The U.S. government has announced another $4.28 billion student debt loan forgiveness package for public service workers amid the threat of a government shutdown over a fiscal spending debate.
This comes as the government came close to a shutdown over Congress disagreeing on an emergency fiscal budget for 2025.
Student debt loan forgiveness has been part of Biden’s campaign promise to offer relief to 43 million Americans by canceling a portion of the $1.6 trillion (£1.2 trillion) in federal student loan debt.
Biden’s initial comprehensive plan in 2022 was to forgive a minimum of $10,000 (£7,954) in student loan debt to individuals earning under $125,000 (£99,435) or households earning less than $250,000 (£198,870) in response to the COVID-19 crisis, totaling around $400 billion (£303 billion).
This received mixed reactions from states and Congress. Proponents of the plan hailed it as a critical step towards making higher education more accessible and stimulating consumer spending, while those opposing the plan said it added to the fiscal deficit and made it unfair for those who had already paid off their education debt as well as for taxpayers, who would be footing the bill.
Several Republican states led by Nebraska took legal action against the plan, and it was eventually struck down in the nation’s highest court in June 2023, which ruled that the Biden administration had exceeded its authority.
The Biden administration then initiated a second program called the Saving on a Valuable Education (SAVE) plan, calling it “the most affordable repayment plan ever created.”
The administration estimated that the plan would cost taxpayers around $156 billion (£118 billion) over 10 years, and Republican attorneys general argued that its actual cost totaled around $475 billion (£377 billion).
A group of Republican-led states then filed two lawsuits: the first led by Kansas and the second by Missouri.
Both lawsuits argued that Biden had exceeded his legal authority and that the SAVE plan was no different from the debt relief plan that was blocked previously by the U.S. Supreme Court. The lawsuits stated that the plan would ultimately be financially damaging to their states.
A series of legal battles ensued after the SAVE plan was blocked, leading again to the Supreme Court upholding the stay. The case remains in legal transit, leaving the 8 million borrowers who had signed up for it in limbo.
