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SCOTUS decision on student loan forgiveness could have big impact

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BUFFALO, N.Y. — The conservative majority in the Supreme Court will ultimately decide whether President Biden’s student loan forgiveness plan moves forward.

“They may be leaning towards not supporting the student loan forgiveness,” Tully Rinckey Partner Leslie Silva said.

The attorney said members of the conservative majority on the court appeared to have significant questions about whether it was appropriate to cancel debt under the Higher Education Relief Opportunities for Students, or HEROES Act, of 2003.

“It specifically has language about modifying repayments, but it doesn’t specifically hold language about canceling debt or releasing claims. That is within another section of federal law,” she said.

Silva said it appears there may also be an issue with the administration failing to make a correlation between the borrowers it’s releasing and the COVID-19 pandemic. However, she said it’s still difficult to predict the outcome because the petitioners could struggle to prove they had the right to sue in the first place.

“Amy Coney Barrett was very clear in her questioning about standing that she may not believe there is standing here and coming from a conservative justice she could potentially sway those that side with her or she could potentially be swayed to dismiss the suit,” she said.

Meanwhile, with $400 billion at stake and 26 million people already applied for forgiveness, the lending industry is watching closely. Jerry Inglet, a family legacy advisor for Wilmington Trust, a branch of M&T, said while the bank does not have a preferred outcome, it certainly could have an impact on the economy.

“It could potentially lower debt to income ratios so there could be additional homebuyers within the market, which impacts banks. There could be additional liquidity that student borrowers were not expecting that might allow them to purchase more items,” Inglet said.

He believes the case may drive people to better understand debt. But Inglet’s also curious to see what kind of student loans families will gravitate to in the future and what will happen if and when a three-year federal payment pause is finally lifted.

“If you haven’t made payments in three years, you’ve kind of lost that muscle and I wonder if folks are ready to get back to it and if they’re prepared for that,” he said.

Silva said if the Supreme Court strikes down loan forgiveness, the president could still have other avenues to do it through executive action.

Congress could also take action as well but with the houses split that may be a more difficult prospect.

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