What If the Supreme Court Upholds Student Loan Forgiveness?

More than 40 million people are eligible for student loan forgiveness, but will only see debt relief if the Supreme Court upholds the program.

The nation’s highest court will hear oral arguments Tuesday in a case challenging President Joe Biden’s authority to forgive up to $20,000 of student loan debt per borrower through the Department of Education. A Biden victory in the High Court would leave those borrowers much better off, at the expense of $400 billion to the government.

Payments and interest on federal student loans have been paused since March 2020. Even if the court allows forgiveness, payments on borrowers’ remaining balance will resume two months after the court makes its ruling.

A Biden victory would mean about 20 million borrowers would never have to make a payment again, because their balances would be wiped out completely. Of those who would still owe on their loans, forgiveness would cut their monthly payments by about $63, data shows. 

“People can start to finally crawl out from under that mountain of debt, to get on top of their rent and their utilities, to finally think about buying a home or starting a family or starting a business,” Biden said in a speech at the White House in August. “It helps both current and future borrowers and it will fix a badly broken system.”

A Biden Victory Would Benefit 40 Million Borrowers

About 16 million borrowers were already approved for forgiveness when the court paused the program while hearing this case.

If the court upholds the student loan forgiveness program, more than 90% of relief would go to households making less than $75,000, the White House estimated. Some student loan borrowers would still be left out—individuals with incomes over $125,000 and households making $250,000 or more, and those with private student loans, for instance.

In addition to the estimated 20 million who would see their balances zeroed out, the reduction in loan balances would make it financially easier for borrowers to make the transition back to repayment, especially for those who are financially struggling the most, the Consumer Finance Protection Bureau (CFPB) said. 

“The cancellation of some student loan debt means that fewer student loan borrowers are likely to be at risk of payment difficulties when federal student loan payments resume,” the bureau said in a November report. “Many borrowers with multiple risk factors who still have outstanding balances when payments resume may have reduced balances going forward.”

Forgiveness would be paired with other student loan debt relief programs the Biden administration has put into place, making repayment even easier. Those who were in default when the payments restart won't have any past-due balance and the Department of Education won’t resume collections until a year after the pause ends.

Furthermore, President Biden has rolled out a more generous income-driven repayment plan that will allow many low-income borrowers will to discharge their loans with $0 monthly payments. 

Cancellation also would make a dent in racial inequality. As the NAACP noted in a brief to the Supreme Court, Black college graduates are more burdened with student loan debt, and more than twice as likely as White ones to owe more than what they borrowed four years after graduation.

This relief to borrowers would come at a cost to the government’s budget. Estimates for the total cost of the program vary, ranging from $305 billion over 10 years (according to the Department of Education) to as much as $519 billion, according to an estimate by the University of Pennsylvania's Wharton School.