Supreme Court rejects Biden's student debt plan

The U.S. Supreme Court blocked the Biden administration's student loan debt relief plan, releasing a 6-3 decision on June 30 in a case brought by Nebraska and five other states (PDF). The plaintiffs held that the program was an unlawful use of power because it had not been approved by Congress.

Loan repayment
The U.S. Supreme Court ruled 6-3 to block a plan by the Biden administration to cancel $430 billion in student loan debt. About 26 million U.S. borrowers applied for student loan relief between when the plan was announced in August 2022 until last November.

The issue was whether the Secretary of Education had the authority under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) to establish a student loan forgiveness program that would have canceled about $430 billion in debt, with an estimated 26 million people who would have all their remaining student loan debt canceled.

Specifically, the administration had proposed forgiving up to $10,000 in debt for borrowers earning less than $125,000 a year. Pell Grant recipients would be eligible for an additional $10,000 in debt relief.

Chief Justice John Roberts wrote on behalf of the majority that the court's precedent "requires that Congress speak clearly before a department secretary can unilaterally alter large sections of the American economy."

A second case challenging the loan forgiveness plan was brought by individual borrowers who did not qualify for the maximum relief available under the plan. The court ruled (PDF) that the challengers did not have legal standing.

In related news, after more than three years, the federal government's pandemic-related suspension of student loan payments and interest is officially coming to an end. Federal student loans will start accruing interest again on September 1, and payments will be due starting in October. This means that interest on federal loans will revert to the fixed rate being charged before the payment moratorium took effect.

The U.S. Department of Education (USDE) will notify borrowers before payments restart.

Dr. Chris Doherty, assistant director of strategic business research and outreach at the AVMA, said that for those veterinarians with student debt, the pause in repayment likely brought some relief to their monthly expenditures, allowing them to redirect these funds elsewhere.

Average debt levels have been on the decline since 2020. The percentage of graduates with no debt was 18% in 2022, compared with 16% in 2021, according to data from the 2023 AVMA Report on the Economic State of the Veterinary Profession.

"Over the last five years, between 82% to 84% of the graduating classes have finished veterinary college with some amount of student debt incurred," Dr. Doherty said. "Thus, for many early career veterinarians, any changes made to student loan repayment is presumably a crucial consideration in their personal financial planning."

The mean educational debt for all new veterinary graduates—including those with no debt—was $147,258 in 2022, down from $157,146 in 2020. For those with at least some student loans, the mean debt was $179,505, a decline from $188,853 in 2022.

AVMA's Personal Financial Planning Tool can help veterinarians put together a budget and to make the adjustments necessary to accommodate the resumption of their student loan payments. More information about student loan repayment programs can be found on the AVMA website.