(6/30/23) Today, the Supreme Court struck down Biden’s student loan forgiveness plan, ruling against the President in a 6-3 ruling in the case of Biden v Nebraska.
(The Court was unanimous in their decision that the plaintiff had no standing in the other case against forgiveness: Department of Education v Brown).
According to the Department of Education, as of January 2023, 26 million people across 50 states had applied or were automatically eligible to receive one-time student loan forgiveness, more than 16M people had already been approved, and roughly 43 million borrowers total were expected to be able to benefit from forgiveness. After today’s ruling, those borrowers may have to seek student loan relief via other methods.
At the moment, it’s unclear whether the Biden administration may be working to push forgiveness forward via other legal means. But if they are, expect more announcements in the coming days.
In the meantime, eligible borrowers can still apply for federal student loan forgiveness via other federal programs such Public Service Loan Forgiveness or Teacher Loan Forgiveness.
[UPDATE: On Friday, June 30, 2023, President Biden announced that his administration would continue to push for student loan forgiveness under the authority of the Higher Education Act of 1965. More details to come]
Forgiveness, while noble, is only “a bandaid on a bazooka wound” (to quote our CEO, Mick MacLaverty). As long as the underlying causes of the student debt crisis remain (that the ever increasing cost of higher education continues to outpace wage growth), this problem will only continue to worsen.
If forgiveness had been approved, it would have been a drop in the proverbial deep dark ocean of student debt that our nation is drowning in.
When forgiveness was first announced, the Department of Education estimated that approximately $500B of debt would be discharged under the forgiveness policy; roughly $360B would go to Pell Grant recipients and $140B to non-Pell Grant recipients.
At first, $500B sounds like a lot (and it is. It absolutely is), but in case anyone needs a sobering reminder, the current amount of outstanding federal student debt is $1.64T (As of Q2 2023). Even if forgiveness had gone through, $1.14T of federal student debt would have remained ($1.27T if you include private student loans). Over a trillion dollars! If you paid back $1 per second, it would still take you 31,000 years to pay back a $1T loan.
Even if forgiveness had gone through, $1.1T of federal student debt would have remained ($1.2T if you include private student loans).
At the recent average rates of borrowing, the level of outstanding student debt would have returned to pre-forgiveness levels in less than a decade.
The student debt crisis is an issue that affects everyone and could have major implications for the US economy. Companies can help address this national crisis by adopting tax-free employer student loan contributions as a benefit.
At Highway Benefits, we believe this benefit is one of the best ways to tackle the student debt crisis in the US. With an employer student loan repayments benefit, companies can help employees pay down the remainder of their outstanding loan balances (federal OR private), potentially saving them thousands of dollars in accrued interest and large amounts of financial stress.
If you’re an employer hoping to add a student loan repayments benefit, Highway can help. With payments resuming for the first time in three years and the cancellation of debt forgiveness, now is a momentous time for employers to adopt this benefit and help their employees through what will undoubtedly be a stressful time. Talk to our team today to learn more.