Iowa borrowers, lawmakers react to SCOTUS decision on student loans

Molly Monk expects she will need to analyze her budget and find areas to cut back when her student loan payments begin again this year.

Monk, a 28-year-old Cedar Rapids resident, is among thousands of Iowa borrowers who were slated for loan forgiveness under a plan announced by President Joe Biden in 2022, before the U.S. Supreme Court struck that plan down on Friday.

“I'll have to either figure out a way to spend less, which I’m pretty thrifty already. Which means not stimulating the Iowa economy as much as I normally do,” she said. “Or I have to figure out a way to make (more) money. So, taking up my free time, hurting my health further. I don't want to have to go back to working multiple jobs.”

Monk, who works in alumni relations at University of Iowa Health Care and bartends on the side, expects her minimum monthly payment on her $13,000 in remaining debt to be about $200 to $300 a month.

After graduating in 2016 from Simpson College, a private college in Indianola, Monk had racked up $30,000 in debt. That was the same amount as her salary at her first job, working at a nonprofit. After graduating, she was able to pay off around $17,000 of that debt, working more hours on top of her full time job than she does now to supplement her income.

The 2020 student loan pause came as a welcome relief to Monk, who had incurred medical debt after developing a chronic nervous system disorder in 2019. The pause allowed her to pay off her medical debt and afford a down payment on a house, both things she said she would not have been able to do if she had continued paying off her loans.

“I was able to afford to buy a house as a millennial, working at a nonprofit because I didn't have to pay my student loans for a couple years,” she said. “That sets you up for so much more economic success in the rest of your life … Being able to afford to buy a house, that is the primary way that Americans build wealth.”

In Iowa, 264,000 borrowers applied for or were deemed automatically eligible for forgiveness as of January, according to the White House, before the program was halted by an appeals court panel. Of those, 169,000 applications were fully approved. The White House estimated last year that more than 430,000 Iowa borrowers would have been eligible for the forgiveness.

The plan would have applied to borrowers making up to $125,000 or married couples making up to $250,000. It was expected to cost around $400 billion, the most expensive executive action in history.

Gabriel Jacobs, who holds a Ph.D. in paleontology, spent the last year as a lecturer in the geology department at Cornell College in Mount Vernon. He said he expects to be paying his $40,000 in loans from undergraduate and graduate school for the next 20 years.

He is currently struggling to find a job in academia after his one-year contract with Cornell expired, making the resumption of payments more concerning. He's said he's hoping he can get his loans deferred while he looks for employment.

"Even if I do get things deferred, interest is going to continue and that's just going to mean potentially taking a couple of years more to actually pay the debt off," he said. "It would have been nice to have $10,000 taken off the top, but we can't have nice things apparently."

Iowa Republicans applaud decision

The court’s decision received an outpouring of support from Iowa Republicans, who had spent a year criticizing Biden for the loan forgiveness plan. Iowa was one of six states that joined the lawsuit that led to the program being overturned, Biden v. Nebraska.

Republicans argued the plan would have transferred debt that students voluntarily took on, to Americans that chose not to go to college or take on debt.

“The Supreme Court’s decision affirms what Iowans have believed this entire time: the hard-working men and women of this country should not bear the burden of paying off others’ loans,” Gov. Kim Reynolds, a Republican, said in a statement. “This plan belittles Iowans who paid their own debt or chose not to pursue a traditional four-year degree.”

Republican Attorney General Brenna Bird, who campaigned with promises to sue the Biden administration, celebrated the ruling and said she would continue to “hold Biden accountable under the laws and Constitution.”

“Today’s Supreme Court win stops Biden’s illegal mass student debt cancellation and protects the 87 percent of Americans without student debt from having to foot a $400 billion bill,” she said in a statement. “Americans who work hard to pay off their loans or decide not to go to college so they can start a family, join the military, or go straight into the workforce after school shouldn’t have to pay for someone else’s loans.”

Biden held a press conference Friday outlining alternative plans to relieve student debt. He said he would attempt to enact a separate loan relief plan under a separate law, the 1965 Higher Education Relief Act.

He also said the U.S. Department of Education would not refer borrowers who don’t pay their bills to credit agencies for 12 months, which reduces the threat of default and prevents a hit to the borrower’s credit score. Bills will still be due and interest will still accrue.

“I believe the court’s decision to strike down my student debt relief program is a mistake, was wrong,” he said. “I’m not going to stop fighting to deliver borrowers what they need, particularly those at the bottom end of the economic scale.”

Iowa’s congressional delegation also welcomed the ruling. Republicans attempted — through debt ceiling negotiations and a congressional resolution that was vetoed — to overturn the plan in Congress this year.

Iowa U.S. Sen. Joni Ernst, who championed a resolution to overturn the plan, compared the proposal to socialism and said it would have unfairly hurt Iowans and worsened inflation.

“Today’s decision is a win for our economy and hardworking Iowans,” Ernst said. “I will continue fighting to provide students and their families with tools upfront to see the true costs associated with their education and to help them make informed decisions about their future.”

U.S. Sen. Chuck Grassley said in a statement the proposal was “not only fiscally insane, it’s unconstitutional.”

Grassley has introduced, and Ernst has co-sponsored, the Understanding the True Cost of College Act, a bill that would create a universal financial aid award letter intended to increase transparency around college costs.