Student Loans: What happens if loan forgiveness is cancelled?
The Biden administration’s student loan forgiveness program might be overturned by the US Supreme Courtwhich would be a setback for the millions of Americans who had anticipated the debt elimination.
President Joe Biden said in August that he would cancel at least $10,000 and up to $20,000 of federal student loan debt for tens of millions of borrowers. However, within months, Republicans and conservative organizations had filed at least six legal objections to his proposal.
Two of those lawsuits will have their oral arguments heard by the justices at the end of February. If the program is ultimately canceled, according to a recent CNBC article, there could be very drastic consequences.
“Historically large” increase in defaults and delinquencies
Undersecretary of the US Department of Education James Kvaal stated in a recent court filing that the COVID-19 outbreak might lead to a “historically substantial increase in the amount of federal student loan delinquency and defaults” if the government isn’t allowed to offer debt relief.
In spite of forbearances being provided to student loan debtors following earlier natural disasters, Kvaal stated that default rates continued to rise once payments resumed.
The borrowers who Biden’s student loan forgiveness plan would have completely erased their burden are those who are most at risk of defaulting, according to Kvaal.
According to official estimates, this would apply to about 18 million people.
Democratic electoral repercussions for restarting federal student loan payments without providing forgiveness would be “serious,” according to Astra Taylorco-founder of the Debt Collective, a group supporting borrowers.
Biden would need to look at alternative legal avenues to provide relief to debtors if the “ultra-conservative US Supreme Court” rejects the president’s proposal, according to Taylor.
She cited the Higher Education Act of 1965which stipulates that the Education Department can “enforce, pay, compromise, waive, or release any right, title, claim, or lien” relating to federal student loans, as an example of a statute that the president might use to support his agenda .
Consequences for Black-Americans
Black Americans have been particularly hard-hit by the nation’s $1.7 trillion in student loans issue
According to a Brookings Institution analysis, black student loan borrowers often owe $7,400 more upon graduation than their white counterparts.
With time, that injustice only grows worse: In comparison to the average white graduate, black college graduates owe, on average, more than $52,000 four years after graduation.