What SCOTUS’s Rejection of Student Debt Relief Will Mean for the Economy
June 30, 2023
By Alí R. Bustamante
The Supreme Court has struck down the Biden administration’s student debt cancellation program, which would have relieved up to $20,000 in debt for millions of borrowers. Now, the $2 trillion student loan crisis is set to persist unmitigated, with 43 million Americans and their families facing resumed interest and loan payments on September 1, and October 1, respectively, after a 3.5-year pandemic-related payment pause.
In striking down student debt cancellation, the court finds that “the Secretary’s power under the Act to ‘modify’ does not permit ‘basic and fundamental changes in the scheme’ designed by Congress.” In effect, the court has prevented the Biden administration from correcting the policy mistakes of the past and locked in bad educational policy for several more years.
This ruling will have the effect of stripping wealth from millions of American families and widening the racial wealth gap between white and Black Americans. Prior to the pause, student loan payments drained a monthly average of $393 from student loan borrowers’ budgets, reducing household disposable income and savings. Amid the economic recession triggered by the pandemic, the student loan payment pause allowed borrowers to retain their income when they needed it most, without any financial penalties such as accrued interest. The retained income directly improved the economic security of borrowers and contributed to the portfolio of fiscal policies preventing the American economy from slipping into an unnecessarily long recession.
Now, for 43 million Americans and their families, the burden of student debt servicing returns. It is unacceptable that millions of Americans hold debts that exist only due to the failed policies of past administrations. Furthermore, without further action, the number of student loan borrowers will increase by nearly a million every year. Policymakers must deliver economic gains to American families by revisiting student debt cancellation efforts and enacting a free public option for college. Americans should have the right to access a free college education and have a debt-free opportunity for a better life.