Student Loan Ruling Risks the Stability of the Entire Economy

The Supreme Court ruling striking down President Biden's student loan cancellation plan has dealt a devastating blow to the hopes and aspirations of millions of student borrowers across the nation. This decision is the final nail in the coffin of the already struggling student loan-financed financial aid system.

Biden's rejected student debt plan was designed to forgive $10,000 for many borrowers and up to $20,000 for those who qualified for Pell Grants. The plan would have provided much-needed relief for as many as 43 million borrowers.

Without the promised cancellation, many borrowers will face insurmountable challenges in restarting their loan repayment in the fall, posing serious risks to our economy and society as a whole.

The administration's plan to offer a three-month grace period for missed payments, once student loans come due in October, and directing loan services to be "prepared" is merely a Band-Aid solution to a much larger problem. While this gesture may provide temporary relief for some, it will not be sufficient to prevent an overwhelming wave of defaults that will likely follow. The repercussions of mass default would create a dark hole of noncompliance that Congress would then be forced to address urgently, as the consequences will be unsustainable for all.

The aftermath of this ruling will put at risk not only the financial future of individual borrowers but also the stability of our entire economy. The burden of unmanageable student debt will weigh heavily on graduates, hindering their ability to invest, buy homes, start businesses and contribute to economic growth. Moreover, the effects will trickle down, affecting consumer spending, the housing market and the overall financial well-being of the nation.

This prospect of massive noncompliance looms large if urgent action is not taken. The burden placed on borrowers, coupled with the lack of meaningful relief, will create a situation that is simply unsustainable for all parties involved. Congress must recognize the urgency of this issue and take decisive action to address the student loan crisis. Failure to do so will not only lead to increased financial hardship for millions of Americans but will burden future generations with the consequences of inaction.

While far more public attention centers around the looming crisis faced by Social Security in 10 years, the crisis in college finance is already upon us. The burden of student loan debt has reached staggering levels — with more than $1.78 trillion owed as of March — which will leave many borrowers struggling to make monthly payments, delaying important life milestones and experiencing immense financial stress. The inability to alleviate this burden through loan cancellation leaves us with a broken system that continues to perpetuate inequality and hinder economic progress.

The Supreme Court's decision to strike down the student loan cancellation plan marks a pivotal moment in the ongoing student debt crisis. Without significant relief measures, countless borrowers will be pushed to the brink of financial collapse, triggering a domino effect that will impact the economy at large. Urgent action from Congress is essential to prevent this dark prophecy from becoming a reality. The crisis is no longer a distant threat – it is here and now, demanding immediate attention and resolution.

Robert Hildreth is a former International Monetary Fund economist. He founded the nonprofit research and policy center Hildreth Institute, dedicated to restoring the promise of higher education. He is also the founder and chairman of the board of college access nonprofit Inversant.