US President Joe Biden's plan to cancel $430 billion in student loan debt ran into a massive hurdle on Friday as the Supreme Court blocked the move. The sharply divided apex court ruled that the Biden administration had overstepped its authority in trying to curb student loans for millions of Americans. With the move putting nearly half a trillion dollars of debt back on household balance sheets, the President is now set to announce new actions to protect borrowers.
The $400 billion plan announced by President Joe Biden last year would have canceled up to $20,000 in federal student loans for 43 million people. Of those, 20 million would have had their remaining student debt erased completely.
The 6-3 decision, with conservative justices in the majority however held that the administration needs Congress' endorsement before undertaking so costly a program. Barring an act of Congress, American households who collectively owe $1.6 trillion in education debt must soon restart making hundreds of dollars a month in loan payments for the first time in more than three years.
While the move has now left borrowers on the hook for repayments, it is however likely to prompt a major reduction in this year's deficit - at least on paper.
The Department of Education had estimated that the debt relief would cost taxpayers about $30 billion annually over the next decade through foregone loan repayments - about $2.5 billion per month - or about $305 billion in total. The Department estimated the net present value of the loan forgiveness at $379 billion over a decade.
Last year the US Treasury took a $430 billion charge against the fiscal 2022 budget results to cover these costs as well as an extension of the general COVID-19 moratorium on payments through the end of 2022. The move had the effect of limiting a dramatic reduction in the fiscal 2022 deficit to $1.375 trillion from $2.775 trillion the prior year.
(With inputs from agencies)
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