Financial Disaster Awaits Millions if Student Debt Cancellation is Nixed, Senator Warren Says

If the Supreme Court strikes down President Biden’s student loan forgiveness plan, millions of Americans will suffer financial hardship, according to a report released by Senator Elizabeth Warren in late February.

The report, which was shared exclusively with Insider, was based on information from 20 advocacy groups asked to explain how the absence of debt relief would impact their members. Among the groups were the debtors’ union, the Debt Collective, and the NAACP.

Student debt forgiveness would help borrowers from low-income and “historically underrepresented communities” the most, and “denying student debt cancellation would cause financial disaster for millions of Americans,” the report said.

The Supreme Court took up two cases in early March, both backed by conservative groups, that seek to halt the Biden administration’s plan to cancel up to $20,000 in student debt for federal borrowers earning less than $125,000 a year. Because of the lawsuits, the action has been paused since November.

“If the Supreme Court sides with the extremist judges, millions of Americans' monthly costs will rise significantly when student loan payments resume later this year,” the report said.

“Further, nearly every response to Senator Warren's inquiry cited the financial hardship of COVID-19 compounding the existing student loan burden felt by millions of Americans,” the report added. “Reducing debt burdens through cancellation will help avoid defaults when student loan payments resume and ensure borrowers do not face financial ruin as the economy continues its recovery from the COVID-19 pandemic.”

Using data from the Department of Education and the U.S. Census Bureau, 81% of debt relief applications came from the bottom 80% of congressional districts, based on income. The bottom 80% has more eligible borrowers than the top 20%, the data showed.

However, despite the figures and the overwhelming public support, Republican lawmakers have claimed that canceling student debt is unfair to those who already paid off their loans or did not borrow for college.
The sentiment is clear among borrowers about the benefit of debt forgiveness. If the Supreme Court strikes it down, it “would mean that the possibility of my future as a homeowner or retire will evaporate and I'm going to continue the cycle of working until I die as a renter living paycheck to paycheck. A decision to deny student loan relief means that I remain uncertain if medication could improve my ability to follow my scholarly interests in research,” a member of the United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW) told Warren in the report.

A 64-year-old Debt Collective member said that “the thought of having the loan payments starting again in general and without cancellation terrifies me. It means I might have to take a second job or use my 401K retirement money to pay for the loans. I [cannot] plan for retirement.”

Biden extended the pause on forgiveness 60 days after June 30, or 60 days after the cases are resolved, whichever happens first, so payments could still resume if the Supreme Court eradicates relief.