Supreme Court’s Student Loan Ruling: Potential $300B+ Savings for US

The Supreme Court’s Decision on Student Debt Relief

The U.S. Supreme Court’s recent decision to strike down President Joe Biden’s student debt relief program for mental health professionals”>student debt relief program has significant implications. Not only does it mark a major reduction in this year’s deficit, but it also claws back over $300 billion in costs associated with the program that were recognized last year.

“It’s deficit reduction relative to a deficit increase that never really went into effect,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget (CRFB).

A Constitutional Challenge

The court ruled 6-3 on Friday that Biden’s unilateral decision to offer up to $10,000 to $20,000 in one-time student debt forgiveness had circumvented Congress’ constitutional right to make laws on spending. This decision came after legal challenges that had blocked the debt relief program.

The Cost of Debt Relief

The Department of Education estimated that the debt relief would cost taxpayers about $30 billion annually over the next decade, totaling around $305 billion. However, the Supreme Court’s ruling means that a significant portion of these costs will be reversed.

• The net present value of the loan forgiveness was estimated at $379 billion over a decade.
• The U.S. Treasury took a $430 billion charge against the fiscal 2022 budget results to cover these costs.
• Without the advance recognition, the deficit would have fallen below $1 trillion.

Implications for the Deficit

The reversal of more than $300 billion in costs will make it appear that this year’s fiscal deficit fell slightly from 2022. However, the Congressional Budget Office is still forecasting an increased deficit of $1.539 trillion this year due to falling revenues and higher spending and healthcare costs.

Impact on Borrowers

The Supreme Court ruling will have minimal cash flow impact, adding back about $2 billion in receipts per month that would have been lost under the forgiveness plan. Additionally, the extension of the general student loan repayment moratorium by the Biden administration will provide relief for borrowers.

• Many borrowers will benefit from the more generous income-driven repayment scheme.
• The general student loan repayment moratorium will end in October, creating new challenges for the U.S. economy.

(Reporting by David Lawder; Editing by Andrea Ricci)