Biden’s Student Loan Forgiveness Struck Down For Wisconsin Borrowers

WISCONSIN — Student loan borrowers across Wisconsin who were expecting to see their debts reduced under a plan from President Joe Biden had their hopes wiped away Friday in a U.S. Supreme Court decision squashing the executive initiative.

On a 6-3 vote on one of two challenges, the justices found Biden lacked the authority to enact the program. Millions of borrowers will now have to start paying back their federal student loans after the COVID-19 pandemic pause on student loans ends. Payments would have been due regardless of the Supreme Court decision but now borrowers will see no reduction in their balances.

Student loan borrowers in Wisconsin have a bit less debt on average compared with much of the nation, according to the Education Data Initiative. Wisconsin is home to over 727,000 student loan borrowers, making up about 12 percent of the state who on average owe just over $31,000, according to Education Data.

About 23.5 percent of borrowers in Wisconsin owe more than $20,000 but less than $40,000, whiles 17 percent owe less than $5,000, according to Education Data.

For the University of Wisconsin-Madison, widely considered the state's most prestigious public university, the average student graduating with a bachelor's degree in 2016 had around $28,000 in debt—though half of the class had no debt, according to an article from the college.

By 2021, over half of UW-Madison's class again graduated without taking out student loans, while others graduated with an average of $27,000 in debt.

Loan interest will begin accruing on Sept. 1 and payments will be due starting in October. Borrowers who don’t pay risk delinquency and eventually default, which would badly hurt their credit rating and make them ineligible for additional aid and government benefits.

The Biden student loan forgiveness plan, which forgave up to $20,000 in debt for some borrowers, would have wiped out about a quarter of the country’s $1.7 trillion in outstanding student loan debt. As many as 14 million borrowers would have seen their debt entirely cleared.

A flurry of lawsuits ensued from Republican-backed states and conservative groups, most of them accusing Biden of executive overreach.

At a cost of around $400 billion, the policy is one of the most expensive executive actions in history. The court heard two cases, dismissing one as lacking standing, but hearing a challenge brought by the attorneys general in GOP-led states Arkansas, Iowa, Kansas, Missouri, Nebraska and South Carolina.

The second had been brought by Job Creators Network Foundation, a conservative advocacy group.

The Biden administration argued the executive action was allowed by 9/11-era legislation, the Heroes Act of 2003, which gave the secretary of education the authority to make changes to student loan programs during national emergencies. The United States was under a COVID-19 emergency declaration at the time of Biden’s executive action.

Attorneys for the plaintiffs said the Biden administration’s interpretation of the Heroes Act was overly broad, and that the law allows for narrow applications of relief, but not the across-the-board loan forgiveness.

The decision comes on the heels of a ruling Thursday striking down college affirmative action admissions policies. When Biden rolled out the plan last year, he said one of his goals was “to help narrow the racial wealth gap.”

About half of the average debt held by Black and Hispanic borrowers would have been wiped out by Biden’s plan.

Both cases focus on policies that address historic racial disparities in access to higher education, as Black borrowers tend to take on disproportionately more debt to afford college, Dominique Baker, an education policy professor at Southern Methodist University, told The Associated Press.

Backlash to racial progress tends to follow periods of social change and advancement, Baker said. In a study published in 2019, Baker found states were more likely to adopt bans on affirmative action when white enrollment at public flagship universities dropped.

“These are policy tools that have an explicit aim around reducing the power of white supremacy,” Baker said. The two court challenges, she said, can be seen “as linked backlash to two attempts towards racial justice.”

The rulings could also have political consequences among a generation of young voters of color who took Biden at his word when he promised to cancel debt, Wisdom Cole, director of NAACP’s youth and college program, told the AP.

“Year after year, we have elected officials, we have advocates, we have different politicos coming to our communities making promises. But now it’s time to deliver on those promises,” he said.

Borrowers who are unable to pay back their loans may qualify for an income-driven repayment plan, which determines your payments by looking at your expenses. If you’ve worked for a government agency or a non-profit organization, you could also be eligible for the Public Service Loan Forgiveness Program, which forgives student debt after 10 years.

Carolina Rodriguez, Director of the Education Debt Consumer Assistance Program at the Community Service Society of New York, told the AP that anyone temporarily unemployed should be able to qualify for a $0 payment plan. And many others qualify based on income and family size.

“The repercussions of falling into delinquency can be pretty severe,” Rodriguez said. “The federal government can administratively intercept tax refunds and garnish wages. And it can affect Social Security, retirement, and disability benefits. Does it make financial sense at that point? Probably not.”

Rodriguez says her organization always advises against deferment or forbearance except once a borrower has exhausted all other options. In the long term, those financial choices offer little benefit, as some loans will continue to accrue interest while deferred.

Bankruptcy is another option, though borrowers will have to prove “undue hardship” prevented them from paying back loans.

"That doesn’t mean people shouldn’t look into it," Rodriguez said. “But they may not be successful at discharging their loans.”

The Associated Press contributed reporting.