The courts are busy. This one goes against Biden. Economic repercussions are significant.
Student Loan Debt Cancellation Blocked
The New York Post reports Biden’s $475B student debt cancellation plan blocked as federal appeals court issues final decision
A federal appeals court delivered a crushing blow Tuesday to a more than $475 billion student debt cancellation program begun by former President Joe Biden, ordering the underlying regulation be blocked in its entirety.
The Eighth US Circuit Court of Appeals had partially blocked the loan forgiveness effort last year — but a three-judge panel at the St. Louis-based court issued a final judgment to a lower court prohibiting any part of the initiative from taking effect.
Judge L. Steven Grasz in a 25-page opinion ruled that Biden’s Education Secretary, Miguel Cardona, had “gone well beyond” his constitutional authority in creating the Saving on a Valuable Education (SAVE) plan.
“Rather than implying by omission or other ambiguities, Congress has spoken clearly when creating a repayment plan with loan forgiveness or otherwise authorizing it — explicitly stating the Secretary should cancel, discharge, repay, or assume the remaining unpaid balance,” Grasz wrote, finding “no comparable language” in the SAVE Plan.
In 2023, the Penn Wharton Budget Model estimated the so-called “repayment plan,” which Grasz said allowed for student debt to be “largely forgiven rather than repaid, would cost taxpayers $475 billion over the next decade.
That was after $1.2 billion already went out the door to student borrowers under the program, which started in February 2024. Around 7.5 million Americans signed up for debt cancellation in all.
“We obtained another court order BLOCKING an illegal Biden-era student loan scheme,” Missouri AG Andrew Bailey crowed on X. “Though @JoeBiden is out of office, this precedent is imperative to ensuring a President cannot force working Americans to foot the bill for someone else’s Ivy League debt.”
In total, the Biden administration cancelled around $183.6 billion in student debt.
“He isn’t ‘forgiving’ debt. He is taking the debt from those who willingly took it out to go to college and transferring it onto taxpayers who decided not to go to college or already paid off their loans,” Sen. Bill Cassidy (R-La.) charged in a statement last year.
Supreme Court Chief Justice John Roberts wrote in the majority opinion striking down the first $430 billion effort that an education secretary “has never previously claimed powers of this magnitude.”
Student Loan Borrowers Are Losing 100+ Credit Points
The College Investor reports Student Loan Borrowers Are Losing 100+ Credit Points
For thousands of federal student loan borrowers, the past few weeks have been a wake-up call. As credit monitoring services send out alerts, many are realizing that their credit scores have dropped by over 100 points—some by as much as 200—due to missed student loan payments.
The issue stems from student loan servicers now reporting 90-day delinquencies to credit bureaus after the federal repayment “on-ramp” period ended.
Collection activity and negative credit reporting was turned off during the payment pause from March 2020 to August 2023. After that, borrowers had a grace period protecting them from negative credit reporting between September 2023 and September 2024, which has now expired.
If we rewind the clock on student loan payments, it’s important to remember that payments were automatically paused for most borrowers starting in March 2020. After multiple extensions, that pause officially ended in August 2023. During the pause, negative credit reporting and collection activity were also paused.
To help ease borrowers back into repayment, the government created a one-year “on-ramp” period from September 2023 to September 2024. During this time, missed payments wouldn’t be reported as late, preventing credit damage.
But as of October 2024, missing payments once again counted toward delinquency. By February 2025, borrowers who hadn’t made payments since then began seeing the impact—90-day late marks appearing on credit reports.
Economic Impact
Money that was spent on vacations, movies, rent, food, or whatever, will now be forced towards payments on debt.
And due to credit dings, it will be harder to get an auto loan or a mortgage.
On February 14, I noted Retail Sales Crash – Did the Consumer Finally Throw in the Towel?
The Census Department shows huge across-the-board declines in multiple categories, down 0.9 percent overall.
The shutdown of illegal immigration and student loans may both have contributed.
At the margin, this is quite recessionary.