Pursuing Full Forgiveness of Student Loans... Spending 50 Trillion Won

US Supreme Court Blocks $500 Trillion Debt Relief Policy, Biden Vows "To Use All Means to Achieve Debt Forgiveness"

Amid the risk of the largest student loan forgiveness in U.S. history being halted by the federal Supreme Court, the U.S. Department of Education has re-announced a plan to forgive approximately 50 trillion won worth of student loans.

According to foreign media including The Wall Street Journal (WSJ) on the 14th (local time), the U.S. Department of Education announced that after reviewing the federal student loan repayment plan (IDR), it will forgive part of the loans for about 800,000 borrowers. The total amount of forgiveness reaches $39 billion (approximately 49.647 trillion won).

The relief targets those who borrowed directly from the Department of Education and have been repaying based on income. The income-driven repayment method stipulates that the remaining balance for those who have been repaying for 20 to 25 years should be fully forgiven.

However, due to errors by repayment collection agencies in income verification and repayment guidance, millions among the 8 million borrowers under income-driven repayment have continued to repay for several years even after their loans were fully paid off. Accordingly, the federal government plans to provide relief by canceling the remaining balances of those who have repaid their student loans for 20 to 25 years.

Previously, the government pursued a plan in August last year to forgive $430 billion (approximately 558 trillion won) in student loans. The plan aimed to forgive up to $20,000 of student debt for households earning less than $125,000 annually ($250,000 combined for couples). However, the federal Supreme Court, reshaped with a conservative majority during former President Donald Trump's administration, ruled 6-3 on the related lawsuit on the 30th of last month, two weeks ago, declaring the plan unauthorized.

Chief Justice John Roberts, who wrote the majority opinion at the time, stated, “The Department of Education claims it has the authority under the law to cancel $430 billion in student loan principal, but it does not,” and added, “The law only allows for modification of existing statutes or regulations, not for rewriting the law itself from scratch.”

Last month, American college students held a protest supporting student loan forgiveness at the U.S. Supreme Court building in Washington, D.C. Photo by AP Yonhap News

As a result, the largest student loan forgiveness in U.S. history is at risk of being nullified. Analysts also predict inevitable political damage to President Biden and the Democratic Party ahead of next year’s presidential election. President Biden strongly criticized the court, saying, “The court misinterpreted the Constitution,” and pledged, “We will prepare supplementary measures and use all means to achieve student loan forgiveness.” The newly announced relief plan is a follow-up measure accordingly.

Education Secretary Miguel Cardona stated, “Borrowers have suffered under a flawed system for too long,” and added, “We will correct past administrative failures and proceed with the forgiveness they rightfully deserve.”

Meanwhile, with the federal Supreme Court putting the brakes on the government’s student loan forgiveness policy, some analysts have raised red flags about the future growth of the U.S. economy. There are concerns that the middle class, the core of the U.S. economy, will reduce spending due to the burden of debt.

This content was produced with the assistance of AI translation services.