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In the long-awaited Supreme Court ruling on President Joe Biden’s student loan forgiveness program, the court blocked The plan succeeded by a 6-3 decision on Friday.
The program, which would have allowed eligible borrowers to eliminate up to $20,000 in debt, was deemed an illegal excess of executive power. The plan cost an estimated $400 billion.
The Supreme Court ruling has important implications for Biden, who has made tackling student-loan debt a key pillar of his 2020 campaign. But the court’s ruling hinged on whether the plan was an overreach of power, arguing that such a plan could not be implemented without congressional approval.
The Biden administration had previously defended the motion by citing the Higher Education Relief and Opportunities for Students Act of 2003 (HEROES Act), which allows the government to provide relief during a national emergency. Still, the court ruled that the HEROES Act’s language wasn’t specific enough to authorize a broad plan like Biden’s.
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“The Secretary claims that the HEROES Act gives him the power to cancel $430 billion in student loan principal, but that is not the case.” Chief Justice John G. Roberts Jr. wrote in his decision: “We are pleased to announce today that the Act allows the Secretary to ‘waive or modify’ existing statutes and regulatory provisions that apply to financial assistance programs under the Education Act and does not fundamentally rewrite that statute. We will maintain our position with
The Biden administration does not agree with the decision, said a person familiar with the matter. CNN, It also wants to “make it clear to borrowers and their families that the Republicans are responsible for denying the relief that President Biden has worked to reach them.”
What impact will this decision have on the economy?
The student loan repayment process, which was paused during the pandemic, will resume in August, with monthly payments due in October. The moratorium will always end regardless of the court’s decision, but millions may have been counting on Biden’s plan to pay off student loan debt, experts say. have expressed concern about the potential wide-ranging impact on
Laura Beemer, a researcher specializing in higher education finance at the Institute of Jain Family Studies, said: new york times Any progress (improvements, etc.) during the grace period Borrowers’ credit scores, which enable them to make significant purchases such as cars and homes, could be canceled as soon as the suspension ends.
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“Any progress made during the moratorium will be immediately reversed,” Beemer told the magazine, adding, “Especially mortgages and auto loans that were financially spared due to non-payment. It’s the same for people who take out new debt in the country,” he said. their student loans. “
In early June, Moody’s Analytics chief economist Mark Zandy expressed similar concerns. CNBC.
“It would cut 0.2 percent of gross domestic product (GDP) over the next year. In a more typical time now, that wouldn’t be such a big deal. The economy would be able to digest it well. But in the current environment, no matter how weak the economy or how high the risk of recession, a few tens of percent could matter,” Zandi said.
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