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This Could Be the Best-Case Scenario for Student Loan Borrowers

There’s $1.78 trillion in outstanding student loan debt right now, and unfortunately, paying down loans is a rite of passage that tens of millions of Americans have to go through. Spending years or even decades in repayment has made many of those college graduates regretful at the financial decisions they made early in life, particularly when their hopes and dreams for a prosperous career haven’t panned out.

It’s in that context that the Biden administration announced nearly a year ago that it planned to roll out a massive student loan forgiveness plan. The move would have completely eliminated outstanding student loans for millions of borrowers, and it would have made a big dent in the balances that others had remaining on their debt. With that plan having drawn lawsuits from opponents that are currently under review by the Supreme Court, many commentators are pessimistic about the prospects for student loan forgiveness in its current form. Nevertheless, there are several ways that borrowers could end up in a best-case scenario — and they’re not all reliant on a favorable decision from the nation’s highest court. Here are a few of them.

Person wearing college graduation gown with arms over head.

Image source: Getty Images.

1. The Supreme Court could support the Biden plan

Few people expect the Supreme Court to rule in favor of the Biden administration on the current lawsuits against the student loan forgiveness plan. The questioning from several justices on the Supreme Court strongly implied a belief that the executive branch had gone beyond its authority under the U.S. Constitution, instead suggesting that more specific authorization from the legislative branch was necessary.

Yet procedurally, there were several arguments supporting the administration’s position that members of the Supreme Court highlighted. Whenever a law benefits someone, others might get left out, but that doesn’t mean that those others have legal standing to challenge the law. One suit before the Supreme Court involves that exact question, as one individual plaintiff got no relief because the Biden plan’s $10,000 forgiveness applies only to federal loans. Another plaintiff complained that others who received Pell Grants would get a larger $20,000 forgiveness amount. Similarly, state governments cited only indirect financial harm from the Biden plan.

If the Supreme Court rules in favor of the Biden administration based on standing, it might invite further lawsuits from others more directly affected. Yet if the ruling lifted injunctions that are preventing the Department of Education from executing plans to forgive debt, then millions of people who have already applied could finally get the relief they’ve sought for years.

2. A back-up plan could prove more effective

Even if the Supreme Court rules against the Biden plan, the administration could essentially make a second attempt using different statutory authority. Some lawmakers who favor student loan forgiveness weren’t pleased when the Department of Education chose a law linked to national emergencies as their basis for taking action, preferring instead broader-based laws that offer more explicit authority.

A second try would inevitably draw just as much litigation as the first. However, if the legal arguments are better, then borrowers might win the second time around even if they lose in the first attempt.

3. More targeted relief could prove just as helpful

Lastly, although the prospects for an immediate $10,000 to $20,000 write-down of debt are obviously attractive to borrowers, other reforms could have the same long-term result. For instance, the Biden administration also hopes to implement new income-driven repayment plans that would cut the amount that borrowers have to pay. This Department of Education initiative would shorten the period of repayment for modest borrowers cut to 10 years from between 20 and 25 years, while many borrowers would see payments reduced by half from current levels.

Admittedly, the stress of having that debt hanging over a borrower for a decade or more isn’t as inviting an outcome as outright forgiveness. Yet if outright loan cancellation efforts fail, anything that would make loan payments easier to handle would be welcome.

Stay tuned

The Supreme Court is expected to release its decision on the student loan cases before it within the next few weeks. No matter what the outcome, though, there are still avenues toward what could become a best-case scenario for student loan borrowers.

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