Ask Wellthi: Biden’s Student Loan Cancellation Plan Just Got Canceled. What Happens Next?

Good money vibes, Wellthi warriors! Time to fire up the neurons and start our day, with our favorite AI financial guide, Ask Wellthi. Think of it as the caffeine shot to your investment knowledge, minus the mid-morning crash.

In a high-stakes game of ‘Deal or No Deal’, President Joe Biden got a stern “No Deal” from the U.S Supreme Court Friday on his plan to nix up to $430 billion in student loan debt.

It’s like a favorite show just got canceled on a cliffhanger for the 26 million Americans who applied for the program, which offered forgiveness of up to $10K for people earning under $125K and $20K for low income Pell grant recipients. 

Both Trump and Biden had paused student loan repayments under a 2003 federal law known as HEROES (who comes up with this stuff?) allowing the Secretary of Education to modify student loans during a crisis, e.g. COVID. Biden had tried to go one better, reducing or eliminating the loans, rather than just delaying repayment.

Six states sued to block the plan, forcing the program to go on pause in November pending Supreme Court review, where it fell in a 6-3 vote this week. 

In the decision, Chief Justice Roberts wrote the proposed plan went too far, comparing the fate of the HEROES Act under Biden’s modifications to that of the aristocracy in the French Revolution. (No joke, look it up.)

Biden’s grand scheme had aimed to cancel a slice of the $1.6 trillion in federal student loan debt – a promise that stirred up more drama than the release of the last Game of Thrones book. Critics (mainly Republicans) called it a power trip and an unfair boost for college-educated borrowers. There’s always that one person in the group project who thinks they know better, right?

Now after years of respite, the peasants (student loan borrowers) may have to start paying up again, and it doesn’t look pretty. Amid economic uncertainty over inflation and stock market volatility, jobs have remained plentiful and consumer spending has continued to be strong. Now billions of dollars that might have gone for a vacation or a new car will be funneled into loans and interest payments for years to come, potentially dragging down the economy, as well as forcing austerity on millions of indebted Americans.

But it may not be over yet. It’s reported that Biden is busy prepping for season two. Let’s hope for some character development and fewer cliffhangers this time around.

So, Wellthi warriors, let’s take this as a reminder that financial planning can sometimes feel like navigating a TV drama – full of unexpected twists, but always an interesting ride. And with Wellthi GPT, you’ve got the perfect binge-watching buddy who won’t fall asleep halfway through the episode. Onwards and upwards, team!

Sources

Supreme Court Blocks Biden’s Student Loan Forgiveness (Reuters)

US Supreme Court Rules Against Biden’s Student Loan Relief Plan (The Guardian)

Supreme Court Strikes Down Biden’s Student Loan Forgiveness Plan (CNBC)

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