The High Court’s Decision on the Secretary of Education: What It Will and Will Not Mean for the Borrowers and the Land, And How It Will Have to End
The six states that filed a lawsuit after Biden’s announcement disagreed with his authority under the federal law. The case was reviewed by the Supreme Court.
The Chief Justice said the Secretary had the authority to change statutes and regulations, but not to transform them.
The use of the Major Questions Doctrine by the high court shows how Congress must speak very clearly when allowing executive agencies like the Department of Education to make decisions about issues that are politically or economically significant. If there is any doubt as to whether Congress granted this power, courts should not assume that Congress did so. The high court struck down the vaccine mandate of the Secretary of Labor.
“The plaintiffs in this case are six States that have no personal stake in the Secretary’ loan forgiveness plan,” she said. “They are classic ideological plaintiffs: They think the plan a very bad idea, but they are no worse off because the Secretary differs.”
The decision comes as a disappointment to federal student loan borrowers who were eligible for relief under the plan — as many as 43 million borrowers, or roughly 1 in 8 Americans.
The secretary of education can “waive or modify” statutory or regulatory provisions that apply to the financial assistance programs under the education act, but not rewrite it to the extent that it would cancel $430 billion of student loans.
The Department of Education’s modifications made a loan forgiveness program that expanded forgiveness to nearly every borrower in the country.
The warm reception the president’s announcement received by younger voters may have helped the Democrats to a better-than- expected showing in the elections. The Supreme Court stepped in to resolve Republican legal challenges that were part of the proposal.
While much can be said about the court’s decision – and no doubt will be in the coming days – here are five things to know about what it will and won’t mean for borrowers and the country.
Why Student Loans Are Pawns: The Case of Biden’s Proposal and the High Court of a Supreme Court Decision
Whatever you think of Biden’s proposal, in this moment, the collective disappointment and perhaps disillusionment of so many Americans is palpable and worth acknowledging.
I will never be able to repay these loans. If the interest rates change, I won’t be able to get out from under it even if we get $10,000 in forgiveness.
Panton made his monthly repayments on his federal student loans from 2003 to 2020, even though the payments stopped in March 2020 due to the swine flu.
“It’s really tragic that student loan borrowers have been stuck in this position as political pawns,” says Persis Yu of the Student Borrower Protection Center, “and now are victims to a politicized court that is willing to jeopardize their financial security for political gain.”
The Student Borrower Protection Center is one of a few groups that have been vocal in their support of debt relief and have put pressure on Biden to be as generous as possible. The NAACP also pushed hard for relief.
In a country where we bail out big banks, where we bail out little banks, and yet the Supreme Court will allow that to happen, I feel like it’s an unfortunate reality.
In the lead-up to the court’s decision, Johnson sent a letter to Biden, advising him, in the case of an unfavorable ruling, to “pursue all legal pathways” to erase student loan debts.
“Let us be clear,” Johnson warned, “absent further, swift action in the wake of an unfavorable ruling from the Court, Black voters stand to be incredibly disillusioned by an Administration who failed to deliver on key campaign promises but succeeded in widening the racial wealth gap.”
Rep. Foxx: Biden’s student loan problem is a violation of the Constitution, and why he’s wrong about it
Many Republicans opposed Biden’s plan because they felt it was an abuse of power to give college-educated Americans a handout. The debt relief plan will cost $400 billion over the next 30 years, according to the Congressional Budget Office.
“I’m very pleased that the Supreme Court is following the Constitution,” says Rep. Virginia Foxx of North Carolina, the Republican chairwoman of the House education committee. The president has taken on Congress’s role by establishing a rule which will allow the taxpayers to help people who took on debt. And I think what he has done is totally illegal.”
A majority of the public (52%) supported forgiving student loan debt up to $10,000 per person, even though Republicans were fierce in their opposition.
Recent legislation to prevent the federal government from defaulting on its debts included a requirement that borrowers begin repaying their student loans at the end of August. The Biden Administration had previously committed to a similar timetable.
Making matters worse, many older borrowers will have a new loan servicing company – not to mention they may have forgotten their online portal passwords; some may not have even checked their balances in months, if not years. Those days are coming to an end.
At greatest risk of falling through the restart cracks are borrowers who were given a chance at a so-called “fresh start” during the pandemic. For these roughly 7.5 million borrowers who are in default, the department is offering protections from involuntary collections on their accounts and the chance to regain access to flexible repayment plans. But, to benefit and get out of default, these “fresh start” borrowers must opt-in to the program and contact their loan servicer.
NPR reported in January that serious funding shortfalls exist in the Education Department office tasked with managing the government’s student loan portfolio.
At the moment, the agency’s costs and services will be slashed because of a flood of borrowers returning to the system.
The Biden administration promised to review the loans of millions of borrowers, who were unfairly set back by years of mismanagement around income-driven repayment plans. In May, that review had been extended for another five years.
That review is a logistical cakewalk compared to helping millions of borrowers with halted loans navigate the return to repayment.
There is a new relationship with deadlines with the influx of new policies. Rodriguez says her staff has come to expect extensions and last minute changes – so have borrowers. She rarely gets calls anymore about the impending restart to federal student loan payments because, she says, borrowers have been here before.
Instead, however, the Education Department has cut funding to loan servicers, according to multiple sources familiar with the cuts, and is allowing them to scale back call center hours.
“We are fully committed to supporting student loan borrowers as they successfully navigate returning to repayment,” says a department spokesperson in a statement to NPR. But the statement also acknowledges: “the Department is deeply concerned about the lack of adequate annual funding made available to Federal Student Aid this year. As the Department has repeatedly made clear, restarting repayment requires significant resources to avoid unnecessary harm to borrowers, such as cuts to servicing.”
“It is possible that loan servicers may be overwhelmed with a high volume of inquiries,” says the National Association of Student Financial Aid Administrators (NASFAA) in a warning to borrowers. It is possible that you won’t get to speak with your servicer via phone, and you might need to call them a few times.
“The consequences of returning to repayment under the current funding system are going to be disastrous,” says borrower advocate Persis Yu, who points out that the student loan system functioned poorly even when it was fully funded and there was no need to help borrowers return to repayment.
Foxx, the House education committee chairwoman, says she too worries about the return to repayment because the department is “terribly managed.” I don’t think there’s any sympathy to give more money to the department. It’s using its money inappropriately, using people inappropriately. And something has to be done about that.”
Student Loan Borrowings: a Biden-Biden Plan for Addressing the “Breakness” of the Student Loan Payment System
The first version was written in case the court preserved Biden’s plan, and the second in case it nullified it. Both versions had the same ending.
“The system is broken and the Republicans are trying to change it to limit student loans interest,” she says.
The inflation-adjusted cost of college has nearly doubled since 1990, from about $15,000 a year to $29,000 in 2020. And students are using loans to keep up. Between 1995 and 2017, federal student loan debt “increased more than sevenfold, from $187 billion to $1.4 trillion (in 2017 dollars),” according to the nonpartisan Congressional Budget Office.
The Biden administration has a plan to address that brokenness and it is reliant on a new, more forgiving income-driven repayment plan that has received praise from borrowers advocates and sharp criticism from Republicans.
It’s unclear how quickly the plan could be available to borrowers, even if the administration is able to roll out it.
In another blow to the Kennedys’ trust, there’s been radio silence since the bill passed. They said they wouldn’t see a solution until the end of 2024 when they last got someone on the phone.
Their group of consolidated borrowers won a victory last year when the president signed a bill that separated their loans and qualified them for federal forgiveness programs.
An Oklahoman couple’s “paddle” with an extended student loan program: She explains why she was shocked when she learned about the FFEL loan
“I just started laughing, and then I started crying because, I mean, the absurdity of the way that this is set up against us is laughable,” Brigid says. The couple is now in forbearance, a less forgiving way to pause their payments in which interest continues to pile up, as they put their resources toward Chris’ treatment.
Their student debt is so large that it would be frightening for two public school teachers. Chris is battling cancer which means he could qualify for interest-free deferment. The couple has gone back and forth with their servicer, asking for that deferment while he undergoes treatment. Since they have one loan, they have to have cancer in order to qualify for interest-free pauses in payments.
She says they feel like it’s their responsibility to pay the loans. “But we’ve also paid the principal back about two and a half times what we took out.”
Among the people who were left out of Biden’s plan because they had FFEL loans is a married couple in South Carolina named Chris and Brigid Kennedy. And it is not the first time their type of loan dictated whether they received forgiveness.
The federal student loan program relied heavily on FFEL loans, which were issued by private banks and guaranteed by the government. An administration official toldNPR that about 800 thousand people would not be affected by the FFEL guidance change.
This pause has allowed her to switch careers and pay off her car, things that felt overwhelming with the weight of her student loan payments. She would have received a $10,000 cancellation of her loans under the Biden administration’s plan. She remembers that the day it was announced was “really joyous” – it gave her some hope. But not enough to ease the pressure of paying interest on top of her original debt.
She took out $30,000 in student loans but had to stop doing so due to a short period of forbearance.
Ariana Cuellar, a 31-year-old borrower from San Antonio, says the payment pause was “a gift,” one that she will miss dearly. She has gotten used to small comforts like having a steady savings account and not stressing out about every “purchase larger than $20.”
Source: https://www.npr.org/2023/07/01/1185327143/student-loan-forgiveness-supreme-court-reactions
A Debt-Loan Forgiven American’s Experience in the Post-Biden Era of Student Loan Forgiveness
He called the debt relief program a “cynical ploy” by the administration, a harmful one: “The goodwill that could come from targeted student loan forgiveness can be put at risk by trying to provide forgiveness to virtually everyone.”
“They were taking a big risk … in getting people’s hopes up, and now seeing those hopes dashed,” he says. “This is politics, right?” The administration should be called out for what it comes with, because it is a lot of deception.
Michael J. Petrilli, president of the conservative-leaning Thomas B. Fordham Institute and a longtime critic of Biden’s plan, understands the denial, and says the blame falls squarely on the administration.
A lot of borrowers are going to be in denial that they finally have to plan for this, as the summer comes to a close.
Under the Biden administration, she’s seen investment in these programs and a deluge of changes to the student loan landscape: “We sometimes joke in the advocacy community, it’s like a decade’s worth of changes in two years.”
“There was no trust before. She says that there is no trust anymore. Most borrowers she speaks to these days are more focused on other paths to forgiveness, such as Public Service Loan Forgiveness (PSLF) and income-driven repayment (IDR) plans.
New York’s Education Debt Consumer Assistance Program (EDCAP) has a woman named Carolina Rodriguez talking to borrowers. She says those feelings of defeat and resignation are not unusual.
He graduated in 2020 at the height of the pandemic, and has yet to consider loan payments or interest yet – both have been on pause since he was a student. Now, with the student loan relief plan officially dead, and payments on the debt set to resume in the fall, he has resigned himself to his debt-laden reality.
“I would say Congress needs to pass this, but that’s not going to happen,” says Graeme Strickland, a 25-year-old borrower in Raleigh, N.C. “It’s become a culture war around this issue. And like, this is my income. This affects the money I’m able to spend on groceries.”