Amanda Fortunato, 32, has been making payments of over $1,000 per month toward her student loan debt since she was 25 (even during the COVID-19 payment pause) and still has a significant balance left. Now that the U.S. Supreme Court blocked President Joe Biden's student loan forgiveness plan Friday, she's worried about "how to make it work" between the debt and upcoming daycare costs for her child due in January. She says the decision shows significant disregard for middle-class borrowers.
"You go to college to try to get ahead in life, and instead it’s like being shackled," Fortunato tells Fortune. "Millennials are the first generation expected to be worse off than their parents. It’s no secret the reason why."
Biden announced the debt cancellation back in August 2022. Fulfilling a campaign promise, the plan would have forgiven up to $20,000 in federal loans for borrowers who received Pell Grants while in school and up to $10,000 for other borrowers meeting certain income requirements.
The plan was met with optimism from borrowers, who reported it would give them more breathing room in their budgets.
But it was also immediately met with a number of legal challenges from conservative opponents, who said the program is unfair and costly. The two cases that made it to the Supreme Court include one brought by two individual borrowers and one brought by six conservative state attorneys general who said the Biden administration does not have the authority to implement the program on its own.
The court sided with the states, saying the Biden administration does not have the authority to cancel the debt on its own. Congress needs to do that. Now borrowers are left dismayed, telling Fortune it feels like the hope they began to have in their financial futures has been quashed.
"It feels like the system went so far out of its way to shoot down something that would help middle-class Americans," says Fortunato. "If we don’t find a solution, the bell will toll eventually for student loans and at some point the entire economy will feel its impact."
The 'hypocritical' decision could hurt the economy
Fortunato is right to believe the effects stemming from the court's decision will reverberate far beyond household balance sheets. Economists have said that without forgiveness, and with federal student loan payments due once again in October, the economy as a whole may suffer. Households are already struggling due to inflation and rising interest rates; credit card debt has hit a new high. Gains made during the student loan payment pause are likely to reverse.
The Supreme Court's decision "has a greater impact in slowing the economy than an interest rate increase by the Federal Reserve," says Silvio Tavares, president and CEO of VantageScore. "Millions of Americans are effectively taking a one-two punch from this ruling and the coming resumption of student loan payments, adding a significant loan and a monthly payment back into their personal finance budgets."
Multiple borrowers pointed out the perceived hypocrisy of the Supreme Court, noting the recent stories of conservative justices receiving undisclosed lavish gifts and luxury vacations from people who have brought cases in front of the court.
Another common comparison made by proponents of student loan forgiveness is to businesses that received hundreds of billions of dollars in loan forgiveness during the COVID-19 pandemic through the Paycheck Protection Program (PPP). If companies can receive that type of relief, why shouldn't individuals, they argue.
Biden himself made the comparison in a statement Friday, calling the ruling "disappointing."
"They had no problem with billions in pandemic-related loans to businesses—including hundreds of thousands and in some cases millions of dollars for their own businesses," Biden said. "And those loans were forgiven. But when it came to providing relief to millions of hard-working Americans, they did everything in their power to stop it."
Unsurprised borrowers are ready for a Plan B
Biden's student loan forgiveness program could have provided relief for Robert, 38, and his family, whose household has around $20,000 in student loan debt. But they "never banked on it being a reality," Robert, who asked that his last name be withheld for privacy reasons, tells Fortune. "It was too far-fetched to imagine it wouldn't be shot down by this Supreme Court. You cannot make financial plans on a maybe or a sometimes."
For all their dismay and disappointment, borrowers like Robert aren't necessarily surprised by the U.S. Supreme Court's ruling.
"[Friday's] decision is not a terribly surprising one," Asher, a 28-year-old in Missouri who has $99,000 in student loans and also asked that his last name be withheld for privacy reasons, tells Fortune. He hopes to see the Biden administration try a different tack on loan forgiveness in the future.
And in fact, Biden announced a Plan B for loan cancellation Friday. The details are scarce, but his administration said it would take at least a few more months for the relief efforts to materialize. There will also be a 12-month period in which missing a payment won't be reported to the credit bureaus, and he highlighted his administration's new income-driven repayment plan, which should lower monthly payments for many borrowers.
For now, though, borrowers should get ready to start making payments on their full balance. Asher encourages others to own their futures and "channel any frustration into getting mad at your debt and kicking it out the door."
"Congress holds the pen," he says. "If people want forgiveness in the future, the key to making that a reality is to elect those who share a similar viewpoint."
