What’s at stake as the Supreme Court weighs student loan forgiveness
A protest sign outside the Supreme Court in Washington, DC on February 28, 2023.
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There is no precedent in recent history for the sweeping federal student loan forgiveness policy that President Joe Biden is trying to implement.
A look at the math of the program shows how profound the relief could be for borrowers, many of whom were struggling before the Covid pandemic – when the economy was at one of its healthiest.
Since then, federal student loan payments have been suspended for three years. Biden had hoped for a rejectionl Up to $20,000 in debt for tens of millions of Americans before resuming the bills, but his policies soon faced a barrage of legal challenges, and their fate now lies with the Supreme Court.
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The outcome of the judges’ decision could have serious consequences for families, said Thomas Gokey, co-founder of Debt Collective, a national association of debtors.
“For a lot of people, that’s life and death,” Gokey said. “What’s at stake is being forced to choose between paying student loans or being able to buy groceries, pay rent and pay medical bills.”
Here’s what’s at stake, by the numbers.
$400 billion in student debt gone
If every eligible borrower applies for relief, Biden’s student loan forgiveness plan will wipe out an estimated $400 billion in federal student debt. after to the Congressional Budget Office.
That would reduce the country’s outstanding education debt from $1.7 trillion to $1.3 trillion.
Fresh start for 14 million borrowers
According to an estimate by higher education expert Mark Kantrowitz, about a third of those on federal student loans, or 14 million people, would have their balances written off entirely through the president’s program.
Those borrowers probably won’t have to make another student loan payment, Kantrowitz said. The Biden administration has said it will not resume bills until 60 days after litigation over its plan is settled (or late August if challenges are pending).
For many people this is life and death.
Co-founder of Debt Collective
“Sixty days will be enough to forgive student loan debt if the president’s plan survives,” Kantrowitz said. “They have already approved forgiveness 16 million borrowers, so they only need to submit this information to the loan servicers.
“It should take the service providers a week or two to complete the implementation,” he added.
37 million people receive loan forgiveness
Biden’s relief is limited to borrowers making less than $125,000 per year as individuals or less than $250,000 as couples.
However, that means that around 37 million people would be eligible for a loan termination, estimates Kantrowitz – up to $20,000 if they received a Pell Grant, a type of low-income family grant, in college, or up to $10,000 if they didn’t.
Monthly bills cut by a third or more
The US Department of Education has said it plans to repay borrowers’ new balances after the writ. It’s a shaky term that means people’s monthly payment is recalculated based on their bottom tab and the number of months they have left on their repayment timeline.
Kantrowitz provided an example: Let’s say a person currently owes $30,000 in student loans at a 5% interest rate. Before During the pandemic, they would have paid around $320 a month for a 10-year term.
If forgiveness comes through and that person receives $10,000 of relief, their total balance would be reduced by a third, and their monthly payment will drop by a third to about $210 a month.
https://www.cnbc.com/2023/03/17/whats-at-stake-as-supreme-court-weighs-student-loan-forgiveness.html What’s at stake as the Supreme Court weighs student loan forgiveness