Supreme Court says NO to Student Loan "Relief"
Biden has a long history of shenanigns when it comes to government student loans
“Last year, the Secretary of Education established the first comprehensive student loan forgiveness program, invoking the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) for authority to do so. The Secretary’s plan canceled roughly $430 billion of federal student loan balances, completely erasing the debts of 20 million borrowers and lowering the median amount owed by the other 23 million from $29,400 to $13,600. Six States sued, arguing that the HEROES Act does not authorize the loan cancellation plan. We agree.” — SCOTUS
Cancelling student loans, which has been mislabeled "student loan forgiveness," is a very contentious issue. Click here to watch my video about student loan cancellation when the government announced last fall that it would be decreasing and "forgiving" student loans.
In 1958, Congress authorized the first federal student loans, providing up to $1,000 per student per year to help them stay competitive in a global economy. National Defense Education Act of 1958, 72 Stat. 1584.
There are already 43 million borrowers who have taken out federal student loans totaling $1.6 trillion. Letter from Congressional Budget Office to Members of Congress, p. 3 (Sept. 26, 2022)
In a 6-3 decision, in Biden v. Nebraska the Supreme Court held that federal law does not authorize the Secretary of Education’s loan forgiveness program. In other words, there is nothing in the HEROES Act that provides authority for the secretary to transfer voluntarily assumed debt onto those who didn’t agree to it.
Held: The HEROES Act allows the Secretary to “waive or modify” existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, but does not allow the Secretary to rewrite that statute to the extent of canceling $430 billion of student loan principal. The text of the HEROES Act does not authorize the Secretary’s loan forgiveness program. The Secretary’s power under the Act to “modify” does not permit “basic and fundamental changes in the scheme” designed by Congress. In such circumstances, the Court has required the Secretary to “point to ‘clear congressional authorization’ ” to justify the challenged program. And as explained, the HEROES Act provides no authorization for the Secretary’s plan when examined using the ordinary tools of statutory interpretation—let alone “clear congressional authorization” for such a program.
As then-Speaker of the House Nancy Pelosi explained: “People think that the President of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress.” Press Conference, Office of the Speaker of the House (July 28, 2021).
Despite Pelosi getting it right for once, a memorandum of law from the Education Department's Office of General Counsel, and Biden himself informing the public that he lacks the authority to enact a student loan "forgiveness" scheme through Executive Order, that didn’t stop him from trying.
It was very clear the HEROES Act did not provide authority to transfer the debt burden of nearly $1,000,000,000,000 in student loans to taxpayers. All that was needed was a plaintiff with standing.
Because the federal government supports and approves of student loans, universities have been able to raise tuition prices beyond what is reasonable. Even with the price increases, colleges know that the federal government will still provide student loans.
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The expansion of federal student loans through congressional action coincided with a tightening of the requirements for student loan discharge in bankruptcy. Looking at the legislative history behind the growing issue of student loan debt reveals a clear pattern of legislators repeatedly enacting legislation that benefits the banks and corporations, rather than the students and borrowers. Additionally, Joe Biden had a significant role in establishing the student debt crisis that he and his administration are now seeking to address.
As a Senator, Biden has spent decades fighting on behalf of banks and lenders while throwing students and their families under the bus in order to make it easier for them to take on large amounts of debt. According to a 2020 article from The Intercept, Biden “supported several bills that contributed to the rise in borrowing from $1.8 billion in 1977 to $12 billion in 1989. Early in his senatorial career, Biden played a role in making it easier for students and parents to take out burdensome loans, spanning across several decades. Later, his landmark bankruptcy reform legislation made it nearly impossible to discharge student loans, birthing a predatory industry and sinking millions into unsustainable levels of debt.”
History:
1965: Higher Education Act created an expanded Guaranteed Student Loan Program
1978: Congress passes the Bankruptcy Reform Act. In it, federal student loans were excepted from bankruptcy discharge unless they had been in repayment for 5 years or more.
1978: Congress passed the Middle Income Student Assistance Act, which eliminated income restrictions on federal loans to expand eligibility to all students. It provided up to $4.7 billion in loans in 1979 alone. Biden helped write a separate bill that year blocking students from seeking bankruptcy protections on those loans after graduation. Then he went on to vote to create the Parent Loan for Undergraduate Students (PLUS) in 1980 and the Auxiliary Loans to Assist Students (ALAS) program in 1981, which extended loan eligibility to students with no parental financial support. Loosened loan eligibility requirements, together with two new federal loan programs (PLUS and ALAS), increased student borrowing from $1.8 billion in 1977 to $12 billion in 1989.
1984: Biden used his senior position in the Judiciary Committee to extend bankruptcy exemptions to non-higher-education loans like those for vocational schools, according to the U.S. Department of Education. By removing "of higher education" from the legislation's language, the Bankruptcy Amendments and Federal Judgeship Act of 1984 tightened the bankruptcy discharge regulations even more. This increased the limitations on discharge to cover both government loans and private loans backed by a non-profit entity.
1990: Crime Control Act — This bill, sponsored by Joe Biden, increased the repayment period from 5 years (as stipulated in the 1978 Bankruptcy Reform Act) to 7 years.
1991: The statute of limitations on collection of defaulted loans was completely eliminated by the Higher Education Technical Amendments.
1996: Congress passes the Debt Collection Improvement Act giving the Department of Education the ability to offset Social Security benefits to pay defaulted student loans
1998: More Amendments to the Higher Education Act make it nearly impossible to discharge federal student loans in bankruptcy. Only under the vaguely defined "undue hardship" could student loans be discharged under bankruptcy law. As explained in a Washington University Journal of Law article, “section 523(a)(8) of the United States Bankruptcy Code allows discharge of student loans in bankruptcy only if the student can demonstrate an undue hardship. The greatest irritation with undue hardship is that it is an undefined term, creating uncertainty for debtors who consequently do not even attempt student loan discharge. Today, four different definitions of undue hardship persist in various localities around the country: the Johnson test, the totality of circumstances test, the Brunner test, and the Bryant poverty test. The lack of a unanimous definition causes wide judicial latitude and inconsistent decisions.”
2005: All qualified education loans were excepted from discharge with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act. Private student loans no longer needed to be associated with a nonprofit institution to be excepted from bankruptcy discharge. With Biden's support, a bill that severely limited borrowers' ability to refinance their student loans and made it more difficult for families to file for bankruptcy was able to fly through the Senate and be signed into law.
Providing "forgiveness" for student loans is not the answer to the issue of mounting student debt.
First of all, I question the need for a college education at all these days. There are so many alternatives such as trade schools, apprenticeships, self-directed learning, entrepreneurship, etc. The days of “everyone” needing a college degree are long gone.
Second, the cost of college education is astronomical! There is no reason I can see for colleges and universities to cost so much. Having worked in higher education for most of my career, I can attest to the incredible waste of resources. There are so many layers of “non-essential” positions and programs. Budgets could be slashed substantially without any loss of academic rigor.
Third, many colleges and universities are not providing real-world education and are paying thousands of dollars for staffing for diversity equity and inclusion programs while eliminating academic majors like history, English and theology. Why would a young adult (or that student’s family) go into exorbitant debt, in essence being a slave to the government, just to get a college degree? That does not make sense to me.
Finally, I can’t stand the ruse of calling this student loan "forgiveness" as it suggests the money vanished when, in fact, the financial burden is just being shifted somewhere else. The government — meaning you and I would be footing the bill (along with the money the feds are printing out of thin air) would simply assume the debt and make the necessary repayments to the creditors. The Department of Education will continue to collect, which will lead to higher inflation as banks lend money to the Treasury to pay off the national debt, higher tax rates, and even more debt (future tax rates plus interest).
Although I believe in repaying what you owe (and believe me, I have worked hard to pay off all my debt and I have vowed to never go into debt again) there could be changes made in bankruptcy laws that would allow people discharge their student loan debt in bankruptcy as long as they have made good faith efforts to repay the loan. That would put pressure on lenders to stop engaging in predatory lending. Financial institutions are unlikely to be willing to guarantee such high-risk loans, which could force colleges to lower tuition fees.
What do you think about student loans, tuition costs and the need (or lack thereof) for college degrees in this day and age?
As always, I appreciate your comments, and I thank those who support my work with a paid subscription.
~ Peggy