Americans with student debt haven't had to worry about making payments for a while. Maybe, just maybe, some of them won't have to worry again.
There's still a possibility that many student loans will be forgiven before that date. But what if that doesn't work out? This could be the worst-case scenario for student loan borrowers.
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A huge decision on the way
Last year, the Biden administration rolled out a plan to forgive up to $20,000 in student debt for Pell Grant recipients and up to $10,000 for non-Pell Grant recipients. The main catch was the income threshold to qualify. Only borrowers with an individual income of less than $125,000 or married couples with a household income of $250,000 were eligible for the debt relief.
But that plan was put on hold by a federal court. The U.S. Supreme Court heard arguments on the challenges to the White House's student loan forgiveness program earlier this year.
Now, the entire idea is only a few weeks away, at most, and potentially only a few days away from being tossed aside. The Supreme Court is expected to announce its decision on the case in June or early July. Only five votes are needed to scrap the president's plan altogether.
A thumbs-down from the nation's highest court is, without question, the worst-case scenario for borrowers with student loans. It would mean no debt will be forgiven. Without a favorable ruling from the Supreme Court, all repayments of student loans must resume in October. However, interest on those loans will again be calculated starting on Sept. 1, 2023.
No more delays likely
But couldn't the Biden administration push back the deadline for repaying student loans as it has done in the past? Not this time.
The debt ceiling deal reached by the White House and the GOP that was passed into law prevents the executive branch from unilaterally suspending the collection of student loan debt. It would take an act of Congress to make another delay happen.
Such congressional action is highly unlikely. The GOP has opposed the suspension of student loan debt. Because Republicans hold a majority in the U.S. House of Representatives, the chances that any legislation to delay repayment of student loans will make it through the chamber are slim, at best.
It's possible that the U.S. Department of Education could implement ways to make it easier for borrowers. One possibility is to extend a grace period for a few months where borrowers wouldn't be penalized if they missed payments. Even if this happens, though, interest would continue to accrue.
An issue in 2024
The idea of student loan forgiveness isn't likely to go away, even if the Supreme Court strikes down President Biden's plan. Instead, it will almost certainly be a key issue in the 2024 presidential and congressional elections.
Over 40 million Americans are repaying student loans. A survey conducted in February by Beacon Research/Shaw & Company on behalf of Fox News found that 62% of respondents believe that at least some amount of student debt should be forgiven.
Should Biden win reelection as president, student loan forgiveness will probably be among his priorities again if the Supreme Court rules against his current plan. But for a best-case scenario for borrowers with student debt to unfold, Biden will need to attract enough support in Congress to move forward.
