Welcome! In all of the news on the change in affirmative action, there was another decision that was announced that impacts students and borrowers everywhere.
We are of course referencing the court decision that ruled President Biden’s decision to cancel student loan debt for students was unconstitutional.
We will try to move through the legalese as quickly as possible and focus more on the actual impact, both immediate and long-term.
What was actually decided?
In case you missed it, President Biden tried to unilaterally cancel student loans for every borrower, up to a fixed amount. This would have affected every individual with debt up to specific income limits.
States sued, stating this was overreach, and courts agreed. In effect, a president cannot unilaterally decide to cancel student debt, only Congress can pass a law to do that.
This is in conjunction with the recent US debt agreement, which firmly ends the student loan pause.
The result? No student loan relief, and a return to payments coming soon.
With that out of the way, what does it actually mean?
Why Does This Matter?
In the short term, it means that student loan forgiveness will likely not happen for a years. No matter your politics, the likelihood that any student loan debt is forgiven through Congressional action is slim, and largely dependent on a Democrat-led Congress.
That may seem like it matters only to those who have already gone to college or grad school, but you have to remember that there is more to the student loan forgiveness than just forgiving debt.
One of the less talked about components of student loan forgiveness is dealing with the structural reasons why students end up in massive debts in the first place. In other words, forgiving debt is a one time thing, but it does nothing to address the high cost of college education.
What that means is that in the short-term, you have to actually assume that you will need to think through the ROI for your degree - is it worth the debt that you may take on?
Bottom line - in the short-term, you will have to be cognizant of the different financial aid packages that are available. If you’re hoping that you will go to school and someone will just forgive the debt, that does not seem likely in the short-run.
In the long-run, it is very unlikely that any movement happens on the student-loan issue. If you are a parent of a young student, it means that the college selection process has to include a financial aid component.
One of the things that families often miss - with the exception of a handful of colleges and universities, the value of a degree from one college is not that difficult to replicate. Meaning, an engineering degree from Purdue is probably as strong as an engineering degree from NC State. But depending on who you are and where you are from, the cost could significantly vary for applicants. Is it worth an extra $10K a year to go to one school over another?
Unless something is done to address the cost of college, this is a reality that every parent will need to face.
Hopefully this provides some valuable insights to you and those around you for planning purposes.