Make Ends Meet: Understanding student loan forgiveness

The Biden Administration wants to wipe out 400 billion dollars in student loan debt for 40 million Americans.
Published: Mar. 2, 2023 at 9:32 PM EST
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LOUISVILLE, Ky. (WAVE) - President Biden’s administration wants to wipe out $400 billion in student loan debt for 40 million Americans.

The news of his proposed student loan debt relief plan was big news.

Word of student loan debt forgiveness went viral fast when borrowers found out about the plan to forgive up to $10,000 in student loan debt or $20,000 for those who received a Pell grant.

Everything is on hold now except the arguments in the Supreme Court and the arguments outside the supreme court as everyone wants to make their case for or against the student debt relief plan.

Mary Jo Terry, a student loan debt expert and Yrefy managing partner, took time to point out what borrowers need to know about the U.S. Supreme Court hearing and what it means about the cancellation or repayment of their student loan debt.

“Student loans are overwhelming,” Terry said. “Usually next to your rent and mortgage payment it’s your largest monthly bill payment.”

The average student borrows over $30,000 to pursue a bachelor’s degree.

President Biden’s student loan forgiveness program now faces two cases in front of the Supreme Court seeking to block it from going forward.

One from a group of six republican-led states-Nebraska, Arkansas, Iowa, Kansas, Missouri, and South Carolina. The other case by two student loan borrowers. One who is not eligible for relief under the plan, and the other who is eligible for $10,000 rather than $20,000 in relief.

”We’re actually looking at another 60-90 days to find out what the high court is going to decide,” Terry said.

The decision, whether President Biden can use the Heroes Act as the legal footing for his student loan forgiveness plan.

Congress passed the first version of the HEROES Act in 2001, after the Sept. 11 attacks, to allow the education secretary to waive or modify provisions of student loan programs for those affected by the attack.

“Is the Heroes Act broad enough to go ahead and move forward with loan forgiveness without going through the legislative process?” Terry asked.

During the COVID-19 pandemic, both the Trump and Biden administrations used the HEROES Act to suspend student loan payments.

”It’s sitting with the high court to make that determination and ultimately is there going to be harm to anyone if they go forward without going through the congressional process because you have to prove harm,” she said.

The two student loan borrowers who filed suit claim they will be harmed because they could not access all of the benefits others would receive. Some also claim it goes around congress which has the sole power to create laws like those related to student loan forgiveness.

“Even if they deny and say you need to go through the congressional process, it doesn’t mean that this isn’t going to transpire” Terry said. “It’s just going to take longer than we expected and we’ll see if it makes it through the legislature process.”

The forbearance could end 60 days after the Supreme Court decision is announced.

Terry stressed that anyone with a student loan needs to look at what you owe. Look to see if you can fit your loan payment into you monthly budget. If not, contact your loan service when payments resume to discuss your options.

“Defaulting on your student loans is gonna hurt your credit,” Terry said. “It’s usually 50 to 150 points. Keep in mind this affects your insurance, your car insurance, your health insurance. This affects the apartment or the rent you’re going to get. You may not be able to get a home.”

Be patient. There’s really nothing you can do right now. Pay attention to the outcome of the case. If the student debt relief plan is given the green light, you MUST fill out the application. If you already filled out the application, make sure all your information is up to date.

The courts have blocked the application site for now, so you cannot sign up until the case is decided.