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Risks for Student Loan Borrowers
Students study at the Perry-Castaneda Library at The University of Texas at Austin on February 22, 2024 in Austin, Texas.
Brandon Bell | Getty Images
Here’s what you need to know about these events.
The Biden administration launched its new repayment plan, known as SAVE, or Saving on a Valuable Education, in the summer of 2023, describing it as “the most affordable student loan plan ever.” With the program, many borrowers were hoping to see your bills reduced by half or more.
However, Republican-backed states including Arkansas, Florida and Missouri filed lawsuits against the SAVE plan earlier this year, putting that aid in jeopardy.
The states argued that the Biden administration was overstepping its authority with SAVE and essentially trying to find a roundabout way to forgive student debt after the Supreme Court blocked his comprehensive plan last year.
In response, two federal judges in Kansas and Missouri temporarily suspended significant parts of the SAVE plan on June 24. Days later, the Biden administration successfully appealed part of the injunction against his plan. However, SAVE’s fate remains in limbo until judges decide the cases.
Borrowers likely won’t know more until after the presidential election in November, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.
Buchanan assumes the cases will eventually reach the Supreme Court.
“So they themselves would not even address the issue until the October period, for a much later decision,” he said.
For now, SAVE registrants can learn more about what recent legal developments mean for them at a story from CNBC from last week.
Meanwhile, a recent Supreme Court ruling is expected to make it more difficult for the Department of Education to provide relief to student loan borrowers.
The high court in late June overturned the so-called Chevron doctrine, a 40-year-old precedent that required judges to defer to a federal agency’s interpretation of disputed laws. Decision 6-3which divided the conservative-majority court along ideological lines, is likely to undermine the federal government’s position regulatory power.
“Federal agencies will have less flexibility in developing, implementing and enforcing regulations,” said higher education expert Mark Kantrowitz.
Rep. Pramila Jayapal, D-Wash., speaks outside the U.S. Supreme Court in Washington, D.C., U.S., Friday, June 28, 2024.
Valerie Plesch | Bloomberg | Getty Images
This could do Biden‘s fresh start effort for comprehensive student loan forgiveness more difficult, Kantrowitz explained. The president had hoped to begin canceling borrowers’ debt under what was called Plan B before the election.
“President Biden’s proposal for student loan forgiveness involves significant interpretation of the statute,” Kantrowitz said. “That makes it more vulnerable to legal challenges.”
So what would a Harris presidency mean for those with student debt?
Harris has helped promote Biden’s policies to ease the burden on borrowersand would likely continue her efforts, experts say. However, as a presidential candidate in the 2020 race, Harris introduced a debt relief program that was criticized for being overly complicated and narrow. (To be eligible, borrowers had to receive a Pell Grant and open a business in a disadvantaged community, among other requirements.)
Ernesto Apreza, Harris’ press secretary, did not immediately respond to a request for comment.
For now, the fact is that Trump is leading in the polls is a concern for consumer advocates.
As president, Trump has called for eliminating existing loan relief programs at the U.S. Department of Education, including the popular Public Service Loan Forgiveness initiative. He also wanted to cut the department’s budget, and its administration interrupted a regulation with the goal of offering loan forgiveness to those who were defrauded by their schools.
“When Donald Trump was president, before the pandemic, a new student loan borrower defaulted every 26 seconds, and more than 99% of educators, first responders and nurses were denied the aid they were entitled to under PSLF,” said Aissa Canchola-Banez, political director at Protect Borrowers Action.
“The stakes for Americans with student debt have never been higher,” Canchola-Banez said.