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Q&A: How the Supreme Court could change student debt relief

The Supreme Court
The U.S. Supreme Court considered arguments to strike down President Biden's student loan debt forgiveness plan, which could affect 800,000 North Carolinians.

The fate of federal student loan forgiveness rests with the Supreme Court. More than 1 million North Carolinians have some form of student loan debt, public or private. The average amount on those loans after graduation is $37,000. Ryan Shaffer spoke with Mary Jo Terry, a business and managing partner at yrefy, a company that refinances defaulted private student loans. She has more than 20 years of experience in the student loans space.

Ryan Shaffer (PRE): Oral arguments began last week at the U.S. Supreme Court, where Texas and five other states are challenging President Joe Biden's student debt forgiveness plan. We're approaching the three-year mark for student loan forbearance, which means borrowers have not had to make payments on their student loans since March 2020. As of 2021, the average debt held by Americans from student loans is above $30,000. Mary Jo Terry, what is the current state of things and and how can borrowers make sense?

Mary Jo Terry: Well, currently they're trying to determine within the Supreme Court whether we can go ahead and move forward with the loan forgiveness program. The loan forgiveness program is for federal student loan borrowers who individually make $125,000 or less a year or as a married couple make $250,000 or less. The Biden administration has attached this particular initiative to the HEROES Act. So the High Court is just trying to make the determination 'does his executive order fit within the HEROES Act and can it move forward without going through the legislative process?'

Ryan Shaffer (PRE): Now the HEROES Act, or the Higher Education Relief Opportunities for Students Act, is a 2001 law and serves as the basis for justifying Biden's debt forgiveness plan. It was amended in 2003 to allow the U.S. Secretary of Education to provide relief during national emergencies. Now there are some particularities, or rather some misunderstandings that I want to hash out here with you. This is not a blanket forgiveness and not every loan, and not every person is eligible. For example, only individuals making up to $125,000 are eligible, as you mentioned. Who does this plan most affect?

Mary Jo Terry: So these are federal borrowers, there's federal and private loan. So it's only for your federal loan currently in a good loan status. We haven't had to make payments since March of 2020, so everybody is in a good loan status. It's for anybody who receives Pell Grants. Pell grants are for the families that had the least amount of money to give towards education. They received $20,000 in relief, and the rest of us can receive a $10,000 reduction. Now at this point, there are no reductions because we're waiting for the determination from the Supreme Court, whether they're going to affirm or deny and realistically we all need to be a little patient because it's going to be 60 to 90 days before we hear back from the the High Court.

But a lot of loan servicers have changed over the last short while. What that means is for those of you who haven't looked at your student loans in the last two years, coming up on three years, you need to go down to studentaid.gov and find out who your loan servicer is. You also need to take the time and update your personal contact information. Most of us have moved change phone numbers, e-mail address. It's going to be really important that if you've applied for the loan forgiveness that your servicer has your contact information.

Ryan Shaffer (PRE): Thank you for providing that context with moving forward. Over 1 million North Carolinians have student loan debt, according to Axios. And if the student loan debt forgiveness plan holds up in court, then 800,000 North Carolinians who are currently eligible and have applied will have $10,000 to $20,000 taken off their plate. But what options do people have in the event that that this is struck down by the Supreme Court.

Mary Jo Terry: If the loan forgiveness is struck down by the Supreme Court, there is a chance it's going to get legislated, so it just needs to be go through the legislative process. In the meantime, it sounds like student loans are going to go into repayment 60 days after June 30, so you're probably looking August, September before you have to make a payment. So in the meantime. If you're unemployed, remember there's unemployment deferments. They're called economic hardship deferments. Also remember, if you're underemployed or you've added individuals to your household — a parent, child, any number of individuals that you might be reporting — there are income driven repayment programs. The point of income driven repayment programs is to take what you make and what your household expenses are and actually tailor a a loan payment to what you can actually afford.

Ryan Shaffer (PRE): Thank you. That was Mary Jo Terry with yrefy, a company that refinances defaulted private student loans. She's a business partner and managing partner at yrefy. Thank you, Mary Jo.

*This piece has been edited for length and clarity.

Ryan is an Arkansas native and podcast junkie. He was first introduced to public radio during an internship with his hometown NPR station, KUAF. Ryan is a graduate of Tufts University in Somerville, Mass., where he studied political science and led the Tufts Daily, the nation’s smallest independent daily college newspaper. In his spare time, Ryan likes to embroider, attend musicals, and spend time with his fiancée and two cats.