrower defense to repayment, disability discharge, and closed school forgiveness programs.
Most recently, the administration dramatically altered the Department of Justice policy for federal borrowers seeking bankruptcy relief. In the past, bankruptcy was a long shot for federal borrowers. Under the new rules, the path to bankruptcy should be significantly more accessible and affordable.
Individually, these programs only impacted a small portion of borrowers. Collectively, they show a clear pattern of targeted relief that could continue.
Backdoor Forgiveness Options
Even if the Supreme Court rules that the President can’t forgive some debt for all borrowers, the President may be able to forgive all debt for some borrowers.
This could play out by expanding the Income-Driven Repayment Plans. Biden has already announced a new IDR plan that would lower monthly payments and provide a quicker path to forgiveness for borrowers with smaller balances.
Further expansion to IDR and tweaking the rules to allow more borrowers to qualify for forgiveness sooner could be the best-case scenario for borrowers.
Sherpa Thought: The targeted relief and expanded IDR routes both appear to be chasing the same goal: helping the borrowers who are struggling the most.
If a borrower has paid a portion of their income towards their student debt for many years, there is an inherent fairness in forgiving the remaining debt.
Fixing the Big Problem
We can’t discuss the future of student loan forgiveness without addressing the big problem.
College is too expensive. The price of college continues to rise at a rate far greater than inflation.
The student loan crisis is a byproduct of high college prices. If the cost of college gets addressed by Congress, fixing the student loan crisis becomes more manageable.
A one-time permanent student loan fix is far more palatable than a temporary band-aid for an ongoing issue.