Student loan borrowers watch Supreme Court case with "pain and anxiety"
Ambalika Williams watched the first day of the Supreme Court hearing on Biden's student-loan relief program with a feeling of hope, but also with a measure of anxiety. Williams has almost $10,000 in student loans, and the case will determine whether her entire debt could be erased in one swoop.
The arguments the justices heard Tuesday represent the culmination of a political and constitutional clash that has left 40 million student loan borrowers in limbo, including Williams, who is the national director of Organizing at Rise, a student advocacy group. If the high court strikes down the program, she worries she will need to delay plans to buy a home.
"I would have to make pretty hard financial decisions, because I would still have this debt," Williams, 33, of Washington, D.C., noted, adding that she had already whittled down her debt from its original $40,000 balance.
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The pair of cases before the Supreme Court forced a halt in the Biden administration's plan to provide up to $20,000 in student-debt relief per borrower. Before the program was frozen, the administration had approved 16 million applications out of the 26 million people who had applied for relief.
Without the legal challenges, many of those borrowers would have had their debts forgiven by now, said Melissa Byrne, executive director of the student debt activist group WeThe45Million.
"The fact that people have to ponder what to do, it means they have to experience stress they shouldn't have to," Byrne said on Tuesday from the Supreme Court, where she is monitoring the case. "People are experiencing pain and anxiety every day" over the hiatus caused by the lawsuits.
Both Byrne and Williams expressed optimism that the Biden administration's plan will prevail, citing a belief that the plaintiffs lack standing, and questions on whether the states and borrowers challenging the program have the legal right to do so. Yet the opposition against student-loan forgiveness may have not only chilled individual borrowers' plans, but could be impacting the national economy, given that millions of Americans remain in limbo about their debt, Byrne added.
"If you are trying to sell a home, you might not be able to sell it because the person who wanted to buy it can't make a decision" because of the legal challenge, Byrne noted. "It is probably impacting you, even if you don't have student loans."
"Financial disaster"
Millions of Americans could face "financial disaster" if the Biden loan-relief program is shut down, according to a new report from Sen. Elizabeth Warren, a Democrat from Massachusetts.
Under the plan, eligible borrowers earning less than $125,000 annually can receive up to $10,000 in student debt relief, while Pell Grant recipients, who are typically lower- and middle-income students, may get up to $20,000 in debt relief.
The program, announced in August, quickly faced legal challenges from six states — Arkansas, Iowa, Kansas, Missouri, Kentucky and South Carolina — and two borrowers from Texas, who separately argued the plan exceeds the administration's authority.
On Tuesday, several of the conservative justices questioned the legality of the program, while Chief Justice John Roberts repeatedly highlighted the enormous cost of the plan, among other issues.
The total of Biden's debt-forgiveness plan, according to an analysis from the Penn Wharton Budget Model, a group of economists and data scientists at the University of Pennsylvania who analyze public policy to assess its economic and fiscal impact, could mount to $519 billion. However, the Biden administration forecasts a lower cost, at about $305 billion over a decade.
If the plan is struck down, millions of borrowers could default on their student loans when the repayment pause, which began in March 2020, ends this summer, the Warren report forecasts.
About 1 in 5 Americans has an outstanding federal student loan, according to a recent study from personal finance site Credit Karma, which polled more than 1,000 adults in December. Of those, more than half say their future financial stability hinges on erasing that debt.
The Candy Land ladder
The possibility of receiving $10,000 in debt relief reminds Mitchell Petit-Frere, director of brand and marketing at the nonprofit Family Promise, of the board game Candy Land and the hope of landing on a space where players can climb a ladder, providing them with a shortcut to the end of the game.
"The reality of the student debt lingering over my head has forced me to alter my financial future," said Petit-Frere, 30, who lives in Parsippany, New Jersey.
Petit-Frere, who is living with his parents so he can pay down his remaining $40,000 in debt as well as save money to move out, said receiving debt relief would help him get one step — or ladder climb — closer to his goal of buying a multifamily home. He plans to rent out the other unit in the property so he can help his parents pay off the loans they took out to help finance his education, which he said stands in the six figures.
"All this debt lingers over my life and my parents' life," he noted.
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The debt relief would certainly help both him and his parents get closer to their goals, he added, but at the same time wouldn't change their daily lives given the amount of debt they hold. But, he said, he finds it frustrating that the program has been challenged and now remains on hold.
"I don't see any fault in trying to ease the financial anxiety of millions of not only young Americans, but older Americans too, like parents," he noted.