The Supreme Court on Friday struck down President Biden's student debt forgiveness scheme, which would have provided up to $20,000 in debt relief for millions of Americans, in a 6-3 ruling.
A number of conservative-controlled states objected arguing both that Biden overstepped his authority, and that it's unfair to expect non-graduates to subsidize graduates. The president denounced the ruling as "wrong," according to the BBC, adding: "The fight is not over."
According to White House figures, more than 40 million Americans would have benefitted from debt relief, with borrowers due to restart paying off their federal student loans in October, following an over three-year hiatus in response to the coronavirus pandemic. The ruling could have a dramatic impact on presidential and congressional elections in 2024, with a Student Borrower Protection Center study concluding student debt paid a big role in boosting the turnout of young voters during the 2022 midterms.
Biden's program would have granted student borrowers earning less than $125,000 a year up to $10,000 in debt relief, with $20,000 available to Pell Grant recipients who come from low-income households.
Newsweek has provided a brief summary of what happens next, both financially and politically, after the Supreme Court's decision.
Student Loan Repayments to Resume
Graduates who took out a federal student loan will be required to continue making repayments in October, with interest beginning to accumulate again from September 1, after being paused early in the Covid-19 pandemic. This was due to take place regardless of the Supreme Court's decision, as part of Biden's compromise deal with Republicans to raise the U.S. debt ceiling, but borrowers won't now receive a substantial reduction in their overall debt.
According to the Federal Reserve graduates were typically paying $200-299 a month before the repayment pause was introduced, with a study from the Consumer Financial Protection Bureau concluding around one in five borrowers had at least two risk factors, meaning they are at risk of defaulting when the payments resume.
The debt forgiveness scheme would have cost about $400 billion, according to figures from the Congressional Budget Office, making it one of the most expensive executive decisions in American history had it not been blocked.
Political Implications
The ruling is likely to have significant political implications, though experts disagree on exactly what these will be.
Speaking to Newsweek before the Supreme Court's decision Thomas Gift, who heads the Centre on U.S. Politics at University College London, suggested an adverse ruling could harm the Democrats in 2024.
He said: "Biden's student debt relief plan was always a massive pander to young and millennial voters.
"So if SCOTUS (the Supreme Court) puts the legislation on the chopping block, it's hard not to think some of the would-be beneficiaries will feel as if they were sold a bill of goods. That's bound to depress some support for Biden that turned up to vote Democrat in the 2022 midterms."
On Thursday morning, Debt Collective press secretary Braxton Brewington said a court decision to cancel the debt relief would raise political pressure on Biden.
In an interview with Newsweek, he said: "This was a campaign promise. And this isn't hypothetical anymore. He's announced a policy and tried to start implementing it. Millions of people have been approved.
"They've gotten notifications from the Department of Education saying 'your debt has been approved for relief.' And I am willing to bet that those people have made financial life decisions based around that notification.
"I don't know if we've ever seen an administration lean so hard into a policy and then back out. It would be it would be disastrous. I don't think anyone would buy it."
Some Democrats are pushing Biden to expand the Supreme Court, following decisions including Thursday's ruling which banned affirmative action in college admissions, but the president has thus far been opposed.
Speaking to MSNBC's Nicolle Wallace on Thursday, he said: "I think if we start the process of trying to expand the court, we're going to politicize it maybe forever in a way that is not healthy."
