3 predictions if Supreme Court rules against student loan forgiveness

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‘Historically large’ increase in delinquencies and defaults

U.S. Department of Education Undersecretary James Kvaal said in a recent court filing that if the government is not allowed to provide debt relief, there could be a “historically large increase in amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic.”

Despite student borrowers being offered forbearance during previous natural disasters, Kvaal wrote, default rates still skyrocketed when payments continued.

The pandemic relief policy that has halted federal student loan payments has been in effect since March 2020, and payments are not scheduled to resume until litigation over the president’s plan is resolved or at the end of August — whichever comes first. come as soon as possible.

″[T]The one-time student loan debt relief program is intended to prevent” rising default rates, Kvaal added.

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President Biden: 22 million people signed up for student loan relief

The borrowers most at risk of default are those for Biden’s student loan forgiveness plan that would completely wipe out their balance, Kvaal said.

The administration estimates that its policy will affect nearly 18 million people.

“These student lenders have a reasonable expectation and belief that they will not have to make additional payments on their federal student loans,” Kvaal said. “This belief may prevent them from paying even if the Department is prevented from relieving the debt.”

‘Gross’ political consequences

Astra Taylor

Source: Isabella De Maddalena

Resuming federal student loan payments without forgiveness would have “extreme” political consequences for Democrats, said Astra Taylor, co-founder of the Debt Collective, a union for debtors.

“[Biden] will launch his reelection campaign in 2024 as America’s debt collector,” he said.

If the “ultra-conservative US Supreme Court” blocks the president’s plan, Taylor said, Biden should explore other legal avenues to provide relief to borrowers.

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He pointed to the possibility that the president would use a different law to justify his plan, such as the Higher Education Act of 1965, which states that the Department of Education may “implement, pay, compromise, reject, or release the any right, title, claim. , lien” related to federal student loans.

Currently, the Biden administration is using the Heroes Act of 2003 to argue that it has the authority to cancel student loans.

That law allows the Department of Education to make changes to federal student loan programs during national emergencies. Critics accused the administration of using the coronavirus pandemic to fulfill a campaign promise and said the relief was not targeted at those suffering financially because of Covid.

Another path the president could take is to try to indefinitely extend the pandemic-era moratorium on federal student loan repayments, said higher education expert Mark Kantrowitz.

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That move, Kantrowitz said, “is more likely to survive a legal challenge.”

‘A devastating blow to Black Americans’

The nation’s $1.7 trillion student loan crisis has hit Black Americans hard.

Black student loan borrowers have $7,400 more, on average, at graduation than their white peers, a Brookings Institution report found.

That inequity only gets worse over time: Black college students owe, on average, more than $52,000 four years after graduation, compared to about $28,000 for the average white graduate.

If Biden’s student loan forgiveness goes down, it will be a “devastating blow to Black Americans,” said Wisdom Cole, national director of the NAACP’s youth and college division.

“The racial wealth gap will widen, and the vicious cycle of economic inequality will continue,” Cole said. “If our leaders truly believe that Black lives matter, they must understand that failure is not an option.”


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