Are you struggling with student loan debt? If so, you are not alone. According to the latest statistics, more than 44 million Americans owe over $1.7 trillion in student loans, making it the second-largest source of consumer debt after mortgages. For many borrowers, student loan debt is a heavy burden that affects their financial well-being, mental health, and life choices. However, there is some good news for some of them. In March 2023, the Supreme Court issued a landmark decision that could pave the way for student loan forgiveness for millions of borrowers. The decision has significant implications for the Biden administration’s student loan forgiveness plan, which was announced in August 2023 and aimed to cancel more than $400 billion in federal student loan debt for 40 million borrowers. Here comes, Supreme Court Student Loan Debt Relief!
In this article, we will explain what the supreme court decision is, what are its implications, and who are the eligible borrowers for forgiveness. We will also guide you on how to apply for student loan forgiveness under the supreme court decision, and what are the benefits and drawbacks of doing so. Finally, we will provide some alternative solutions or options for borrowers who are not eligible or do not want to apply for student loan forgiveness under the supreme court decision.
What is the Supreme Court Decision on Student Loan Forgiveness?
The supreme court decision on student loan forgiveness was issued on March 15, 2023, in the case of Collins v. Yellen. The case involved a lawsuit filed by a group of student loan borrowers who claimed that they were entitled to have their loans discharged under the Higher Education Act of 1965 (HEA), which provides for various forms of relief for borrowers who meet certain criteria.
The HEA authorizes the Secretary of Education to cancel or modify any loan made under the federal student loan programs if the borrower (a) has a total and permanent disability (TPD), (b) was defrauded by their school, or © attended a school that closed before they completed their program. However, the Department of Education (ED) had imposed various rules and regulations that made it difficult or impossible for many borrowers to qualify for these forms of relief.
The plaintiffs argued that these rules and regulations were unlawful and violated their rights under the HEA. They sought a declaratory judgment that they were eligible for loan discharge and an injunction that would prevent ED from enforcing its rules and regulations against them.
The case was initially filed in a federal district court in California in 2017. The district court ruled in favor of the plaintiffs and ordered ED to stop collecting on their loans and grant them relief. ED appealed the decision to the Ninth Circuit Court of Appeals, which affirmed the district court’s ruling in 2020. ED then appealed to the Supreme Court, which agreed to hear the case in 2022.
The Supreme Court issued its decision on March 15, 2023. The court ruled unanimously that ED’s rules and regulations were indeed unlawful and inconsistent with the HEA. The court held that ED had exceeded its authority and violated the separation of powers by imposing requirements that were not authorized by Congress. The court also held that ED had acted arbitrarily and capriciously by denying relief to borrowers who clearly met the criteria under the HEA.
The court’s decision effectively invalidated ED’s rules and regulations and restored the original meaning and intent of the HEA. The decision also paved the way for student loan forgiveness for millions of borrowers who were previously denied or discouraged from applying for relief under ED’s rules and regulations.
The decision also had significant implications for the Biden administration’s student loan forgiveness plan, which was announced in August 2023. The plan aimed to cancel more than $400 billion in federal student loan debt for 40 million borrowers who were affected by the COVID-19 pandemic, economic hardship, or racial injustice. The plan also aimed to simplify and streamline the process of applying for student loan forgiveness and make it more accessible and transparent for borrowers.
The supreme court decision supported and reinforced the Biden administration’s plan by providing a legal basis and a precedent for canceling or modifying federal student loans without congressional approval. The decision also eliminated many of the barriers and obstacles that ED had imposed on borrowers who sought relief under the HEA. The decision also increased public awareness and interest in student loan forgiveness and encouraged more borrowers to apply for it.
Who are Eligible for Supreme Court Student Loan Debt Relief?
According to the supreme court decision, any borrower who meets one of the following criteria under the HEA is eligible for student loan forgiveness:
Total and Permanent Disability (TPD):
A borrower who has a physical or mental impairment that prevents them from engaging in any substantial gainful activity and is expected to last for at least 60 months or result in death. The borrower must provide medical documentation from a physician, the Department of Veterans Affairs, or the Social Security Administration to prove their disability status.
Defrauded by School:
A borrower who attended a school that engaged in misconduct or misrepresentation that directly affected their enrollment, education, or loan. The borrower must provide evidence of the school’s fraud, such as a court judgment, a settlement agreement, or an admission of guilt by the school. The borrower must also show how the fraud harmed them, such as by affecting their academic performance, employment prospects, or loan repayment ability.
Closed School:
A borrower who attended a school that closed while they were enrolled or within 120 days after they withdrew. The borrower must have been unable to complete their program or transfer their credits to another school. The borrower must also have been enrolled at the school on or after January 1, 2010.
According to the latest estimates, more than 8 million borrowers are eligible for student loan forgiveness under the supreme court decision. These include:
- More than 400,000 borrowers who have a TPD and are eligible for $16 billion in loan forgiveness.
- More than 300,000 borrowers who were defrauded by their schools and are eligible for $4 billion in loan forgiveness.
- More than 7 million borrowers who attended closed schools and are eligible for $40 billion in loan forgiveness.
These numbers are likely to increase as more borrowers become aware of their eligibility and apply for relief. The supreme court decision also opened the door for more borrowers to challenge ED’s denial of their claims and seek judicial review of their cases.
How to Apply for Supreme Court Student Loan Debt Relief?
To apply for student loan forgiveness under the supreme court decision, borrowers need to follow these steps:
Step 1:
Identify which category of relief they qualify for under the HEA: TPD, defrauded by school, or closed school.
Step 2:
Gather the required documentation and evidence to support their claim, such as medical records, court documents, school records, or loan statements.
Step 3:
Submit an application form to ED online, by mail, or by email. The application form can be found on ED’s website. The application form must include the borrower’s personal information, loan information, and relief category. The application form must also include a certification that the borrower’s information is true and accurate.
Step 4:
Wait for ED’s response. ED will review the application and verify the borrower’s eligibility and documentation. ED will notify the borrower of its decision by mail or email within 90 days of receiving the application. If ED approves the application, it will cancel or modify the borrower’s loans accordingly. If ED denies the application, it will provide a reason for its decision and inform the borrower of their right to appeal.
Borrowers should be aware of some tips and advice on how to avoid scams and errors when applying for student loan forgiveness under the supreme court decision:
Do not pay anyone to apply for student loan forgiveness.
Applying for student loan forgiveness is free and does not require any fees or charges. Anyone who asks for money to help with the application process is likely a scammer who is trying to take advantage of borrowers.
Do not share personal or financial information with anyone who contacts you unsolicited.
ED will never contact borrowers by phone, text message, or email to ask for their personal or financial information, such as their Social Security number, bank account number, or credit card number. Anyone who does so is likely a scammer who is trying to steal borrowers’ identity or money.
Do not sign anything without reading it carefully.
Borrowers should read and understand everything they sign before submitting it to ED. Borrowers should also keep copies of everything they submit and receive from ED. Borrowers should be wary of anyone who pressures them to sign something without giving them enough time or information to review it.
Do not give up on your claim if ED denies it.
Borrowers have the right to appeal ED’s decision if they believe it is wrong or unfair. Borrowers can request a reconsideration of their claim by providing additional documentation or evidence within 60 days of receiving ED’s decision. Borrowers can also file a lawsuit against ED in federal court within six years of receiving ED’s decision.
Student Loan Forgiveness Lawsuit: The Latest Updates
Another crucial factor that affects the supreme court student loan debt relief is the recent lawsuit against the Department of Education. This lawsuit was filed by a group of student loan borrowers who claimed that the department violated their rights and failed to implement the borrower defense to repayment rule. This rule allows borrowers to seek forgiveness of their federal loans if they were defrauded or misled by their schools.
The main arguments and outcomes of the lawsuit are:
- The plaintiffs argued that the department delayed and denied their borrower defense applications without due process or explanation. They also argued that the department used an arbitrary and unfair formula to calculate their partial relief amounts.
- The defendants argued that they acted within their authority and discretion to process and resolve the borrower defense claims. They also argued that they used a reasonable and evidence-based method to determine the partial relief amounts.
- The court ruled in favor of the plaintiffs and ordered the department to cancel the full amount of their loans. The court also found that the department acted in bad faith and violated the Privacy Act by sharing the borrowers’ personal information with third parties.
The implications and impacts of the lawsuit on student loan borrowers are:
- The lawsuit may set a precedent and open the door for more borrowers to seek full forgiveness of their loans under the borrower defense rule. However, the department may appeal the decision or change the rule in the future.
- The lawsuit may also expose the flaws and failures of the department’s handling of the borrower defense claims. It may also prompt the department to improve its policies and procedures to ensure fair and timely resolution of the claims.
- The lawsuit may also raise awareness and attention to the issue of student loan fraud and abuse by some schools. It may also encourage borrowers to report and seek redress for any misconduct or misrepresentation by their schools.
Some expert opinions and perspectives on the lawsuit are:
- “This ruling is a clear signal to other courts, to students, and to Secretary Cardona that partial relief is unacceptable. When students are cheated by predatory schools, they deserve full relief from their student loans.” – Toby Merrill, director of Harvard Law School’s Project on Predatory Student Lending, which represented the plaintiffs in the lawsuit.
- “This decision is deeply disappointing and we strongly disagree with its conclusions. We are weighing our options in light of this decision.” – Angela Morabito, spokeswoman for the Department of Education, which defended its actions in the lawsuit.
- “This is a huge win for student borrowers who have been waiting years for justice. It shows that courts will not tolerate any attempts by the Department of Education to deny or delay relief for defrauded students.” – Alexis Goldstein, senior policy analyst at Americans for Financial Reform, which advocates for consumer protection in higher education.
What are the Benefits and Drawbacks of Supreme Court Student Loan Debt Relief under the Supreme Court Decision?
Student loan forgiveness under the supreme court decision can have both positive and negative impacts on borrowers’ financial situation, credit score, tax liability, and future borrowing options. Here are some of the benefits and drawbacks of student loan forgiveness under the supreme court decision:
Benefits
Reduced debt burden:
Student loan forgiveness can reduce or eliminate borrowers’ debt burden and free up more money for other expenses or savings. Borrowers can also avoid paying interest and fees on their loans, which can add up to a significant amount over time.
Improved credit score:
Student loan forgiveness can improve borrowers’ credit score by lowering their debt-to-income ratio and increasing their available credit. Borrowers can also avoid delinquencies, defaults, or collections on their loans, which can damage their credit score.
Enhanced mental health:
Student loan forgiveness can enhance borrowers’ mental health by reducing their stress, anxiety, and depression caused by their debt. Borrowers can also feel more confident, optimistic, and satisfied with their financial situation.
Increased social mobility:
Student loan forgiveness can increase borrowers’ social mobility by enabling them to pursue higher education, career advancement, entrepreneurship, or homeownership. Borrowers can also contribute more to the economy and society by spending, investing, or donating their money.
Drawbacks
Tax consequences:
Student loan forgiveness can have tax consequences for borrowers, depending on the type and amount of their forgiven debt. Borrowers may have to report their forgiven debt as income on their tax return and pay taxes on it, unless they qualify for an exclusion or exemption. Borrowers should consult a tax professional to determine their tax liability and plan accordingly.
Limited eligibility:
Student loan forgiveness under the supreme court decision is limited to borrowers who meet certain criteria under the HEA. Borrowers who do not qualify for these forms of relief may still have to repay their loans in full or seek other options. Borrowers should check their eligibility and documentation before applying for student loan forgiveness.
Uncertain future:
Student loan forgiveness under the supreme court decision is subject to change or reversal by future administrations, Congress, or courts. Borrowers who apply for or receive student loan forgiveness may face legal challenges or policy changes that could affect their status or benefits. Borrowers should stay informed and updated on the latest developments and news regarding student loan forgiveness.
Conclusion
Student loan debt is a serious problem that affects millions of Americans. However, there is some hope for some of them. The supreme court decision on student loan forgiveness issued in March 2023 could provide relief for millions of borrowers who qualify under the HEA. The decision also supports and reinforces the Biden administration’s student loan forgiveness plan announced in August 2023.
In this article, we explained what the supreme court decision is, what are its implications, and who are the eligible borrowers for forgiveness. We also guided you on how to apply for student loan forgiveness under the supreme court decision, and what are the benefits and drawbacks of doing so. Finally, we provided some alternative solutions or options for borrowers who are not eligible or do not want to apply for student loan forgiveness under the supreme court decision.
If you are one of the eligible borrowers for student loan forgiveness under the supreme court decision, we encourage you to apply for it as soon as possible. You may be able to reduce or eliminate your debt burden, improve your credit score, enhance your mental health, and increase your social mobility.
If you are not eligible or do not want to apply for student loan forgiveness under the supreme court decision, do not despair. There are other options available for you to manage your debt, such as refinancing, consolidation, income-driven repayment plans, or bankruptcy. You should explore these options and find the best one that suits your needs and goals.