The Supreme Court’s decision to overturn the Biden administration’s federal student debt relief plan will deny hundreds of thousands of Kentuckians the opportunity to get out from beneath burdensome student debt. The decision will especially harm low-income Kentuckians, who stood to benefit most from the relief plan, and Black Kentuckians, who are more likely to have student debt due to lower family wealth.
The Biden administration’s plan would have canceled up to $10,000 of student debt for most borrowers with federal loans. An additional $10,000 — for a total of up to $20,000 — would have been canceled for individuals with student debt who received a need-based federal Pell Grant while attending college. While more action was ultimately needed to reduce the debt burden on student loan borrowers, the administration’s action would have been a crucial step forward.
“Student debt cancellation would have relieved enormous financial stress facing families and benefited the economy as a whole,” said Ashley Spalding, Research Director at KyPolicy. “Many Kentuckians have delayed moving ahead with homeownership, starting a business, saving for retirement or making other important investments because of their student loan balances. Without this relief, they’ll continue suffering under the weight of that debt.”
A 2021 Kentucky Center for Economic Policy report showed around 616,000 Kentuckians have student debt and the average amount of debt is $33,300. Approximately 209,400 of them owe $10,000 or less and would have qualified to have their debt wiped out entirely. Another 406,200 would have had a portion of their debt canceled (these numbers don’t take into consideration the likely small number of individuals who may have been disqualified due to the $125,000/year income cap).
A significant share of these Kentuckians with student debt would have been eligible for up to $20,000 in cancellation for Pell Grant recipients. More than 40% of Kentucky undergraduate students receive Pell, and Kentucky college graduates with Pell Grants who took out loans are more likely to have larger student debt amounts than those who did not qualify for Pell. The majority of student loan borrowers nationally receive Pell Grants.
In late January, the White House announced that 362,000 Kentuckians had applied or were automatically eligible for debt relief before the Department of Education stopped accepting applications due to legal challenges.
READ MORE: What Kentuckians Say About Student Loan Cancellation
